Originally aired April 29, 2026 on Extropy On AIr.
Organizational entropy rarely starts with a bad decision. It builds from silos that began as good solutions, incentives that reward each team for different things, and drift that piles up between planned projects. In this episode, Kevin Zirkle and Steve Ramirez of Extropy Advisors explain where entropy really comes from and why coherence has to be chosen.
Listen to the full episode on the Extropy On AIr podcast page or on Spotify.
Key takeaways
- Silos don’t start as silos. They start as solutions that work well for one team.
- Misaligned incentives let every team succeed on its own terms while the overall system underperforms.
- Most organizations manage projects, not drift. The long stretches between planned changes are where systems quietly move away from their original design.
- By the time you see exceptions, shadow systems and escalations, the drift has usually been building for a long time.
- Over-centralizing trades one kind of friction for another. The goal is coherence, not making everything the same.
How do silos form?
Silos usually start as solutions. A team has a real problem, so it fixes its process, adds a tool and defines how it will measure success. It works for that team.
Steve, who led a procure-to-pay transformation on the client side before joining Extropy, explained what happens next. Another team does the same thing, then another. Nobody steps back to ask how each change affects the rest of the organization. Over time, processes stop lining up, data definitions drift apart and systems no longer integrate cleanly. Eventually there isn’t one operating model anymore. There are several.
That’s why things start to feel harder even when no single piece is broken. It isn’t one big issue. It’s a lot of small misalignments adding up.
How do misaligned incentives create entropy?
Every function is measured differently, and those measures don’t always point the same way. Procurement focuses on cost savings, AP on efficiency, and finance on accuracy and control. None of those are bad goals, but together they can pull in different directions.
Steve described a familiar example. Procurement negotiates terms that make perfect sense from a cost perspective, but those terms create complexity downstream in AP, so AP builds workarounds to cope. Nobody was wrong. As he put it, these weren’t bad decisions, they were uncoordinated ones. Kevin called it misaligned success: every team hits its own targets while the system as a whole underperforms.
What is drift, and why does it matter?
Drift is the build-up of small, uncoordinated decisions that happens between planned changes. Deliberate change is different: you define a future state, align people around it and implement it.
The problem, Steve said, is that most organizations manage projects, not drift. They have short bursts of intentional change followed by long periods where the system evolves on its own. Processes get adjusted locally, workarounds appear and new requirements get layered in. None of it is necessarily wrong, but over time the system moves away from what it was designed to be.
From the inside, it feels like things are slowly getting heavier. Processes take a little longer, more exceptions show up and more people get pulled into decisions. The natural response is to add a step, a control or a report. Each fix makes sense on its own, but together they add complexity until everything starts to feel hard. By the time the symptoms are obvious, you’re reacting to something that’s been building for a long time.
Should you centralize to fix fragmentation?
Not as a first move. Centralization solves for consistency, but it can create rigidity, and if you overcorrect you slow the business down in a different way. You end up trading one type of friction for another.
What you actually want is coherence. It isn’t about making everything the same. It’s about making everything work together, which means being intentional about where consistency matters and where flexibility is valuable. That requires understanding the system as a whole.
Coherence doesn’t emerge on its own as organizations grow. It comes from intentionally designing how decisions connect, how information flows and how teams interact, and then reinforcing that design over time.
What should you do if you recognize these patterns?
- Find where teams evolved independently. Look for changes made without coordinating across the system.
- Look at incentives. Where are teams rewarded for outcomes that create friction somewhere else?
- Measure the drift. Compare how things work today with how they were originally designed.
- Resist the urge to centralize everything. Understand the system before you try to fix it.
In their words
“They don’t start as silos. They start as solutions.”
Steve Ramirez, Procurement SME – Marketplace, Extropy Advisors
“Coherence is a choice. It doesn’t emerge naturally as organizations grow. It has to be designed and, more importantly, it has to be reinforced.”
Kevin Zirkle, Director of Business Development, 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. Steve Ramirez is Procurement SME – Marketplace at Extropy Advisors and part of the delivery team. Before joining Extropy, he worked on the client side, leading through a procure-to-pay transformation that Extropy supported.
Frequently asked questions
Where does organizational entropy come from?
Mostly from three forces: silos that form as teams solve their own problems, incentives that reward each function for different outcomes, and drift, the slow build-up of uncoordinated changes between planned projects. None of them requires anyone to make a bad decision.
Why do silos form in well-run companies?
Silos usually start as solutions. A team fixes a real problem with its own process, tool or metric, and it works. When other teams do the same without coordinating, their processes, data definitions and systems start to diverge into separate operating models.
Should you centralize everything to fix fragmentation?
Not right away. Centralization brings consistency but can create rigidity and slow the business in new ways. The better goal is coherence: deciding where consistency matters and where flexibility adds value, so the parts work together.
Keep exploring
- More episodes of Extropy On AIr
- Previous in the series: 5 Signs Your System Is Breaking Down
- Next in the series: The Speed Trap: When Growth Outpaces Your Systems
- How we approach transformation: Why Extropy
Seeing silos and drift in your own finance operations? Book a discovery call to talk through where your teams have drifted apart and how to bring them back into alignment.
