Understanding Parkinson's Law and Organizational Entropy: Lessons for Modern Internet Companies

Parkinson's Law, also known as the "official disease," "organizational paralysis," or "big‑company disease," was introduced by British historian and political scientist Cyril Northcote Parkinson in his 1958 book Parkinson's Law .

Parkinson concluded that in administrative management, agencies expand like a pyramid, staff numbers keep inflating, everyone stays busy, yet organizational efficiency steadily declines—a phenomenon he called the “pyramid‑rising” effect.

He analyzed why staff numbers swell: an incompetent official has three options—resign, bring in a capable assistant, or hire two less‑capable assistants. The first is unacceptable because it sacrifices power; the second creates a rival; the third is chosen, leading to two mediocre assistants sharing work while the official remains aloof, and the cycle repeats as each assistant recruits even less capable helpers.

The root cause of this "Parkinson phenomenon" is organizational entropy increase .

Organizational entropy refers to a closed organization reaching a stage where personnel become complacent, rigid, and lack vitality; execution and effectiveness drop, the organization becomes stagnant, and ultimately faces demise.

To counter entropy, organizations must continuously eliminate lagging members, introduce fresh talent, conduct performance assessments, and drive organizational change—summarized as effective management.

In the internet era, many companies are reshaping their structures. For example, Haier’s "micro‑enterprise" model and Zhang Ruimin’s "person‑unit integration" abolish the traditional pyramid, turning the company into an incubator where employees become "micro‑owners" directly facing users, thereby accelerating market response.

The internet itself is a decentralized, mesh‑like organization without a central decision point, allowing rapid, situational decisions and greatly speeding up the response of each connected unit.

This architecture demands high capabilities from staff, blurred role boundaries, multi‑role collaboration, and small, task‑driven teams that form and dissolve as needed, without relying on hierarchical or complex process controls.

The key characteristics of such internet‑era structures are flatness, decentralization, and self‑organization.

Compared with traditional pyramid‑style, functional, divisional, or matrix structures, internet companies face faster environmental changes, requiring shortened decision radii and flattened hierarchies.

Many emerging internet firms adopt a flat structure: a few hundred employees are organized into only two layers—a core management team led by the CEO and dozens of small work groups that can quickly re‑assemble into larger project teams for major tasks and then dissolve.

Internet enterprise architecture must be flexible, product‑centered, and organized into project development groups that integrate resources for rapid product innovation, stay market‑oriented, focus on customer needs, and continuously improve products and services. The internet mindset emphasizes openness, collaboration, and sharing, which should also permeate internal organization.

Xiaomi exemplifies a flat structure, believing that excellent people possess strong self‑motivation and self‑management. Traditional distrust‑based management is unnecessary; employees are driven by a shared product belief, simplifying management.

In fast‑growing Xiaomi, focusing on core products and maintaining flat management enables extreme execution and rapid development.

Xiaomi’s hierarchy is minimal: a few thousand staff are organized into three levels—seven founding partners, department leaders, and engineers. Teams are kept small (around a dozen members) and split into even smaller groups as they grow.

The office layout reflects this structure: one layer for product, one for marketing, one for hardware, and one for e‑commerce, each led by a founder who can directly oversee execution without interference, allowing each domain to strive for industry leadership.

Except for the seven founders, other employees have no formal titles; promotions are reflected only by salary increases, eliminating title‑based conflicts and keeping focus on work.

This flat structure reduces time wasted on hierarchical reporting. Xiaomi holds only a weekly company‑wide meeting and very few other gatherings; in its early years, the seven partners met collectively only three times, devoting the rest of their time to product development. For example, the 8.15 e‑commerce campaign was planned, designed, developed, and supplied in under 24 hours, achieving nearly 100,000 reposts and 200,000 units sold.

Founder Lei Jun positions himself not as CEO but as chief product manager, spending most of his time in product meetings with MIUI, MiTalk, phone, and marketing teams, where product details are decided collaboratively with product managers and engineers.

Author: Huang Zhekeng. Source: Excerpted from the bestseller Technical People’s Path of Cultivation .

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