Tuesday, January 22, 2008

The Corporate Intellect Plateau Effect - Part One

Over the last six months, I've discussed with a number of my friends the concept that I call "The Corporate Intellect Plateau Effect". This is the first part of a series I'll write on this topic.

Whenever I talk to business owners, they often say that the number one asset of their business is their employees. This is mostly because the way the business operates is locked up in the heads of the people that work there. Not only that, over time staff learn the tricks needed to be more efficient with their time and the company's resources. Also, they discover the individual quirks of fellow employees, and how to maximise one anothers expertise. All of this contributes to the total intelligence of the organisation, or what I call, the "Corporate Intellect".

Most businesses start out with one or two people deciding that they want to be their own boss. At this time, Corporate Intellect is very low, as while the individuals have a clear understanding about how the business should operate, there hasn't been sufficient time to learn better and smarter ways to do those activities. Also, typically the customer base is small, which means there hasn't been signficant exposure to a variety of customer interactions. Over time, as the business grows, more people are employed, typically in specific roles, such as sales, marketing, finance, operations, manufacturing, etc. Each of these 'early' employees are faced with the challenge of shaping their own teams, and as the business is still relatively small, they are aware of each of the other teams, and the importance that each play in the overall success of the business. (To read more about team interaction, here is a good starting place on Wikipedia.)

As staff numbers grow, and time passes, the Corporate Intellect increases. However it is natural for some individuals to leave the organisation, with a resultant impact on the net Corporate Intellect with each departure. While new people are employed to fill these roles, they start with a clean slate, and thus initially have little or no positive effect on the Corporate Intellect. Subsequently, with each long term employee leaving and being replaced by a new employee, the Corporate Intellect begins to remain fairly static. This cycle is the Corporate Intellect Plateau Effect.

In my next post, I'll look at how to quantify this effect in an organisation. In the meanwhile, let me know what you think. Have you come from, or currently work for a corporate and seen this too?



Anonymous said...

While I agree in principle with the concept, my experience is that the plateau is actually a downward slide. My reason being people are tending to spend less and less time in each job. People no longer join a firm at the bottom and leave as the CEO 45 years later. So while a new employee will gain expertise and eventually contribute to raising the Corporate Intellect(CI) back up towards the previous level, ancedotal evidence(the best kind on the interweb) suggests they will leave the position with a shorter length of service than the person they replaced and therefore the CI never recovers. These may not be massive drops in the CI level, but it is still a decrease.


Tino said...

Hi Stu,

This is an interesting topic. It sounds like its closely related to knowledge management principles.

Take a look at the follwoing link and let me know what you think.

Does this sort of tie in with what you are talking about?

Wikipedia Knowledge Management Summary



Stuart Bale said...

Tino: I think the link you've supplied is more related to how organisations try and manage the effect I have described.

I'd really like to try and create a way for a business to define when they typically reach the plateau, as this is a critical stage in the growth of a business.