Originally aired April 21, 2026 on Extropy On AIr.
Most organizations don’t realize their systems are breaking down until something visible goes wrong, like a delayed close, an audit issue or an executive escalation. But the warning signs show up much earlier, disguised as everyday work. In this episode, Kevin Zirkle and Mike Jasper of Extropy Advisors walk through five signals to watch for and how to spot them before they become a crisis.
Listen to the full episode on the Extropy On AIr podcast page or on Spotify.
Key takeaways
- Entropy doesn’t look like failure. It looks like effort: busy, resourceful people keeping things moving.
- Leaders see outcomes, not the manual work, rework and exception handling it took to deliver them.
- Five signals point to a system breaking down: exception dependency, shadow systems, decision escalation, metric conflict and hero dependency.
- Treating each symptom as an isolated problem usually just moves the complexity somewhere else.
- Start with diagnosis, not solutions. Pick one process, ask three questions and observe before you fix anything.
Why do organizations miss the warning signs?
Because the signals look like day-to-day work. Teams solving problems and getting things done can look like resourcefulness, not a system under strain.
Mike explained that leadership usually sees the outcome: transactions get processed, reports go out and deadlines are met. What they don’t see is how much manual intervention it took. Teams often hide that friction, and most organizations only measure outcomes like throughput, cycle time and cost. They rarely measure rework, the time spent on exceptions or the friction in getting decisions made. Kevin added a fourth: trust. Once people stop trusting the system, they start building their own versions of reality.
What are the five signals of entropy?
Mike shared the five signals he looks for when he first meets a new organization:
- Exception dependency. On paper the process is automated. In practice, it only works in ideal conditions, and anything outside the standard flow needs manual intervention. Over time, the exceptions become the real process.
- Shadow systems. After a major technology investment, spreadsheets, side reports, offline workflows, emails and chat groups start to appear. It’s a sign the team doesn’t trust the system of record, or the system doesn’t fit how they actually work. Mike’s first move with a new client is often to count the spreadsheets.
- Decision escalation. Decisions that should be made at one level keep getting pushed up. Usually it’s because ownership is unclear or the data isn’t trusted. As Kevin put it, leaders end up acting as the integration layer in the process, which doesn’t scale.
- Metric conflict. Different parts of the organization optimize for different things. One department’s KPIs improve while another’s decline, and fixing one makes the other worse.
- Hero dependency. The system works because a few people know every workaround and who to call. That knowledge fades with turnover, promotions and transfers, and things start breaking as it goes.
Kevin’s test for hero dependency: if you’re nervous every time a certain person goes on vacation, your system isn’t working. A few key people are.
What do shadow systems and exceptions really tell you?
They are the team compensating for a gap. Either the system doesn’t reflect reality, the data isn’t reliable, the process doesn’t support how decisions actually get made, or the process was over-engineered to cover every scenario.
Mike described projects that aimed for an 80/20 split between automation and manual work but landed closer to 60/40. Once people build their own versions, you lose a single source of truth, and different teams start making decisions from different data. Exceptions are similar. Every process has some, but when they become a significant share of the workload, they’re no longer edge cases. They’re the system telling you it wasn’t designed for the real world.
Why do quick fixes make things worse?
Because the symptoms feel isolated, so the instinct is to fix each one on its own: more automation for exceptions, better reporting for shadow spreadsheets. But they’re rarely isolated. For every symptom you can see, there are usually several more underneath.
Solving symptoms one at a time doesn’t reduce entropy. It redistributes it to another part of the organization, and the overall system gets more complex over time.
How should leaders diagnose entropy?
- Shift from problem solving to pattern recognition. Instead of only asking how to fix an issue, ask where else you see the same pattern across the organization.
- Treat symptoms as signals. Every workaround, escalation and shadow system tells you something about how the system was designed.
- Resist jumping to a solution. Adding automation or new technology on top of a problem you don’t understand can reinforce it. Diagnose before you design.
What can you do next week?
Start simple. Pick one process, whether it’s accounts payable, accounts receivable or procurement, and ask everyone who touches it three questions:
- Where are we relying on exceptions?
- Where are people working outside the system?
- Where do decisions get escalated unnecessarily?
Then, as Kevin advised, don’t fix anything yet. Just observe. The goal at this stage is visibility. Once you can see the patterns and their root causes, you’re in a completely different position to make real change.
In their words
“Entropy doesn’t feel like failure. It does feel like effort.”
Kevin Zirkle, Director of Business Development, Extropy Advisors
“When exceptions become a significant percentage of the workload, they stop being an edge case.”
Mike Jasper, VP of Finance Transformation, Extropy Advisors
About the speakers
Kevin Zirkle is Director of Business Development at Extropy Advisors, where he works across Extropy’s partner ecosystem, matching organizations with the right technology and the right people to move transformation from the whiteboard into production. He also hosts Extropy On AIr’s series on corporate entropy. Mike Jasper is VP of Finance Transformation at Extropy Advisors, where he leads digital transformation and client success, working hands-on with clients to set success criteria, optimize their people, process and technology, and measure the results. He is also a regular voice on the show.
Frequently asked questions
What are the signs a business process is breaking down?
Five common signals are exception dependency, shadow systems like side spreadsheets, decisions that keep getting escalated, metrics that conflict between teams, and dependence on a few “hero” employees who know all the workarounds.
Why do organizations miss these warning signs?
Because they look like normal work. Leaders see outcomes like processed transactions and met deadlines, but not the manual effort, rework and exception handling it took to get there. Most organizations measure outcomes, not that invisible effort.
How do you start diagnosing entropy in your organization?
Pick one process, such as AP, AR or procurement, and ask everyone who touches it three questions: Where do we rely on exceptions? Where do people work outside the system? Where do decisions get escalated unnecessarily? Then observe before fixing anything.
Keep exploring
- More episodes of Extropy On AIr
- Previous in the series: The Digital Transformation Myth: Technology Comes Last
- Next in the series: Where Entropy Comes From: Silos, Incentives and Drift
- How we approach transformation: Why Extropy
Recognize some of these signals? Book a discovery call to talk through what they are pointing to in your finance operations.
