Three Vital Events that help us understand business and nonprofit organizational dynamics:

1. Founding: a new organization coming into being. New organizations are a source of variety in organizational populations.
2. Transformation: organizations changing from one form to another. E.g. from simple to complex. With the exception of changes within an organization as it ages, transformation is a fairly rare organizational event.
3. Disbanding: organizations cease to exist. Organizations may dissolve, go out of business, shut down, disappear, or otherwise cease to exist.

Understanding the volatility underlying population change

On the board, I drew graphs with number of organizations on the y axis (vertical axis) and time on the x axis (horizontal axis). One graph showed population growth, one showed stability, and one showed decline. We made the point that we could explain the trend in the graph by the relative balance between foundings and disbandings (ignoring the rare event of transformation in this analysis). But the relative balance between foundings & disbandings does NOT tell us the absolute frequency of these events: they could be high or low, or in between.

Rates of founding and disbanding

We typically calculate rates over a one year period, using the number of organizations alive or active at the beginning of the year as the denominator. The numerator is the number of organizations that were founded or disbanded over the course of the year.

Typical rates in America are around the 10 percent level, but they vary across regions. E.g. in Research Triangle Park, foundings are higher and disbandings are lower than in the Western part of the state.

Four Evolutionary Processes: see Table 2.1 in Organizations Evolving.

Questions we discussed in class:

1. What's an intentional variation? A blind one? What is the relative balance between them? Who cares most about this issue? Do people recognize blind variations when they experience them? Are they reluctant to acknowledge them?
2. What's an example of an external selection force? An internal one? Are they often in conflict?
3. What retention mechanisms are commonly used by student groups, clubs, and associations? What's the role of emotion in such mechanisms?
4. What's wrong with this statement: "Mack Brown was a coaching genius. He took over a declining program and in seven years, realized his dream of building a top program." (Hint: you should be able to define & explain the post hoc fallacy, also known as retrospective reconstruction fallacy.)

Final task of the day: Take the data from our North Carolina County Business patterns exercise in the last class & construct an evolutionary explanation for them. (Hint: look for evidence of big firms coming or going.)

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