Institutional Sclerosis (Olson)

Organizations accumulate interest groups, rules, and legacy processes over time that progressively choke adaptability. Mancur Olson showed that stable societies breed special-interest coalitions that extract rents and resist change. The pattern is insidious: each rule made sense when created, but the aggregate effect is paralysis. Warning signs include decision cycles lengthening year over year, 'compliance' headcount growing faster than production headcount, and new initiatives requiring more approvals than the year before. The British economy's post-war stagnation, Kodak's inability to pivot despite inventing digital photography, and the late Roman Empire's bureaucratic ossification all illustrate the terminal phase. The cure—periodic creative destruction—is politically painful, which is why most institutions choose slow death over reform.

When to use it

When an organization feels slow despite talented people. When approval chains grow but output doesn't. During periodic organizational health audits. When competitors with fewer resources are moving faster.

How it can help

Helps leaders audit their organization for accumulating friction before it becomes fatal. The practical test: measure how long it takes to go from idea to shipped product today versus three years ago. If the ratio is worsening, sclerosis is setting in. Prevention requires scheduled 'rule sunset' reviews where every process must be re-justified from scratch. Early detection saves organizations because the early stages are reversible—remove three unnecessary approval layers and speed returns. The late stages require restructuring or spinning out new entities free from legacy constraints. Think of it as organizational cholesterol: measure it regularly, intervene early, or face a heart attack.