Albert Einstein is best known as the absentminded genius who gave us the
theory of relativity, but he also developed a more humorous hypothesis of human
foibles: "Only two things are infinite," he concluded, "the universe and human
stupidity… and I'm not sure about the former."
Stupidity chimes with many anecdotal reports of corporate life, from Henry
Ford's refusal to listen to minions who said he should update the Model T, to
Coca-Cola's launch and subsequent withdrawal of New Coke in 1985.
And organisational cultures that unintentionally encourage stupidity may have
contributed to the current financial crisis, according to André Spicer,
Professor of Organisational
Behaviour at Cass, and Mats Alvesson, Professor of Business Administration at
Lund University in Sweden, whose theory of "functional stupidity" aims to
explain how intelligent and knowledgeable employees often leave logic at the
A Stupidity-Based Theory of Organizations, their new paper for the Journal of
Management Studies, suggests organisations that make a virtue out of the
cleverness of their staff and sell intangible services - accountancy firms,
consultancies, banks - are particularly prone to stupidity, assuming that their
intelligent staff act logically yet at the same time incentivising rash
behaviour based on intuition rather than deliberation.
Professors Spicer and Alvesson have spent years studying knowledge-intensive
workplaces: research and development labs, management consultancies and even
schools, where the nuts and bolts of what key employees handle is knowledge.
"The mantra of the '90s was, if you want to be competitive, work out what your
unique knowledge is and harness it," says Professor Spicer.
He points to the weighty body of research on organisational knowledge,
information, competence, wisdom, resources, capabilities, talent and learning
that has emerged inrecent decades. "Once inside these organisations we
discovered that, yes, there were lots of very smart, intelligent people with
degrees and PhDs from top universities, but when we looked at how they behaved
and used that intelligence day-to-day, it seemed to be highly limited. They
were either using intelligence in myopic ways, or doing things that were
downright stupid and didn't make much sense. And when they stood back and
looked at it, they admitted that this was the case."
Professors Spicer and Alvesson came across management consulting firms, for
example, which would recruit top university graduates, only to have them spend
their first few years inputting data to Excel spreadsheets and PowerPoint
The financial crisis prompted them to take a closer look at whether evidence
and literature pointed to some kind of organisational stupidity.
"When we were interviewing people inside some of these organisations, many
would say, 'This is just stupid'," recalls Professor Spicer. "We disregarded it
at first as just a sign of exasperation, but as we did some additional reading
around the topic, we realised there was quite a history of philosophers trying
to figure out why humans are often determined by their stupidity."
Non-rational or irrational decision-making in organisations has fascinated
Nobel prizewinners for decades, from Herbert Simon's theory of bounded
rationality (the rationality of individuals is limited by the information they
have, the cognitive limitations of their minds and the finite amount of time
they have to make a decision) to Daniel Kahneman's discovery that when we
process information, our brains interchange between two different systems:
deliberative processing and intuition, our default position in daily
But Professors Spicer and Alvesson believe these works miss a set of deviations
from smartness, which are neither semi-rational nor purely stupid. Functional
stupidity in organisations, they reckon, is demonstrated by the absence of
three processes: reflexivity, justification and substantive reasoning,
Lack of reflexivity means an inability or unwillingness by
employees within an organisation to question its dominant beliefs, norms and
expectations. For instance, employees may not consider or question
organisational morality because "what is right in the corporation is what the
guy above you wants from you". And this suppresses an employee's capacity
Lack of justification entails employees neither demanding nor
providing reasons and explanations.
This allows practices to be accepted without any significant critical scrutiny.
For example, organisations will often adopt new practices with few robust
reasons beyond the fact that they make the company "look good" or that
"competitors are doing it".
The final warning sign of functional stupidity, a lack of substantive
reasoning, happens when the focus is on achieving a given end, while
ignoring the broader substantive questions about what that end actually is. For
instance, an accounting firm may compress a broad range of issues into
recordable numbers, but ignore many of the more substantive debates around what
those numbers represent and the moral implications associated with using them
This is a form of stupidity, say Professors Spicer and Alvesson, because it
halts reasoned investigation and consideration of the implications of
"Our argument is that stupidity is different from irrationality," says
Professor Spicer. "Irrationality is an outcome, but stupidity is a
There are several steps, say Professors Spicer and Alvesson, that organisations
can take to escape the functional stupidity trap. In knowledge-intensive
workplaces, for example, organisations can be more specific about desired
outcomes, and give employees greater responsibility for and ownership of
outcomes. "Think of architects who used to work with physical models, but now
do almost everything by computers," says Professor Spicer. "Organisations
should redesign their processes to bring back tangibility to the work being
Secondly, Professors Spicer and Alvesson say organisations must encourage
employees to step back and ask reflexive questions, allow for devil's advocates
and remove taboos (and threat of punishment) from the airing of criticism. They
argue that corporate strategy must move beyond meaningless mission statements.
"If organisations were more honest about the substantive work they do, and that
was reflected in the goals they set, that would help give more substantiveness
back to the workplace," says Professor Spicer.
And finally, the two academics make a plea for organisations to value expertise
once again. "What strikes me when I examine many of the grand failures of the
last few years is that financial market experts were marginalised and
discouraged from giving their opinions," says Professor Spicer. "There has been
a degradation of professionalism in many organisations, with professional
knowledge being used in only the most narrow of ways."
He points to research by Dr Amanda Goodall, a Senior Lecturer in Management at
Cass, whose study showed that Formula 1 team bosses who started out as drivers
or mechanics won twice as many races as their rivals. "Or consider what makes
Michelin three-star restaurants maintain excellence over long periods of time -
it's the chefs who started right at the bottom, cleaning the pots and
Leaders who know - really know - how their organisations create value will be
less likely to lead their employees into functional stupidity, say Professors
Spicer and Alvesson.
Ian Wylie is a freelance journalist. He can be contacted at firstname.lastname@example.org