This is a diagnostic designed to help investors, stakeholders, and financial advisors look behind the financial numbers of large organizations. Specifically, it detects a condition, the Circle within the Square Pattern (CSP), invisible to most standard metrics that is the root cause behind several systemic problems that can compromise the long term viability of a firm.
When you examine the greatest examples of corporate mismanagement – Enron, Goldman Sachs, Drexel Burnham and Lambert - they all share one thing in common - they were all driven by a Player Culture. Had this diagnostic been applied to these situations the conditions supporting these scandals could have been identified well before the real damage was done.
The CSP is a direct result of a kind of corporate contra-selection - a distortion of the law of natural selection that is a characteristic of large organizational environments
1.
Lack of Leadership – Senior management is more focused upon strategy than on developing and preserving the key competitive advantage of the company.
2.
Rigidity – The company becomes burearucratic and overly focused upon accountability and compliance . This causes it to be too inflexible and slow to respond to changes in the business environment
3.
Brain Drain – Creative thinkers, free spirits, and those of strong moral conviction to do not fit into the corporate culture and end up leaving the company. This contra-selection leaves the organization vulnerable in times of crisis and volatility.
4.
Restricted Information Flow – The rigid structure restricts the flow of information up and across the organization chart. Meanwhile the cult like atmosphere creates the uniformity of thought that filters out information that does not support senior management’s strategic vision for the company.
