Ten signs of Organisational Decay

Many once great organisations have disappeared over time. They may have been unable to stem the tide of technical innovation or the entrance of low cost competitors or in the public arena they may have become irrelevant as service providers.

Mostly they have sown the seeds of their demise many years before, missing the tell tale signs and hence being powerless to do anything about it. Here are my top ten signs of organisations losing relevance and heading for oblivion.

Everybody agrees. When there is no dissent in an organisation it means one of three things. The boss is so dominant that no-one dares to contradict what he or she says. In this case the boss had better be perfect as they will make all the decisions. I am yet to meet anyone befitting that descriptor.

Alternatively, everyone is working in silos, uninterested in what happens in other functions or in the boss's domain. A slow death of confused objectives, wasted effort and low productivity ensues from this warning sign. Thirdly, everyone may be asleep.

Data shows that there is little room for improvement. When organisations coast and do not reinvent themselves they are in trouble. When their analysis tells them they do not have to change and adapt they will be blindsided by some change in the market or technology. If their data says there is no room for improvement, the data is wrong or the interpretation severely flawed.

There is no cost pressure. Technology, reduction in trade barriers and the relentless internationalisation of companies means that there are only two types of cost pressures. The ones you see and the ones you don't.

There is only cost pressure. When organisations get locked in on cost reduction without a purpose e.g. reducing costs to gain or retain market share or reducing costs to generate cash to invest or reduce debt, they enter a death spiral. The death spiral ends with the golden dollar; the last dollar to be saved as the lights are turned out.

Decisions are not made. Initiatives are trapped in endless rounds of deliberations by subcommittees rather than subjecting them to rigorous risk analysis and contingency planning. The organisation paralyses like a rabbit in the headlights of change and becoming just another piece of road-kill.

Progress is difficult to define. When one year appears to be no better or worse than another, just different, it means that no matter what the vision statement shingle says, the organisation has no vision or goal that is measurable. It does not know where it is going and will get to somewhere that it does not know, but does not like.

Risks are not knowingly being taken. This is a double edged sword, risks can be known but not taken or unknown and inadvertently taken. At some time, cumulative aversion of risks will result in a very low return. Continued inadvertent taking of unknown risks courts a quick end to an organisation.

Projects are always late or change in scope. Continued delays in delivering the benefits of projects will result in an accumulation of increased costs and reduced benefits with. Continued changes in scope not only has an impact on the cost benefit of projects but also demonstrates a lack of planning in a project and/or will on part of the executive team.

In either case, organisations that display poor planning or poor will to keep to a plan will be significantly less productive than organisations that do not suffer from this malaise.

No-one is a poor performer. When no-one gets feedback that they could do better and are made to understand clearly what is expected of them then either the organisation has robots for staff or the have no sense of what are the minimum standards of performance and what are stretch targets for individuals.

Having no minimum standards of performance or stretch targets for people drives performance to a lowest common denominator and a gradual spiral into mediocrity.

Organisations that are in trouble do not arrive there suddenly. Even if they believe that the cause was sudden such as a devaluation that exposed them to foreign currency losses or a recession that arrives quickly and collapses sales, the seed of their problems is evident many years before.

Organisations that regularly take a good hard look in the mirror at themselves tend to avoid the worst of sudden changes in fortune. They may choose to do so at their annual retreat or at an annual challenge session where the executive team complete a “what if” analysis to see if their strategies and tactics are still suitable to achieve a goal which is still appropriate.

Organisations when facing the implications of a sudden change in fortune that complain about their bad luck start or continue the steady decay into irrelevance.

WOODRIDGE

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Ten signs of Organisational Decay