The 4 Main Reasons For Organisational Failure

The only constant in business is change. I’m sure you’ve heard that statement many times.

And one of the main reasons why organisations stagnate and fall is because of the lack of understanding about this simple philosophy.

Charles Handy said it best when he opined ‘Change is only another word for growth, another synonym for learning.’

Without learning and growing, we are left behind by our competition.

So, what are the main reasons for organisational failure? We’ve often written about what you need to do in order to ensure your organisation stays on the path to success.

What we don’t usually do, however, is focus on the reasons that organisations fail.

In my experience, there are four main reasons why organisations fail.

While it may seem to you, if you’re a lower or middle level manager, that you are responsible for your department ultimately succeeding (and that your department contributes to the overall success of the organisation) there are some critical components you may not have considered.

The main 4 reasons for organisational failure are:

System and structural failures – the systems you have in place to get the job done are flawed, at best, fatal at worst. Systems failures in companies can have many causes, including a flawed development process, too many defects causing rising costs and overload or defects. Without the focus being on the causes of system failure, we run the risk of poor application and failing complexities.

Financial management failure – the accounting department does not properly track expenses and departments are overspending, thus cutting into the organisation’s profit margin. Too many businesses fail because of lack of financial viability or poor accounting procedures.

Customer and marketing failure – you have a poor marketing plan and you have no idea who your niche client base really is. Today, it’s imperative that you know who your market is and how viable it is for the short and long-term. Without that certainty, you will make the wrong decisions regarding what to invest in, with often dire results.

Failure at the top – upper management isn’t making educated decisions, or members of upper management are simply making very bad decisions despite the resources they have available. Too many managers we work with are too operational in their outlook. This causes businesses to not be able to see the wood for the trees, and cannot see beyond the fire-fighting duties of short-termism.

These aren’t all things you can necessarily control but they are all things you can be acutely aware of as you progress throughout your day. Take a look at your organisation as it stands now. Is it set up for failure in the next decade? Or is it viable in the short and long-term?

The new decade will usher in more competitive pressures, forcing us to re-evaluate the structures of our organisations and identify where we need to re-energise and re-focus. Without doing so, we will fall victim to the ever-changing requirements of our markets and risk becoming one of those companies that fall short of industry requirements and end up losing, failing or even dying.

Can you identify why organisations fail? Are you set up for failure or success?

Thanks again,

Sean

Sean McPheat

Managing Director

MTD Training