Why Organizations Fail

Why Organizations Fail

Management & Organization

Cause and Effect

 

Organization - a group of people working together for a cause, a task or a goal - is the normal way of life world over. We are born in an organization and leave life in an organization. When this does not happen there is something wrong. Life goes as a part of some group always: may be parents, family, society, community, nation, employer, friends, school, or just a crowd on road side. All organizations must be effective and managed smoothly, for healthy life, society, even the nation. Fact is, that no society can provide its members, with a high quality of life, unless it has effective organizations-that is able to meet their objectives, perform and deliver. Working together brings power, even to as small organization as a family of four, not to talk of multinationals. We in India have some best organizations like Delhi Metro Rail, ISRO, National Disaster Response Force, Armed Forces the best in the world etc.

  

Despite what is said above, intentions and efforts; organizations fail either because of management or the people working in and for it. Either way it is a national loss, irrespective whether an organization is public or private. Why it so happens, perhaps many are not able to find an exact answer and sell such failed concerns without going deep into the causes and making an effort to correct it. There can’t be instant answer to this intricate and underneath issue. It has always been easy to point out shortcomings than to correct them and that too for success. Sale is just an admission of incapability of such great institutions as Govts and against the welfare of the people.

 

Why organizations fail, they are created to succeed. Obviously they do not run with the time, whereas they should be ahead of the time. Technology that too which changes over night is the great invention and a marketing strategy of 20th and 21st Century, we do not know what would happen in 22nd Century. It tries to cater to every wish a human mind can think of- variants in variants with a capacity to throw away obsolete. One has to leave the inertia, if you are pulled back, you are titling to wrong side of success.

“You can’t ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.”

                                                             —Steve Jobs

Covid19 is a great teacher. Now India is after self-sufficiency, indianisation of everything, increasing local production, reducing imports, giving employment to skilled and unskilled labour at its place of origin. This took India just four-five months and we have done much. Lesson of the story is that we should adapt ourselves to solve problems. Problems are part of every management process. We should be quick enough to solve them, any delay would kill the organization.

Labour intensive organizations are prone to failure because of lack of national work culture-which presently is goad continuously with punishment which for obvious reasons is not possible for any managerial model. Other disadvantage attached to such concerns is that the slightly senior employees use their position and trust for personal gains, a termite to destroy the very foundation of the concern. The only saving devise is intensive inspections with ruthless punishments and linking the wages with performance: basis being perform and get paid. 

Inter-personal Relations: The inter-personal relations among the employees should always contribute to higher productivity and helping attitude towards one another.  The managers and supervisors must use their position and experience for the purpose. This is true of all positions, otherwise bottlenecks and stumbling blocks kill smoothness required.    

Every company has two organizational structures: The formal one is written on the charts; the other is the everyday relationship of the men and women in the organization.

                                                         Harold Geneen

Chief Executive Officer, to whom everybody looks for guidance and development, has to be more than  prism-when white colour rays pass through the prism they become a beam of seven colours; to succeed a CEO should reflect only the colour needed. Owner CEO are very effective and so are the men of passion to succeed, devoted to their job-the total quality people. But such people are limited but their success stories are unlimited. The third alternative for the CEO is to employ professionals highly qualified give them on the job, experience, training and profile skills. But fact, remains that to perform and degree are two entirely different things and so is the training may be from the highly placed schools. Appointment to higher positions from the men who joined the organizations at lower levels, give an advantage of lot of experience and the situations they had faced earlier. Many a times they prove gem of men and are able to take the concern out of red. To perform and deliver is in their blood, they like to have their own say.  

 

There is another option normally not used by many but in Govt it is used for all important assignments that matter for the country. Appointment by invitation, whereby an invitation for appointment is sent for the position in view. It requires intensive study of both national and international resources as well an authentic account of the proven capabilities of the prospective incumbent. It is bit costly proposition since one has to take care of all the responsibilities of the individual concerned and his honour.

Competition is something that keeps a concern on toes and going when going itself is tough. It is slightly easy to deal with domestic competition as there is level playing field except for the intrinsic worth of individual assets. Here goodwill, quality of the goods and competitive price play. International competition is a wild guess, nobody can predict when it will hit, how and why. Dumping that is selling below the cost price is common where the price difference is compensated by the foreign Govt by subsidies, rebates, duty draw backs, lower taxes and tariffs etc. In such a situation Govt has to play its part otherwise industry is doomed as has happened with SMSEs in India on account of the Chinese highly subsidized goods. Here collective bargaining bodies like FICCI, CII in India of should take care of industry. 

