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We explain organizational failure through incompetence, groupthink, or corruption. But what if excellent organizations with talented people are structurally unable to judge well—not because of who they are, but because of how decision demand relates to processing capacity?
When good organizations make bad decisions, we reach for familiar explanations. But each has gaps.
The people making decisions simply aren't good enough
But: But these organizations often have exceptional talent and track records
Social pressure suppresses dissent and critical thinking
But: But bad decisions happen even in organizations with strong debate cultures
Decision-makers are captured by special interests
But: But many failures involve no corruption—just poor outcomes from good intentions
Decision-makers didn't have the right data
But: But failures often occur with abundant information—the problem is processing it
IRSA research suggests a structural explanation: organizations fail when decision demand exceeds processing capacity. Here's the sequence:
Decision demand exceeds the institution's processing capacity. More cases, more complexity, more stakeholders than the judgment bandwidth can handle.
Under pressure, the institution substitutes faster mechanisms for slower judgment: rules, precedent, external consultants, algorithms, delegation.
Each substitution reduces flexibility. The organization increasingly runs on autopilot—unable to exercise judgment even when the situation demands it.
Decisions become predictably suboptimal. Not because people are bad, but because the system structurally cannot exercise the judgment needed.
Key insight: This isn't about bad people or bad intentions. It's about architectural failure—the structure of how decisions flow through organizations.
Board approved expansion that drained resources from core mission
Board was captured by ambitious executives
Board faced 40% more decisions than previous year; expansion got 15 minutes
Launched product that violated stated company values
Values were never real—just PR
Review processes couldn't keep pace with launch velocity; values-check was skipped
Approved application with known safety issues
Regulatory capture by industry
Application backlog was 18 months; 'expedited review' became the default
Under decision overload, boards substitute faster mechanisms (rules, consultants, precedent) for slower judgment. This isn't failure of character—it's a structural rate-limiting problem. When processing capacity is overwhelmed, even excellent boards can't exercise the judgment their role requires.
Groupthink is one factor, but IRSA research shows a more fundamental issue: when processing capacity is overwhelmed, the organization structurally cannot exercise judgment—regardless of group dynamics. You can have perfect psychological safety and still fail if you can't process decisions fast enough.
Three approaches: (1) Reduce decision load—not everything needs board-level judgment; (2) Increase processing bandwidth—better preparation, clearer frameworks, appropriate delegation; (3) Build 'authority insulation'—structural buffers that protect judgment capacity from demand spikes.
Because the problem is structural, not personal. Brilliant people in an overwhelmed system still face rate-limiting. The institution's decision architecture—how information flows, how decisions are staged, what gets escalated—matters more than individual capability.
IRSA's research on Authority Capacity provides formal frameworks for understanding—and preventing—organizational decision failure.