The Compounding Principle applies not just on a personal /individual level but also at a Team or Organizational level.
Let's take a family which could be considered as team and imagine for instance that the mother tells the child "It's bad to hit other kids" while the father tell him "It's OK to hit other kids, show them who's the boss!"
What do you think is going to happen with that child?
In a business environment it's easy to notice the Mixed Effects of Compounding. If in an enterprise the employees or departments make choices that reinforce one another the results/profitability would go one way.
But if in an enterprise the employees or departments make choices that contradict or cancel each other out not only the results / profitability will go down but the business will destroy itself.
As previously stated it's important to distinguish between:
- positive and negative compounding effects;
- occasional and recurring / repeated actions;
- their mixed effects;
If in a business one employee / department makes an occasional mistake and another employee / department corrects it that would be a good thing. That would be a short term cancelling out compounding effect.
But if in a business one employee / department makes repeated mistakes and another employee / department needs to correct it that would be a bad thing. Why? Because instead of doing one's job one has to constantly correct someone's else's mistakes. So the appropriate thing would be to learn and prevent same mistake from happening or replace the faulty employee.
The reverse doesn't apply when it comes to positive actions either on the short or long term.
Read about Positive Negative Mixed Compounding Effects
Consider Thinking and Answering the following Questions about Compounding Principle.