WTO Agreement is far more liberal than GATT, intend to establish world as a village, has opened up the frontiers beyond nations and is prone to exploitation also. Profit motive everywhere has killed many local industries as industrialists world over shifted to places with less restrictions and more profit. In India many SMSEs failed as similar imported products available were cheaper than Indian brands. Nation has to safe guard its own interest, if they do not will find themselves in odds when they are required to in evens. 

Liberalization is another killer of enterprises in India, as domestic market was opened without ensuring capability of enterprises here to meet the international standards, norms, competition and technology. Many SMSEs have suffered a lot. Liberalization should have meant ease of doing business, whereas SMSEs face many hurdles at State and Local level like pollution and local body compliances.

Weak regulations relating to Money Laundering has done a great damage to the industry and trade which is reflected by the mounting Banks NPAs.  Loans taken from the Banks have been diverted for personal assets within the country and abroad. 

Loans to industry are available at lower rate of interest: which create an urge not to repay, delay repayment, this has led to diversion of the funds and created indiscipline in the financial market which has made many financial institutions including Banks to fail. 

Govt policy of disinvestment is result of Govt’s policy to get rid of loss making concerning instead of taking steps to correct their operations and generate employment and revenue. This has encourage marginal public sector undertakings (PSUs) to hasten the process for early disinvestment. Privatization is not a cure for every evil. Normally PSUs are big concerns so it has also led to shut down of private industries supplying parts and raw materials to such big concerns.

Culture of people affects the working of industries. There are a few countries where industries and organizations do not fail because they have learnt it hard way to protect themselves and be the best everywhere is their way of life. So is with Law, if people have respect for law or implementation is strict, people are more obedient by nature that affect health of industries and enterprises. We here in India are slightly away from these things. Hence industries fail.

Attitude of the owner a great factor in success of a concern. Most of the owners consider it as a profit earning machine. It is really bad, you have to nurture what you have created like children only then they will survive. In public sector many of the Departments consider these as the dumping grounds for those who are unfit or have to be adjusted and many take undue advantage from these enterprises. With attitudes like this the concern has to fail it is only the question of time. In such tiring situations it is integrity of the CEO that is put to hard test-many compromise the same as they are not personally put to loss but are the trusted employees of the owner Govt, so concern in doldrums.  In fact, nobody monitors whether the business is on right track or not. When the owners wake either it is too late or it requires a surgery of the highest order.

Inter-face is another aspect of the organizations. Inter-face with whom-with all those who matter, marketing network, raw material suppliers, work force, real consumers, shareholders, banks and financial institutions the source of cash and capital can provide insight into the working of the company. But majority do not bother for such an exercise and where done it is not a serious matter but a perfunctory one without any results and leads. 

Monitoring is a correction tool if done at an appropriate level; has so many benefits and very few financial implications. Higher the level of monitoring   more are the benefits. Stricter the norms, prescribed and performed, corrections become easy and smooth. It can turn the red into green. Monitoring brings out concealed errors and slips. The only ifs are monitor in time and have sharp eyes and ears, to read what is not written and to listen which is not being said-the way to find a needle in a haystack. If monitoring is not done seriously it become “Money Torn”. 

Diversification - the process of a business enlarging or varying its range of products or field of operation is need of the hour but the people do not see writing on the wall –the result is concerns go into losses and hence fails. Some concerns continue with the initial business even after it has become socially obsolete - a fatal approach. In fact, the process of diversification should start as soon as the concern becomes operational or with first adverse sign, like loss of goodwill, excess inventory of finished products, employees leaving etc. Start where you are. Use what you have. Do what you can. 

Innovation and Creativity Innovation and creativity are essence of life and work. They give job satisfaction and pleasure. Those who indulge in these should always be encouraged. Lack of recognition discourages employees and hits the organization hard. These are the tools to kill the competition and put you much ahead of the others, must use and invest in them.   

Innovation is the lifeblood of an organization. Knowing how to lead and work with creative people requires knowledge and action that often goes against the typical organizational structure. Protect unusual people from bureaucracy and legalism typical of organizations.

Max De Pree

Sum up

We cannot solve our problems with the same thinking we used when we created them.                                                      -Albert Einstein

“To be successful, you have to have your heart in your business, and your business in your heart.”

                                                                     —Thomas Watson

“Some people dream of success, while other people get up every morning and make it happen.”

                                                                     —Wayne Huizenga

Failure does not exist, or at least it does not exist unto itself. Failure is simply the absence of appropriate action at opportune time.