Organizational IQ is a quantitative measure of an organization's effectiveness in information distribution, decision making, and execution. Haim Mendelson and Johannes Ziegler explain the IQ analogy in their book Survival of the Smartest: "…the effects of a high Organizational IQ are similar to the benefits of a high psychological IQ. In both cases, the IQ describes the capability of either an organization or an individual to quickly process information, come up with effective decisions, and implement them." The difference, of course, is that Organizational IQ can be dramatically improved in fairly short order – as many real-life examples document. A high Organizational IQ enables companies to react quickly to changes in the marketplace, and to adjust their operations accordingly. While traditional management practices suffer from a huge time delay between cause (poor operational practices) and effect (failure in the marketplace), high-IQ companies actively monitor and improve the effectiveness of their practices and therefore avoid the causes of poor performance in the first place. (see chart).

Research at Stanford University has identified Organizational IQ as the core success factor in fast-moving business environments. The significance of Organizational IQ can be summarized in another quote from the book Survival of the Smartest: “If our principles [of Organizational IQ] can indeed help companies improve their performance, then a higher Organizational IQ should be associated with greater financial success. [Two academic papers] … rigorously test this proposition …. These findings strongly support our theory: For companies that operate in the same business environment, the higher the Organizational IQ, the more successful the company. The results are very strong and are both economically and statistically significant.


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