A study from Aalto University School of Business warns that organizations need to be vigilant against what they call “institutional parasites” or they risk serious harm in the long run.
These parasites, the researchers say, thrive in the complex and hard-to-understand structures of many organizations. They could be suppliers, partners, or even employees.
The study points to examples like accounting firms that help companies cook their books, like what happened with Enron and Arthur Andersen, and firms that promise good outcomes in audits but might not deliver.
How parasites thrive
Using a model developed by Dr. Rintamaki, the researchers looked into how these parasites spread and how to stop them effectively.
At first, both the parasite and the organization might benefit from their relationship. For example, the parasite might win contracts by promising good results, and the organization might save money. But in the long run, this can hurt the organization.
The study says that in complicated environments, these parasites can go unnoticed or their negative effects might not be obvious, making it even more important for organizations to stay alert.
“Institutions identify and act against obvious threats but it is the insidious ones that can fell them. A leech that is visibly draining blood from a body will be quickly removed,” the researchers explain. “An internal parasite, such as a roundworm, can cause significant harm to the host human before they realize they have a problem and seek medical attention and treatment.”
Looking beyond the short-term
Because parasitical activity can initially seem beneficial for both parties involved, leaders may turn a blind eye or fail to recognize and address the parasites within their organization. This oversight can create an environment where more parasites thrive, eventually leading to serious consequences, even organizational collapse.
Furthermore, the authors caution that efforts to manage or eradicate these parasites can sometimes backfire. Leaders might respond with new policies and regulations, hoping to curb the problem. Paradoxically, such measures can unintentionally make things worse by adding complexity and obscurity to the organization’s operations. This shift of focus towards bureaucratic processes rather than core functions can result in inefficiencies and harm the organization’s reputation.
The authors advocate for bold action from leaders, emphasizing the need to “reform” institutions by prioritizing transparency and reinforcing fundamental principles. Regulators and legislators, upon uncovering wrongdoing, should also adopt this approach and strive to better identify parasitical actors.
Often, organizations that have strayed from their original principles must undergo significant changes to maintain or regain success.
“Complexity is the key driver of institutional parasitism and as organizations grow it is more difficult for leaders to be aware of emerging problems across many sites or partner organizations,” the researchers explain. “It’s also a fact of life that there is sometimes a gap between what we claim about ourselves and what we do—and that can apply, for example, to monitoring of suppliers.”
When faced with a parasitical threat, the instinctive reaction might be to pile on more rules and clauses to already extensive staff manuals or supplier contracts. Yet, leaders would be better served by simplifying things and examining the essential functions, goals, and standards of their organization. Ironically, this process of simplification can sometimes enable leaders to preserve a semblance of the status quo.
