The Corporate Growing Process

I followed the evolution of various private companies, in their early stages, before they become big conglomerates. I noticed substantial similarities, and based on such observation I developed a map indicating the correlation between the main organizational parameters. After consulting with numerous people in different industries, and upon discussing it in a series of forums and functions, I gained enough confidence in its validity to submit it for public review.


My analysis was triggered by Peter Drucker’s assertion that “any organization that doubles or triples in size over a short period of time has necessarily outgrown its theory”. What I found was a series of examples of cyclical evolutions, each being characterized by certain essential attributes: Size (expressed in Throughput or number of employees), Organizational structure, Strategic focus, Mode of interaction and Control mechanisms - to name a few.


Another interesting finding was the realization by consulted experts in the field, that the chart offers not only an evolution map, but also provides answers to problems of dis-functionality and misalignment, as noticed in organizations situated on different stages of development.

Organizational Entropy

According to the second law of thermodynamics, during any process the change in entropy of a system and its surroundings is either zero or positive. In other words the entropy of a closed system tends toward a maximum. I was always wondering if this principle holds true in a business environment.

In its sociological application the concept of entropy is used as a metaphor for chaos, disorder or dissipation of energy. In a company - as a closed system - the energy is conserved. But it tends to degrade from useful forms to useless ones: everybody’s busy but value is not created.

The entropy of an organization is reflected in the amount of energy not converted into work during a process. The more uncertainty in vision, randomness in strategy, or indecision in action, the higher the entropy. Entropy is a measure of the inability of a system’s energy to do useful work; it becomes a measure of the business inefficiency.