The End of Entropy: Building Corporate Structures That Improve With Wear

Kerie Kerstetter

It is a law of thermodynamics that all things decay with time. This has been the bane of paperwork’s existence, dating back to medieval times when transcriptionists worked around the clock copying old contracts, sometimes written on animal skins, that decayed with the seasons. But that all changed in 1440.

That year, a German inventor created the printing press. For the first time, information could be copied faster than it decayed, and it unleashed nothing less than the enlightenment. We are on the cusp of another such revolution, albeit humbler, in the realm of legal operations.

For the first time in history, the office of the general counsel can store, copy, and distribute entity data faster than it can be corrupted. And what’s more, it can defy physics and create corporate systems that do more than simply resist the sands of time—they actually improve with use.

A Storm of Change

The pandemic of 2020 didn’t lead to the invention of entity management software but it did precipitate its meteoric rise. Already by the start of the year, nearly 40% of corporations over $1B in revenue were using it, and now businesses of all sizes have been forced to adopt it to deal with the five horsemen of the digital decade:

  1. Regulation
  2. Governance
  3. Cybersecurity
  4. Remote work
  5. Economic turbulence

Most of these organizations are using entity management software as a repository. That is a fine use, but not very durable in a changing world. It can help them stay more organized and save themselves some administrative headache, but with more regulation and more change around the corner, some teams are using software to take things further.

Once information is digitized and centralized, new possibilities open up. Legal teams can begin to explore collaboration, where they not only request and disseminate information through the system, but deputize individuals across the business for keeping that information accurate.

Take signing authority, for example. It’s not uncommon today for legal teams to ask HR teams for up-to-date employment information via spreadsheets across dozens or hundreds of sub-entities to verify which directors still work for the business. What if they could deputize each of those HR teams to keep that information current in the centralized record without having to send a request?

And what if they could go further and integrate their entity management system with HR systems such as human capital management (HCM) software to pull that data automatically? And once the HCM is linked, why stop there?

This brings us to a brave new frontier of collaboration, streamlining, and automation whereby legal teams create a corporate record that updates itself. It can just as easily push information out. What if sales teams are curious whether they can actually close a deal in a new region? Up-to-date and accurate “crowd-sourced” entity information can tell them. Or what if a general manager of a region can easily see that the reason for a subsidiary’s existence is to qualify for a specific grant, and to not wantonly close that office?

The more the data is seen as useful throughout the business, the more it is accessed. The more it is accessed, the more it is verified. And the more it is verified, the more useful it becomes. Data takes on its own life, the system becomes a self-sustaining cycle, and the organization improves with use.

How Does One Begin?

How does one begin to build an entity that improves with wear? We cover that topic in our latest guide, Evolving from Organizational Chaos to Modern Entity Management. We provide a Maturity Curve to rank your organization today, as well as steps for how to finally see the end of entity entropy.

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Kerie Kerstetter
Kerie Kerstetter is a former Senior Director at Diligent and the Next Gen Board Leaders. She has done extensive work into how governance and ESG technologies empower leadership to make informed, data-driven decisions while mitigating cyber risk. Kerie was one of the founding members of Boardroom Resources, the premier educational resource for board members, acquired by Diligent in 2018.