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9 Most Powerful Factors that can make Organizations Fail And their Possible Solutions

It is a documented fact that for decades, emerging technologies, regulatory convergence and multinationalism have totally impacted and thus, redefined a business space; enabling upgrades, cuts across borders and evolved in a most impressive way. Yet, the bigger the these companies get, the higher they are prone to fall and falling hard! The market place has repeatedly been hit by huge corporate organizations(examples are Kodak BP, AIG etc), and smaller ones are crumbling. Let’s discuss case studies of some organizations that were failing and how their management provided workable solutions.

*One of the largest department store and e-commercee-commerce retailers in the US, J. C. Penney Corp operates some 1,100 J.C. Penney department stores in 49 states and Puerto Rico, and about 10 Foundry Big & Tall Supply Co. stores (Hoovers, 2014). In its bid to rejuvenate its aging business, the company hired and has since fired Ron Johnson as its CEO, a former Apple stores chief as consequences to disastrous results (Davidson, 2014; Hoover, 2014). J.C. Penney’s former CEO Myron Ullman returned back to assume his past leadership role and to undo the strategies implemented by former CEO Ron Johnson “that included eliminating sales and promotions in favor of everyday low prices” (Davidson, 2014:B1). The company announced it would close down 33 underperforming stores by May 2014 and lay-off 2,000 employees and save about $65 million as a part of its turnaround strategy (Davidson, 2014). The decision to close stores came after an analysis of store performance at the end of year (Kell, 2014).

*According to Kapner and Prior (2014), “the department store is trying to claw its way back from a disastrous overhaul that led to a 25% drop in sales and a $985 million loss a year Barlier” (B3). In fact, its CEO has quickly stabilized its financial condition and cash position. Its prior sales decline has been detoured as a result of a few strategic decisions including: Dropping some underperforming brands, bringing back popular in house brands, altering some brands offering to ensure fewer items but more of them, and reverted to discounting (Kapner & Prior, 2014). In fact, Penny reported a profit of $35 million on its quarter ended February 1, 2014 compared with $552 million in loss a year earlier. Mr. Ullman stated, “Penny had completed the first two phases of its turnaround-firming up relationships with suppliers, strengthening its finances, and rebuilding its management team and product offerings. Now it is working on refining its merchandise and marketing strategies” (Kapner & Prior, 2014).

Every businessperson wants the best for their brand and this makes decision making difficult and occasionally increases our suspense level which affects our actions. However, before making a business act, it’s important to consider the present and future implications.

Inorder to buffer already existing and fully functioning organizations, as well the small upcoming ones, from adding to the appalling statics of failed business ventures, here are the 9 most powerful factors that can make any organization fail,no matter how grand or small the start-up is.

1. Leadership Failure

Your business can fail if you exhibit poor management skills, which can be evident in many forms. You will struggle as a leader if you don’t have enough experience making management decisions, supervising a staff, or the vision to lead your organization.

Perhaps your leadership team is not in agreement on how the business should be run. You and your leaders may be arguing with each other publicly, or contradicting each other’s instructions to the staff. When problems requiring strong leadership occur, you may be reluctant to take charge and resolve the issues while your business continues to slip toward failure.

Possible Solution

Dysfunctional leadership in your business will trickle down and affect every aspect of your operation, from financial management to employee morale, and once productivity is hindered, failure looms large on the horizon.Learn, study, find a mentor, enroll in training, conduct personal research—do whatever you can to enhance your leadership skills and knowledge of the industry. Examine other business and leadership best practices and see which ones you can apply to your own.

2. When You Lack Uniqueness and Value

You may have a great product or service for which there is strong demand, but your business is still failing. It may be that your approach is not good enough, or you lack a strong value proposition. If there’s strong demand, you probably have a lot of competitors and are failing to stand out in the crowd.

Possible solution

What sets your business apart from competitors? How do you conduct business in a way that is totally unique? What are your competitors doing better than you are? Develop a customized approach or service package that no one else in your industry is using so you can present it as a strong value proposition that attracts attention and interest.

