Lesson 8: Are bureaucratic organizations really pyramid schemes in disguise?

Most of us are familiar with the concepts of pyramid or ponzi schemes.   The schemes are funded by entrance into the program, and the founders along with the early joiners get a payoff based on the funding from later entrance.  The problem results from the need for endless growth of new members on a geometric scale, and the schemes eventually collapse as they rely on an unsustainable model of growth.

What is frightening is that the model is eerily similar to large bureaucratic organizations such as many large publicly traded organizations, public offices and large educational institutions such as universities.

While there are exceptions to the general rule, career “success” and/or “development” are based on increasing salary and title, which go together. In other words, people make more money the farther up the management ladder they go, which means they are valued more by the organization the more subordinates they manage.

Of course, large corporations make money on providing products and value added services, so they are much more robust and sustainability than a ponzi scheme.  That’s why a large company like Panasonic or IBM don’t go up in flames with a single year of red ink or reduction in business growth.  They also don’t need to add employees endlessly in order to grow.

However, these organizations still can suffer same disadvantages as pyramid or ponzi schemes as they require geometric growth to create more middle and upper-management positions.   So while maybe the organizations can still sustain themselves and create profits without geometric growth in their workforces, from the perspective of a single employee, the opportunity for you to increase your “career” and earning potential is limited by similar forces.

It is simply much easier for a smaller organization of 5-20 people to double growth and earnings than for a company like IBM, GM, Panasonic or Hitachi (Organizations which can be as large as 200,000-300,000 employees) to double the amount of earnings and positions.  So if you get into these companies during a fast growing phase, you have much higher potential for career growth and promotion.  The more the company puts an importance on seniority, the more the timing of entrance determines your potential for growth as opposed for skills and ability.

Companies also have a limited life, much like a product cycle.  Even the top firms of their era, such as IBM, Panasonic, Sony, Hitachi, Toyota, GM and others all entered a period of losses/decline after they reached a certain size.  Then they either go bust or enter a period of uncertainty where they must restructure their workforce and business model.


So if we are honest with the facts and history of large prominent firms, you are taking a huge career risk if you attempt to join a company at it’s height of success and popularity because it’s highly likely it’s largest growth spurt is already behind it and the accelerating pace of technological change and globalization will make it much more difficult to maintain it’s rate of growth and most likely cause the firm to enter a period of loss, decline or bankruptcy.




Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s