All organizations, whether they are for profit or nonprofit, have traditionally evolved from the creative energy of their founders organizing stakeholders behind a common purpose. The founders function as the decision makers because we believe that they know better how to achieve the common purpose over time. As an organization matures, the founders invite other stakeholders to become decision makers, and the rest of the organization follows their collective leadership. This human organizing principle is so much the norm that we consider it natural. It has always happened this way and it still does. Until it doesn’t anymore!
We are waking up to what seems to be a complete reversal of this traditional organizational dynamic. The Internet has radically altered the world. Both for-profit and nonprofit organizations find themselves dealing with a new paradigm.
Three Change Factors
There are three factors that are driving the “creative destruction” of traditional organizations.
- The skyrocketing level of education in the post-World War II era is probably the primary driving force behind this shift to greater participation in all decision making. Since 1940, the percent of Americans who have completed high school has increased from 24.1% to 83.6% and college completion has jumped from 4.6% to 26.5%.
- From 1994 to 2004, Internet access in America jumped from 4% to 74.9%. This equal access to information has changed the way stakeholders view their participation. They are no longer deferential toward “wiser” top management. In their minds, all knowledge is created equal.
- Because they find themselves living in an equal opportunity knowledge-acquisition world, younger generations are increasingly assuming the right to be included in the decision-making processes that most affect them.
The Impact Across All Sectors of Society
Let’s take a look at some examples of how this Internet democratization of information has led a decentralized generation to seek greater participation in decision making.
- THE ARAB SPRING – Muslim countries across North Africa and the Middle East erupted in revolution when their repressed populations were able to use the Internet to inform themselves about what was going on in the outside world and then communicate and organize on cell phones through the use of social media.
- DONALD TRUMP – Hijacked the Republican Party using Twitter to communicate with a constituency that materialized from nowhere and caught traditional Republican leaders napping.
- THE BOTTOM-UP ECONOMY – Consumers and businesses now co-create value through a form of participatory product development. Instant satisfaction feedback on sites like Yelp, Angie’s List, Facebook, Foursquare, and Goodsnitch can make or break a company’s product or service in one day. Executives utilize these instant feedback sites to redesign products, improve service systems, and create training programs based on the participation of their customers who feel they are entitled, and take every opportunity, to have their say.
- HEALTHCARE – The Internet has allowed consumers to diagnose and make their own treatment decisions. Gone is the passive patient who thinks the doctor is God and wouldn’t think of questioning their care.
- NONPROFIT – Recently, stakeholders in the nonprofit sector are using an “exit” strategy to move themselves up to decision maker. If they cannot participate in the decision making process of their current organization, they simply form their own organizations and then make all the decisions themselves.
This paradigm shift is an ongoing explosion in the desire, ability, and opportunity of stakeholders to play a powerful role in individual and organization-level decision making. The implications for nonprofit and for-profit governance and leadership are considerable.
