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Sunday, December 12, 2010

Why Organizations Die?

The phases in the life of an organization closely resemble those in the life of a human being - taking birth, surviving infancy and childhood, growing up and maturing, achieving success to a certain extent constrained by the inherent potential, getting older and then finally dying.

Since organizations are not real biological/physical entities but rather notional/legal entities death in the case of an organization is not only in the form of getting closed in a physical sense but also in the form of getting bankrupt or getting acquired. This difference also holds the answer to the question "Why Organizations Die?".

The key factors which are instrumental in leading organizations towards their death can be summarized as below:

1. Ignoring changing customer trends, wants, needs, expectations and preferences - an organization should always remember that it exists for its customers and not the other way around.

2. Acquiring a superiority complex about the organization's technologies, products, people, systems, policies and processes - an organization should always remain fully aware and sensitive about the real world in which it operates.

3. Not keeping pace with newer methodologies and technologies - an organization should constantly learn and adopt improved ways of conducting business.

4. Not ensuring a high performing culture - an organization should understand that high performing doesn't mean rewarding people who work on projects in trouble and those who stretch themselves hard late into the night and on weekends (this means the organizations doesn't want its employees to focus on improvement, prevention, effectiveness and efficiency but rather focus on execution and just more execution, corrections, corrective actions and fire-fighting).

5, Not ensuring business is conducted within legal and ethical boundaries - an organization should know the legal and ethical ways of behavior and never cross the boundary.

Another related question which comes up naturally in a discussion on the topic "Why Organizations Die?" would be "How An Organization Can Succeed at Keeping Itself Away From Obsolescence and Closure?"

The titles of the following books by the renowned author Jim Collins are worth taking a closer look if one is interested in understanding the implications and possible solutions for an organization's sustainability not just in long term but for ever:
1. Built to Last
2. Good to Great
3. How the Mighty Fall

The above books essentially delve deep into questions related to sustainability of organizations. Many earlier posts in this site have also explained about sustainability of business organizations. A list of those is as follows:__

1. Successful Business Model
Discusses the correlation between sustainability and scalability to the success of a business enterprise.

2. Winning at Business in the Long Run
Discusses about advantages of long-term decisions for an organization.

3. 4 Es for Sustainable Business Success
Discusses about fundamental concepts and foundational elements for ensuring long term business success

4. Doing is to Survive... but Improving is to Grow
Discusses about focusing on improvement and growth and not merely on execution and survival.

5. Leaders and Shopkeepers
Discusses about the importance of vision for an organization.

Ignoring the factors and considerations discussed in the above posts would severely diminish the chances of an organization to survive. This is in addition to the five key factors described earlier in this post.

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