There have been numerous examples where organizations fail to identify an impeding slowdown in the economy and keep on manufacturing their products at full steam without taking into account how the product is selling in the marketplace and eventually are forced to extend credit lines to the dealers and are squeezed by their suppliers leading to a severe strain on cash flows and eventual crumbling of the organization. This situation is just one example of how an organization can lose touch with what is happening on the ground and end up creating a financial hole which has the potential to take down the whole organization.
The reason why I am talking about such a depressing scenario is because I think , while it is important to understand what makes an organizational successful, it is also crucial to understand what causes organizations to fail-to understand what NOT to do when you are walking into a period of growth.
Once an organization becomes successful, there is always a tendency to replicate the formula for success by continuously repeating what made it successful in the first place. For instance, imagine the future of Apple, if after creating the iPod, Steve Jobs and gang just decide to start making more of iPods and try to sell them in the market without realizing that the competition is busy creating products which are better, cheaper and more universally compatible than the iPod. The future would be very bleak for Apple without an ability to innovate and manufacture products which help it capitalize on its success. So, it is important for a successful organization to realize that- what made it successful will not always keep it there and hence it is important for it to keep looking to innovate and better itself every day in an effort to keep the organization relevant and maintain its success.
Organizations put together elaborate research, social media, communications and information gathering cells in an effort to create a formal structure in the organization which will help it sense the changes in the environment and hence respond to it in an appropriate manner. While it is important to establish formal systems of intelligence gathering and information sharing within the organization, it is also critical for an organization to be cognizant of the fact that there will be subtle changes in the environment which may be missed by such formal structures but may prove to be significant game changers at a later date.
As observed by Starbuck, Greve and Hedberg (1978):
Many unanticipated events are never perceived at all; others are only perceived after they have been developing for some time…organizations overlook the earliest signs that crisis are developing, because the earliest signals are poorly observed variables and they are communicated orally in informal reports.
Thus, it is critical for an organization to be aware of the early signs of impeding trouble which may or may not be observed by the formal structures or mirrored by the metrics being tracked.
Organizational success while dependent on strategy, execution, environment and several other factors, cannot be achieved if we do not have the right set of people at every level in the organization. The focus here is on having the right people in the right roles. It is the people who make decisions and execute organizational strategies and no individual has the capability to make decisions which are based on 100% of the available information and hence it is imperative that we have people who have the ability to process the available information for a certain role in the best possible way and then make the most optimum decision given the constraints under which any human being would operate. Thus, while an organization may be successful today, what would keep it successful is its ability to hire and engage the right people in the right roles.
As is popularly attributed to Jack Welch (CEO, General Electric), maximizing shareholder value is often used by organizations as the ultimate measure of a company’s success. However, in March 2009, Jack Welch himself called maximizing shareholder value as the "the dumbest idea in the world". While it is important for organizations to consider the interest of its shareholders, it is critical for organizations to understand that their long term success cannot be achieved without taking into account the societal impact of their actions. A lot has been written about corporate social responsibility (CSR) but it is now time to move beyond the talk and token acts of CSR to restore the faith of the people in the businesses ability to contribute and make a difference. Successful organizations measure the worth of their business not only in financial terms but also in their ability to positively impact the lives of the people and the community in which they operate.
While I may not completely subscribe to this school of thought of looking at failure to identify lessons for success- it’s like asking a divorce lawyer for marriage advice, but I still do think that organizations have limitations which may stem from cultural, environmental and human factors and hence it may be helpful to look at failures in our effort to create a formula which guarantees organizational success…if such a formula for organizational success does in fact exist??
