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Importance of Being Human

Unlike most living species on the earth, human beings are probably the most complicated of the lot. Not only are they the most intelligent species aroung, they are also arguably the most social and civilized beings.

As human beings grow from a child to an adult individual they also become rigid in their thoughts. The enshrining principles that guide an individual are the net products of that individual's immediate family, his/ her neighborhood (society / friends), the education system and access to other cultures (through technology or means of travel). Depending on the strength of each of these parameters the thoughts of an individual take shape. Organizations are also similar to human beings to a major extent. When the organization is small it's similar to a child where its mannerisms are extremely chaotic. Like a child an organization also assimilates all the inputs coming to it from its environment without laying any priorities. The organization lacks clear direction & goals and policies & procedures remain unclear. As the organization matures, similar to a teenager, it also develops clarity of goals and direction and there is a consistency in priorities as well-defined policies and procedures come up. The organization gathers stability at this stage. Finally, like a full grown adult who has his/her unique belief systems and thought processes, an organization has its own well defined values which result in distinctive culture. The organization has a high Performance (Outstanding, sustainable results) at this stage with a clear statement of mission that creates sense of esprit de corp. However, along with initial high performance comes rigidity of values as well.

<="#000000">The similarities don't end here. Just like human beings even organizations also face frequent survival issues and many of them die eventually. A brief analysis of the Fortune 500 list, from 1955 when it was first started, shows that of the 1950+ companies that have made it to the list, only 66 have been able to remain in it consistently. Only the fittest survive. Darwinian principles at WORK, one may say!!

There are many reasons that can be attributed to failure of organizations such as: Managerial errors; ill-informed decisions; Greed/risk; Availability of funding; Corporate culture; Hubris; Distance from reality; Creative destruction. While we may argue that Schumpeterian principles remain a major cause of the death of many organizations, where new innovations create new world order and destroy existing ones. However, a re-look at some of the other reasons mentioned above shows that most of the reasons for failure boil down to failure of people.

A look at the recent 2008 recession shows that out of the 20 biggest corporate bankruptcies ever filed, 8 were filed after 2008 and 6 of those 8 were financial services organizations. Financial Services unlike manufacturing are some of the most direct customer facing services. Add to that, the enormous amount of scrutiny that financial service organizations go through on a regular basis must ensure that they remain lean and fit. The question, therefore, is why did this industry perform so badly during the 2008 recessions? A larger question that we may also seek to answer is why do some organizations survive while the others die?

Financial service industries by their very own nature perform extremely complicated operations, absolutely illegible for the layperson (even with high qualifications). Crises such as Sub-prime lending crisis of 2008, the effects of which the world is still coping with, are so complicated that even the people who designed the mechanisms couldn't understand it. The Black-Scholes equation, the holy grail of investors was the core of financial markets. It opened up a new world of ever more complex investments, blossoming into a gigantic global industry. But when the sub-prime market turned sour, the darling of the financial markets became the Black Hole equation. The downside was the invention of ever-more complex financial instruments whose value and risk were increasingly opaque. Myriad organizations hired mathematically talented analysts to develop similar formulae and in the process created an industry which remained extremely opaque to the outside world.

However, what the smart people disastrously forgot was to ask how RELIABLE the answers would be if market conditions changed i.e. sentiments of people who had invested in those financial products changed.

Was an equation to blame for the financial crash, then? Yes and no. Black-Scholes may have contributed to the crash.  But the mathematical models grossly failed to represent reality adequately. The reality was considering PEOPLE in their complex mathematical equations.

What would Keynes, one of the greatest minds of 20th century, do in today's inordinately poor economic scenario? He would be extremely unhappy, for he was strictly against the idolatry of market economics, which incidentally most of the organizations seem to follow even today. As he described about the market - "the worm that had been gnawing at the insides of modern civilization... the over-valuation of the economic criterion". According to him the market was made for human beings - not human beings to serve the market. He strongly believed that nothing had value except the experiences of individuals.

 What do we learn, therefore, from the recent past as well as from the views of past century? It becomes extremely evident that organizations, how much ever smart they may tend to be, must consider PEOPLE at the core of their offering. Instead of making things extremely complicated and opaque it makes sense for smart organizations to SIMPLIFY their operations. Instead of equations driving them to deliver values, it should be experiences of individuals that drive them to success.

As elaborated in the initial paragraphs, organizations are a sum total of their own experiences, which at a later date lend them rigidity. Organizations become slaves to the same rules that they developed to generate high-performance. They forget the fact that it's not the rules that they are supposed to serve. Instead, it's the people who are to be served, and that is where rules must come from.

This is where organizations are dissimilar with human beings. While human beings have this unique capacity to express and read emotions and adapt themselves, most organizations are incapable of doing so. Thus, organizations must create FLEXIBLE systems, where they can read the emotions of the people they are meant to serve, LEARN from the people and ADAPT.

Flexible systems within organizations must also enable them to trash their own beliefs and challenge their own assumptions.

P.S: Scientific evidence shows Whales are more intelligent than Human beings. But is the self-described "Social Animal" human being ready to challenge its own beliefs????

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