Human ressources
law & economics

On January 28, 1986 I was shocked, as so many were, by the explosion of the space-shuttle Challenger. During the next several months, I spent much of my time following the investigations into its cause, most notably by a commission headed by the former Congressman William P. Rogers. What was revealed, over time, was that the disaster was not the result of a single decision; it was the expression of an organization that was deeply flawed along an apparently innumerable set of organizational dimensions. It had, for example, lost control of its spending and even, incredibly, over its own technical processes. Contractors, by nature subject to their own organizational constraints, were in the position of being able to do their work without supervision from NASA, who no longer had the capacity to understand what they were doing. All of these organizational flaws showed up in various ways in the final product, such as cracks in turbine blades, on one hand, and increasingly inadequate crew training on the other. The Rogers Commission left no doubt that if the specific problems that led to the Challenger explosion had been averted, something else would have come along that would have had equally catastrophic results.

But all of this raised a paradox. There was never any question that the NASA that landed people on the moon was a great organization. Yet here we were, only fifteen years later, and NASA was an organized mess. As James Webb, the man who, more than any other single person, had built NASA put it: "There was an organization that was regarded as being perfect, that suddenly doesn't do the simplest thing".

So the question for me, as a student of organizations, was how did that deterioration happen? How did an organization that, at one point obviously knew how to be great, become, within a relatively brief period of time, a failure?

I developed a theory, based on psychoanalysis, that was able to explain this. In fact, it did better than that. It showed, not only how a great organization could fall into the condition I called "organizational decay," but that the attainment of greatness was part of the reason why decay took place.

The theory was wide-ranging. Every type of organization was susceptible to this form of deterioration. So I tried it out on General Motors, another once great organization that had become a disaster area, where it worked equally well.

I've since changed the focus of my research somewhat, but I lecture on this theory to my MBA students, who know full well what I am talking about. So I bring it forward now.

The Ego Ideal

For psychoanalytic theory, the early stages of psychological life are not really left behind, but continue to influence us even as adults. Of particular importance to us here is the earliest stage of life, which is marked by the emotional fusion of infant and mother. The mother is the world to the child and her love of the child is experienced, not as her love, but as what the world is made of. The child feels like the center of a loving world; lovable, not for what he or she does, but for whom he or she is. Freud refers to this happy state as primary narcissism.

But the world, alas, is not our mother and is indifferent to us. The feeling of lovability is overcome by anxiety, intolerable feelings of helplessness and isolation. The only way to defend ourselves against it is by the fantasy that we will become again the center of a loving world as we were when that world was a loving mother. Freud refers to this fantasy as the ego ideal. The attainment of the ego ideal is the basis of hope, not only for the child, but for all of us.

Anxiety, thus, never disappears, but becomes tolerable because we believe that we can get away from it. There is thus a tension created, between anxiety, representing the lack of mother's love, on the one hand and the ego ideal, representing the end of anxiety, at the other. They are two sides of the same coin.

Organizations and the Ego Ideal

One cannot live a tolerable life without hope. Therefore we all need to have an ego ideal. We satisfy this need by seeing the ego ideal in some state of affairs that we can attain. Then, our anxiety drives us to attain that state. So we strive to obtain "success," or fame, or romantic love.

For our purposes, what is important is that many people see the organization that they work for as the ego ideal. This is the basis of psychological involvement in an organization. I call an organization seen in this way the "organization ideal." But, of course, membership in an organization, by itself, will not bring the ego ideal about. What will maintain the organization ideal while still registering that the organization has not brought an end to one's anxiety?

One can have the idea that the organization of one's fantasies does not exist at one's own level, but can be found at a higher level, where the organization really is, ultimately at the level of the organizations' top management. Then, one's anxiety can serve as a goad to gain organizational advancement. This is the basis of much of the motivation to work, specifically, the drive to rise in the organization's hierarchy, which is taken to be the route to the ego ideal.

