organizational inertia

Organizational inertia is the tendency of a mature organization to continue on its current trajectory. This inertia can be described as being made up of two elements -- resource rigidity and routine rigidity. Resource rigidity stems from an unwillingness to invest, while routine rigidity stems from an inability to change the patterns and logic that underlie those investments. Resource rigidity relates to the motivation to respond, routine rigidity to the structure of that response.

In the face of rapid or discontinuous external change, it is the organizational inertia that must be overcome if a firm is to survive. In a competitive situation where new players are entering the industry, it is the incumbents that are particularly susceptible to the downside of this inertia. In this case it is often referred to as incumbent inertia.

Overcoming organizational inertia --
Threat perception in organizations experiencing discontinuous change is often thought to be the impetus necessary to prompt organizational change, a change in inertia, by decreasing the current inertia through changes in resources and routines. While threat perception is a response catalyst, it has been found to decrease inertia in some cases, a good thing, but increase inertia in other cases.

Organizational inertia and threat perception implications and management --

Gilbert's 2005 study concluded the following propositions regarding threat perception and resource rigidity --

• The perception of an imminent threat in the face of discontinuous change enables managers to overcome sources of resource rigidity that stem from resource dependence (see resource rigidity).
• The perception of an imminent threat in the face of discontinuous change enables managers to overcome source of resourced rigidity that stem from incumbent position reinvestment incentives.

Gilbert's 2005 study concluded the following propositions regarding threat perception and routine rigidity --

• Perception of an imminent threat leads to a contraction of authority that amplifies routine rigidity.
• Perception of an imminent threat leads to a reduced level of experimentation that amplifies routing rigidity.
• Perception of an imminent threat leads to a focus on existing resources that amplifies routine rigidity.

The preceding propositions leads to three propositions regarding the organizational response to threat perception --

• Involving outside influence when deciding how to respond to discontinuous change will increase the likelihood that mangers will structurally differentiate a new venture from its parent organization. One reason for creating a differentiated structure is to decouple the motivation at the parent from the motivation at the venture. Being separate, the employees of the differentiated unit own the opportunity in a way they never would as part of the traditional business. The parent organization can remain focused on th threat to the core business while the differentiated unit(s) can fully focus on new opportunities.
• Structural differentiation can help decouple threat perception in a parent from an opportunity perception in a new venture.
• Outside influence, structural differentiation, and opportunity framing combine to relax routine rigidity in a new venture.
Outside influence and structural differentiation both serve to frame opportunities in a more beneficial manner for the new venture, decoupling the motivations and getting the venture focused on innovation of the new venture rather than on the parent company. The relaxed routine rigidity is a key element in fostering innovation in a yet to be defined area. The structural autonomy lowers the tendency for a parent organization to assert authority over a new venture. Structural autonomy expanded the ability of venture management to run local experiments that would not have been possible in a world of business model and product templates. Outside influence also helped expand the alternatives considered in the new ventures.

Gilbert, 2005, 741-743