This is how you build a brand. Your brand is the image your customers recognize and associate with your business. Your brand identity- including your logo, tagline, colors, and all the visible aesthetics and business philosophies that represent your company should be supported by your value proposition. It should separate you from the pack and present your individual perspective to your customers. Do everything you can to present that unique value stand point.

3. Not Understanding Your Customers’ Needs

Your business will fail if you neglect to stay in touch with your customers, and understand what they need( the feedback they offer). Your customers may like your product or service but, perhaps they would love it if you changed this feature or altered that procedure. What are they telling you? Have you been listening? Or is the market declining? Are they even still interested in what you’re selling? These are all important questions to ask and answer. Maybe you’re offering a product or service that is fallen well below trend.

Possible solution

A successful business keeps its eye on the trending values and interests of its existing and potential customers. Survey customers and do market research and find out what their interests are and keep abreast of changes and trends using customer relationship management (CRM) tools. Effective use of CRM can help keep your business from failing.

4. Unprofitable Business Model

Similar to leadership failure, is building a company on a business model that is not sound, operating without a business plan, and pursuing a business for which there is no proven revenue stream. The business idea may be good but failure may come in the implementation of the idea if there are no strategic guidelines in place.

Possible solution

Ensure you research and review the way other businesses in the industry operate. Develop a complete business plan that includes financial forecasting based on predictable revenue, strategic marketing, and challenge management solutions to overcome potential obstacles and competitor activities.

5. Having a vision, but not a strategic plan.

Majority of organizations want to succeed, I mean know no organization no matter how shitty the establishment is wants to fail. They even have a fairly descriptive vision of what success would look like. Yet only a few have developed the necessary strategy and action plan to get there. Let’s go back to basics for a moment. To be successful, businesses must know what makes success possible. Interestingly enough, this begins by learning what makes their competitors succeed and fail. A deep understanding of the industry is key. This means they must find out their competitors’ market shares, client portfolios, product portfolios, key leaders, high-level political connections, recruiting practices, etc. Likewise, they must assess themselves in every one of those areas.

Possible solution

As a business owner, you must know what your competitive advantages are, and, if you have none, you must be able to either develop them quickly or get out of the business. Not having a strategic plan is a major source of stress, conflict, mistakes, multidirectional blame and failure.

6. When You Hire The Wrong People.

When as an organization, you hire out of sheer necessity, it can lead to one of the costliest mistake you have ever made in business. When organizations feel the impact of work overload resulting from a vacancy (someone resigned or was let go) or sudden business growth, stress is inflicted on every collaborator, relationships start to suffer and performance starts to decline. This puts pressure on the executives and managers to hire the first acceptable applicant rather than the best possible one. The rationale behind this decision is usually that, it might take too long to hire the right person. What they do not put into consideration is the end game. The initial relief is far offset by the long-term cost of dealing with an employee without committment, drive, vision,tenacity, progressiveness and all other intrinsic attributes that can make any potential employee fit to do the job excellently. But of course, these organizational leaders often feel the temptation not to pay a competitive salary, which always leads to recruiting redundancy.

Possible Solution

If you do not have the time to search for the best possible candidate, then hire for limited-time contracts until you find a high performer. Another advice is, if as an organization, you do not intend to pay a competitive salary for the post you are recruiting for, then do not complain, enjoy less than efficient and effective addition to your organization.

7. Letting politics supersede business.

While making friends is quite beneficial, friendship at the workplace is as dangerous as it comes. We all crave to feel comfortable with the people we work with, and therefore reach out to form a bond of friendship with some of them. This move can be double edged- on one hand, it could make the workplace atmosphere bearable and peaceful, but on the hand , this friendship could cloud professional judgement. This action is unfair to the organization and can ultimately become the source of future problems. Similarly, as an employee, when the focus is on getting on your boss’s good side, it will at some point require you to abandon good leadership and management practices. The initial feeling of comfort will sooner or later be replaced by the inevitably stressful aftermath of unsound organizational decisions. Suffice to say office politics is the result of letting friendship and getting too familiar with the boss supersede good business practices.