But maintaining this idea requires the belief -- the feeling, really -- that the organization's high officials have attained the ego ideal; idealizing them, in other words. Therefore, given the motivational importance of this idea, one can see how organizations would want to maintain the idealization of its top management. This will be most easy to do when the organization is flourishing, thereby providing proof of the greatness of its top management.

But hubris breeds nemesis, as the Greeks put it; the gods despise human arrogance and send retribution. This is where the fall from greatness begins. For no organization, nor any high official, can be perfect. So maintaining the idea of their perfection builds a fiction into the system. In various ways, this leads to the organization cutting itself loose from reality and, ultimately, becoming incapable of coping with it. I give the name organizational decay to this condition. It has a number of dimensions. I'll mention a few of them, with examples from NASA and General Motors.

Dimensions of Organizational Decay

1. Commitment to a bad decision

Every person and every organization can make a bad decision, but the organization ideal, the perfect organization, cannot. The result is that when a bad decision is made, the organization cannot recognize that it was a bad decision, and is stuck with it and with its consequences. At NASA, the original bad decision was to maintain the Shuttle's operations schedule at an ambitious level, even though the funding upon which the original schedule had been based had been drastically cut. Every organizational disaster found by the Rogers Commission had this at its core.

2. Denial of reality through the idealization of the organization

Psychologically, the consequences of the bad decision are transmitted through the transformation of the organization's culture. The bad decision is justified on the basis that it must have been correct since the organization is the organization ideal; it is perfect. This is the point where the organization begins cutting itself loose from reality.

This is former NASA astronaut John Glenn:

“Well, I think there has been, and I think back in the days when I was in the program I think there was a can-do attitude, a go-for-it attitude… And I think that can-do attitude, perhaps at least with some people at NASA... was replaced by a can't-fail attitude, and I think that's unfortunate that that crept into the program”

Eugene Cernan, another of the original astronauts, put it more pithily: "I think they were just caught up with the fact that 'Hey, we're infallible. We can't help but succeed.’ "

But this self-idealization does not consist only in beliefs; it has programmatic consequences. For example, NASA changed its production management process to something it called "success oriented management." This differed from traditional management in that it did not test the components of complex systems individually, but assumed they would work, bolted them together, and then tested the whole assemblage. The results, predictably, were disastrous. According to an article in Science magazine that appeared in 1979, six years before the Challenger explosion, at least five major fires resulted, damaging, among other things, a fuel pump, the engines and test orbiters to which they were attached, and the test stand.

3. Advancement of employees who detach themselves from reality and discouragement of reality‑oriented employees

The self-idealization of the organization must result in decisions that are increasingly poor. The capacity to maintain idealization of this increasingly flawed organization and the high officials who represent it, and especially the capacity to maintain the motivation of others by making a persuasive case for this idealization, become increasingly rare. At the same time, they become increasingly important. As a result, the capacity to cut oneself loose from reality, and to enhance the detachment of others from reality, become increasingly important criteria for selection and advancement.

John DeLorean, a former high executive at General Motors, describes what it took to "get ahead" at GM:

“That something different was a very subjective criterion which encompassed style, appearance, personality and, most importantly, personal loyalty to the man (or men) who was the promoter, and to the system which brought this all about. There were rules of this fraternity of management at GM. Those pledges willing to obey the rules were promoted. In the vernacular, they were the company's "team players." Those who didn't fit into the mold of a manager, who didn't adhere to the rules because they thought they were silly, generally weren't promoted. "He's not a team player," was the frequent, and many times only, objection to an executive in line for promotion. It didn't mean he was doing a poor job. It meant he didn't fit neatly into a stereotype of style, appearance and manner. He didn't display blind loyalty to the system of management, to the man or men doing the promoting. He rocked the boat. He took unpopular stands on products or policy which contradicted the prevailing attitude of top management.”

