Organisation theory asks how firms coordinate thousands of strangers. Weber described bureaucracy; March and Simon modelled bounded rationality; contemporary management literature tracks psychological safety and moral injury. FPE asks the same question in one line: does this level-\(L+2\) node still satisfy \(\mathcal{R} \ge 1\)?
| Concept | What it names |
|---|---|
| Formal vs informal organisation | Chart on paper vs how work actually gets done |
| KPI / metric fixation | Optimising measurable proxies instead of outcomes |
| Moral injury (Litz et al.) | Harm from enforced participation in actions that violate witnessed reality |
| Creative destruction (Schumpeter) | Macro-statistic of firm-level \(\mathcal{R} < 1\) events |
| Technical debt / org debt | Accumulated friction and obsolete process |
Firm mortality is approximately exponential (Daepp et al., 2015) — consistent with a ratio that drifts stochastically until it crosses 1.
| Term | Organisation reading |
|---|---|
| \(P_{in}\) | Revenue, funding, billable hours, volunteer effort |
| \(\eta(I)\) | TFP, output per meeting, time-to-ship, specialisation gains |
| \(\omega\) | Layers of management, compliance load, process theatre |
| \(\mathcal{D}_{KL}\) | Board deck vs shop floor; strategy vs market reality |
| \(\Gamma\) | Silos, grievances, unfinished reorgs, political factions |
| \(\Phi\) | Employees, tacit know-how, key engineers, trust stock |
| \(\Psi\) | Investors, customers, regulators, industry ecosystem |
| \(\mathcal{R} < 1\) | Layoffs, bankruptcy, acquisition, irrelevance |
When metrics diverge from witnessed \(P\) on the floor, workers hold high \(\mathcal{D}_{KL}\) between institutional \(Q\) and daily reality. Energy that could lower collective surprise instead goes to maintaining the fiction — paid in burnout (burnout_and_substrate.md).
KPI theatre is not “lying” alone — it is multiplicative denominator inflation: every decision made on false \(Q\) raises future \(\Gamma\) when reality arrives.
Moral injury occurs when an agent must act on institutional \(Q\) while their ISM models witnessed \(P\) — e.g. selling a product they know fails, enforcing a policy they know harms \(\Phi\). The agent pays glucose and sleep to suppress surprise instead of updating the org’s model. This is individual denominator stress caused by organisational-code \(\mathcal{D}_{KL}\).
Specialisation raises \(\eta\); coordination raises \(\omega\). Late-stage organisations often add process without \(\Gamma\) reduction — meetings, dashboards, approvals — which is \(\omega\) without return. The classic mistake: cut \(\Phi\) (layoffs) to fund \(\omega\) (consultants) while leaving \(\mathcal{D}_{KL}\) untouched.
Short-term stability when:
| Strategy | When rational |
|---|---|
| Voice | Shared error, repair culture, your \(\Phi\) can sustain cycles |
| Exit | Large \(C\), predatory \(\mathcal{D}_{KL}\), \(\mathcal{R}^{(L)}\) trend negative |
| Loyalty | Recoverable org, voice already moving the super-node |
Unionisation is collective voice — lowering individual cost of op. 1+2 by pooling \(\Phi\).