Organizational Supercompensation? Could Alternating Familiar and Challenging Conditions Benefit Individual and Organizational Fitness?

Although organizations have always needed to respond to changes in their environment, with the current high corporate mortality rates there is much interest in how an organization can survive in highly unstable and unfamiliar environments. In practice, the level of environmental dynamism fluctuates between stability and instability periodically or sporadically, with the magnitude, frequency, unpredictability, risks, and nature of such fluctuations rapidly increasing in recent times. Our focus is on how an organization can survive such fluctuations. It is well-documented that humans and other organisms can benefit from some environmental variation, as in training regimes where increased intensity or new activities followed by a period of rest and recuperation can lead to improved health and performance. To investigate whether this is possible for organizations also, we developed an agent-based model that simulates project-oriented organizations with individuals interacting, completing tasks, and developing skills. The model illustrates how organizations exposed to periodic episodes of familiar stable and unfamiliar unstable external entropy levels can, under specific conditions, recover and maintain or improve performance. This research contributes to understanding how organizations adapt and thrive in dynamic environments, offering insights for managers navigating extreme variations in external entropy levels.