At the same time, valuable employees who keep their eyes on reality, and are not swept away by fantasy, become increasingly marginalized and ignored. They are not invited to important meetings, their projects are not funded, and they are left with nothing to do. Often these were the employees who were responsible for the organization's great achievements. But in increasing numbers, they leave the organization of which, in previous times, they had been the backbone.

4. Deterioration of Management

As this goes on, the quality of managerial work deteriorates. The individuals who rise to high positions are in over their heads. They become incapable of doing the work that the position calls for. Often, they do, instead, the work that is familiar and with which they feel comfortable.

At a university with which I am familiar, a provost, hired for political reasons, spent much of her time reviewing the applications faculty members submitted for their sabbaticals. The important decisions that needed to be made usually were not. Another person, hired as president, spent much of her time designing revisions of the university's road system. Relations with important sources of funding were left to atrophy.

5. The Organizational Jungle

The deterioration of management often results in a deterioration of interpersonal relations among managers. A person who is in over his head knows, on some level, that things are beyond him. This is obviously very threatening. What if others find out? So he must act so that others do not find out. Part of his job, we know, is to enact the organization ideal; to act, in other words, as if he were the perfect manager in his position, fitting in and coordinating perfectly with the other perfect managers. Much of his anxiety will result in a redoubling of this effort in this performance. But there is no one he can talk to about this discrepancy between himself and his role, not even his spouse. Truth is, he cannot even consciously acknowledge it himself. Under these circumstances, he is likely to project the cause of his anxiety outward, on to others. He is not feeling overmatched by his work; they are accusing him of being in over his head. They are trying to take away his job, he thinks. So what does he do? He defends himself by attacking them, trying to take away their jobs. And how do they respond to his attacks? They attack him back. So what began as a fantasy of persecution becomes a reality of persecution. And so, behind the veneer of management working and getting along perfectly together we find a jungle, a Hobbesian war of each against each and all against all, unacknowledged and largely unconscious. One can think of worse approximations to hell.

6. Separation of Management and Employees

The result of this must be that management and lower employees come to live in two different organizations. Through idealization, the organization's management comes to live in a dramatized world that is perfect; it is the organization ideal. In this performance,, everybody is fully suited to their job and fully dedicated to the organization, they communicate perfectly with one another, constructive criticism is welcomed, and all the decisions that are made are exactly right. None of this is true, but it is believed, and remember that much of the rest of the organization has the task of acting as if it is true, and that the fantasy of the organization ideal has been made real. In other words, their part in this is to tell the boss what he wants to hear.

In the meanwhile, those who must do the actual work know full well the flaws in decision making, the opacity of communication, the dangers of delivering bad news, and so on. If they have problems in their work, they are stuck with them. Management, whose job, one would think, would be to handle those problems, doesn't want to know about them. In the first place, they conflict with the idealized image of the organization and its high officials, which is to say themselves. In the second, as the promotion process settles the ranks of management with people who cannot do their work, they would be unable to deal with problems that arise.

These two worlds were clearly in evidence at NASA. Testimony of the high officials revealed that they thought NASA was perfect, and that whatever NASA did was perfect because it had been done by perfect NASA. The engineers who actually did the work knew that was far from the case. The Shuttle, they knew, was a disaster waiting to happen. They used to hold their breath when the rocket took off. They knew the Challenger would blow up on that day, and why. And yet they could not get the management to recognize the substance of their concerns.

7. Feynman's Test

The separation of management and employees suggests a way of detecting organizational decay, which I call Feynman's Test.

The great physicist Richard Feynman was one of the members of the Rogers Commission that was looking for the causes of the Challenger disaster. At one point he grew bored with some of the irrelevant detail that they were being subjected to and, he said, "I made up a little game for myself."

Feynman had come to the view that that NASA management had a wildly unrealistic idea of the reliability of the Solid Rocket Boosters, whose seals were the immediate cause of the failure. If the problem were systemic, he reasoned, one would be able to find the same disconnection from reality in other areas, such as the main rocket engines.