Possible solution

The most effective way to break this dynamic and reverse its negative impact is by providing top-notch training on leadership, management and organizational learning, with a first-class coaching program. This is a proven fact, but it requires full commitment from top leadership.

8. Lack of Trust in Your Team

General mistrust at the workplace is a systemic weakness arising from the combination of the three aforementioned problems namely: *not having a plan, *hiring the wrong people and *politics superseding sound business practices. Therefore, if as a team leader, you feel you cannot trust your people in general, it means either you have control issues or your organization has been down the wrong path for a long time already.

Possible solution

Your organization must have a workable plan in place to tackle the venom called lack of trust amongst its team members. The only way to do this is to build trust again. The affected organization needs to produce a strategic plan, hire the right talent and kick politics out the door.

9. Mishandling disagreement

In any organization, genuine disagreement based on different individuals, with intrinsically different approaches to resolving the same problems, is bound to occur. This disagreement tilts towards one thing; to know what the actual problem is, or what the best goal is and the best approach to solving or achieving it respectively. This is the foundation of learning and progress. However, evident disagreement about important issues, arising mainly from people trying to excuse their mediocrity or hide their silent political liaisons, is the foundation of organizational failure. The way to handle either type of disagreement is different.

Possible Solution

Handling genuine disagreement as described earlier, it is imperative for your organizations to hold professionally-guided strategic sessions of brainstorming, problem solving and organizational alignment. Conversely, to handle apparent disagreement as described earlier, organizations must fire the unethical, politically-entangled, underperforming employees and craft a strategic plan to provide the direction and purpose needed to hire the right people.

When an organization has been subjected to the excrutiating consequences of the previous five afflictions, top leadership is, by definition, a fundamental part of the problem. In these circumstances, making the necessary, tough decisions for the first time in months, years or decades does often trigger feelings of guilt. The usual verbalization is something like, “How can we fire people? How can we freeze salaries? How can we close down that division if we were the ones leading this organization down the wrong path in the first place?” Yes, this is a terrible spot to be in. But it is often either that or full organizational failure and bankruptcy. So, in order to save what is still salvageable, surgery is inevitable. This surgery can be in form outplacement programs and attractive severance packages which are usually the only two ways to palliate the pain, anxiety and uncertainty inherent to this kind of emergency protocols. However, it advisable not let your business get to this point.

Generally, organizations perform 3 major functions, these are social, managerial and entrepreneurial functions. (Mourdoukoutas, 2011).

Organizational social function fulfils the purpose of serving its customers and other social responsibilities and needs; and also the provision of employment and income for labour. The managerial function of an organization see to how economic resources are to be appropriately allocated and how different tasks must be performed while the entrepreneurial aspects deals with discovery and exploitation of new business is the

most important function, as it drives innovation, sustains the firm and keeps it viable.(Mourdoukoutas, 2011; Gottardo and Moisello, 2011). The aforementioned three functions are interrelated; the social function for instance, impacts and imposes various constraints on the entrepreneurial and managerial functions. On the other hand, the entrepreneurial and the managerial functions impose their own constraints on the social function. Accordingly, a failure in any of these three functions

negatively affects the other two functions. If said failure goes unchecked, it can lead to organizational decline and eventual demise of the organization (Mourdoukoutas, 2011).

While these three functions are interrelated, a failure in any of these three functions negatively affects the other two. In addition to that, a firm needs global individual who is strategically capable to lead the firm to be globally competitive According to aadvicese that was given by an investor to Peter Relan, founder of 9+; “no matter how great an idea is a business success is more about the sailor than the boat” (Villano, 2014:48).

Using examples from real-life organizations’ challenges- some instances being Borders Group, Circuit City, Eastman Kodak, Fisker Automotive, JCPenney, and Quiznos; this study concludes that if an organization fails to adequately manage its major functions, that could lead to its decline and possible failure.

Funmilola Bamidele

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