In 1991, James March published a paper that described one of the most fundamental contradictions in the life of organizations. He divided everything a company does into two types of activities: exploitation—extracting returns from what already exists and already works, and exploration—searching for what does not yet exist.
The first is optimization, efficiency enhancement, process refinement, cost reduction. The second is experimentation, new directions, searching—most of which will lead nowhere.
March's key observation is that not only is a balance needed between them; they compete for the very same resources and, more importantly, require opposite conditions.
Exploitation yields results predictably, quickly, and measurably. Exploration yields results rarely, slowly, and with a high failure rate. Any system that honestly compares these two types of activities using the same criteria will always favor the former. And this is not a management error—it is simple arithmetic. Investing in optimization pays off with a clear probability; investing in exploration does not.
March called this a competence trap at the organizational level: a company gets better and better at what it already knows how to do, and precisely because of this, it becomes worse at doing anything else. In the short term, it looks healthy—efficiency is growing, processes are fine-tuned. In the long term, it becomes increasingly vulnerable to changing conditions, because its entire structure is tailored to a single model that will, sooner or later, cease to work.
For HR, there are several non-obvious implications here, because the contradiction directly boils down to people and evaluation systems.
The same evaluation criteria cannot work for both types of activity. If an employee tasked with searching for something new is evaluated based on predictability of results and meeting deadlines, they will stop searching—they will rationally shift to tasks where the outcome is controllable. If the head of an experimental unit is incentivized under the same bonus scheme as an operational manager, experiments will cease.
The requirements for people are also different. Exploitation demands discipline, repeatability, and attention to deviations. Exploration requires tolerance for uncertainty and readiness for the fact that most of the work will yield no results. This is not a question of a specialist's competence; these are different profiles. Expecting both qualities from one person in a single role is a common mistake when drafting job requirements.
What is done in practice: structural separation—experimental areas are taken outside the operational loop, with separate criteria and a separate evaluation horizon; time separation—a protected allocation of time for exploration that does not compete with operational tasks for priority; people separation—recognizing that a predisposition toward one type of activity does not make a person weaker in another, but simply different.
The main thing to understand is this: if no deliberate action is taken, the organization will drift toward exploitation on its own. Not because someone decided so, but because every single decision in its favor seems reasonable.
#HR #OrgDesign #Ambidexterity #Management
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