So he got together with a group of the engineers who worked on the main engines, together with their supervisor Mr. Lovingood, and asked them to write down their estimate of the possibility that the main engines would fail. The engineers' estimates ranged from 1 in 200 to 1 in 300. Mr. Lovingood wanted to avoid giving a number, but in the end gave the same estimate that NASA management had offered for the total system: 1 in 100, 000. The result:

“When I left the meeting, I had the definite impression that I had found the same game as with the seals: management reducing criteria and accepting more and more errors that weren't designed into the device, while the engineers are screaming from below, "HELP!" and "This is a RED ALERT!"”

So we may generalize. The people who do the actual work know what is going on; they have to if they are going to get it done. The question is whether their management knows. If the quality assessments of the management and the working employees are too far apart, that suggests it might be time to raise one's own RED ALERT as Feynman put it.


I have spoken about organizational decay as if it were something that just happens, the result of impersonal processes. If that were the case, one would think it could be fixed by other impersonal organization processes. The problem here is that the processes that give rise to organizational decay are far from impersonal; they are personal, indeed.

The truth is, we love being idealized. We want others to tell us how wonderful we are. Everybody does. And if we use promotion in an organization as a vehicle for gaining idealization, this gives us an extreme personal investment in it.

A high position in the organization's hierarchy is a focus for idealization and this serves a motivational purpose for the organization. But it also means that those who have used it for that purpose are in the position to use their power to require their idealization by those beneath them. The attainment of their own perfection was, after all, the reason they sought the position in the first place.

In the end, then, the cause of organizational decay is our own narcissism, and this can only be resolved by each of us through the acceptance of our own limitation. It is not organizational, nor even psychological; it is existential and spiritual.


As I mentioned before, I've changed the focus of my research since I developed this theory; I now study "political correctness." Interestingly, though, the psychology of PC is not so far removed from the narcissistic processes I talk about here. Instead of idealizing the organization and its high officials, the politically correct organization idealizes people who are thought to be oppressed. But the loss of reality is rather similar, except that the damage done by PC is potentially far more severe. In a decadent organization, a person who keeps his eyes on reality and calls things as they are may be marked off as not a team player and lose the chance of promotion, but in a politically correct organization that person will be seen as a moral monster and shunned, if not expelled entirely. The main difference is that in the decadent organization, a person's idealization consists in thinking that he does a good job, whether he does or not. But doing the job is still important. In the PC organization, doing a good job is of no significance. In fact, the organization changes its whole meaning. From a business where people make a living, it becomes just a stage for a morality play that may have nothing to do with its business at all; its business may actually get in the way. Organizational decay may make an organization inefficient, but PC can kill it outright. Yet these are considerations that will have to be explored on another occasion.

 Posted October 3rd 2013


All Rigths Reserved © RIMEFI
howard S.

Howard S. Schwartz grew up in New York City and attended Antioch College. His PhD is from Cornell University. He was one of the founders of the International Society for the Psychoanalytic Study of Organizations. The theory presented in this article is further developed in his book Narcissistic Process and Corporate Decay: The Theory of the Organization Ideal (NYU Press). His most recent book is Society Against Itself: Political Correctness and Organizational Self-Destruction (Transaction Publishers). He teaches at Oakland University and is currently on sabbatical leave in New York City. 


Psychoanalytic Study of Organizations 
Psychosociology, Psychoanalysis and Organizational Behavior, Psychodynamics of Political Correctness 


Oakland University 


Narcissistic Process and Corporate Decay: The Theory of the Organization Ideal, NYU Press, 1992 


Footnote 1: Empirical studies indicate that internal managers are more likely to be promoted CEO if the firm has high performance (see for example, Dennis and Dennis (1989), Weisbach (1989), Easterwood and Raheja (2012)). Note that the only requirement for Raheja (2005) model to work is that internal managers prefer to be CEO of a higher value firm, it is not necessary for the board to select and outside CEO candidate.