Why Good Organizations Sometimes Fail — PEN Sept 2023

September 19, 2023

I get asked occasionally what is the single biggest reason organizations fail.  Of course, there isn’t one right answer: organizations — even from the same sector or industry — have different cultures, different core competencies, different strategic challenges and advantages, different circumstances that contribute to success or failure.  As a result, some organizations struggle with workforce issues, some with customer service, some with operations, or increased competition, or staffing, or depth of leadership strength, or any number of other issues.  The correct answer is: it depends.  (Which is why I strongly suggest that organizations occasionally assess themselves against a true standard of excellence like the Baldrige Framework – to identify and prioritize improvement opportunities that, when systematically addressed, promote better outcomes and guard against the risk of failure.  For more information on Baldrige, visit here.  And for more information on assessing your organization against it, visit here.)

But when I step back and reflect, there really are some common ingredients I’ve seen in organizations that struggle.  I’ve been involved with PEN now for nearly 30 years, both as a volunteer and on staff, and I’ve worked with literally hundreds of organizations to help them improve their processes and their outcomes.  I’m not sure that makes this month’s column completely scientific, but here are the themes I’ve seen when good organizations begin to fail — themes that, if addressed and reversed, might actually help organizations continue to achieve and succeed…

Complacency.  This may be the single biggest reason good companies fail: they grow complacent.  They form habits; they get lazy; they stop taking (intelligent) risks.  Inertia is a terrible thing for organizations — the “we’ve-always-done-it-that-way” syndrome usually doesn’t work in a world that’s constantly changing.  The unfortunate thing is complacency affects many (perhaps most?) of us: in the beginning, we work hard at something but over time, it’s easy to back off the throttle — to settle in and somewhat go through the motions.  This can happen anytime to anyone in any role within any organization.  It starts with an individual here and there, but it can spread to a team, a department, or a whole organization — it’s like a disease that can seriously impact organizational culture and eventually organizational performance.

One way to address this is to create a culture of achievement: set aggressive goals and then hold yourself and your colleagues accountable to those goals.  In addition, leaders (and all workers) should challenge the status quo — ask questions about why things are done a certain way; explore possibilities, opportunities, what if’s.  I’m not advocating for chasing shiny objects: decisions should be made with data and reflection, but I do encourage organizations to guard against getting too comfortable.  Keep learning; keep challenging yourself and your colleagues; keep driving forward.  After all, if you’re not moving forward, you’re likely moving backward (but you may not know it until it’s too late).

Inability to Improve. Which brings me to the second common reason good organizations fail: they don’t know how to improve.  I can’t count the number of organizations that simply don’t have a performance improvement system — they don’t have a method or set of tools that they use to understand how current processes are working and to make changes to those processes so that outcomes improve.  In Baldrige-speak, we call that systematic evaluation and improvement: using data to analyze process performance and then applying methods to improve those processes.

There are many useful frameworks and tools out there, from PDSA to Lean to Six Sigma to any number of others, including some “home grown” systems.  Each method has a slightly different purpose, but all of them can be useful.  And I’m going to say something that may sound a little blasphemous in the continuous improvement world: it may not matter which one you choose, so long as you pick one, implement it, and stick with it.  Really, it’s the discipline of evaluating key processes in your organization (systematically and repeatedly) — I guess that’s why it’s called “continuous” improvement — that creates a culture of improvement.  So pick a method(s), get it in the hands of your people, and empower them to make changes to their work for the benefit of customers and other stakeholders.  As they say: “turn them on and then turn them loose!”

Failure to Listen.  Another reason some organizations fail is that they stop listening — listening to customers and potential customers, listening to their workforce, listening to their partners, and just being aware of changes in their environment to which they need to be responsive.  Customer preferences do change (anyone still holding a Blackberry?); marketplaces change and forces shift (think about how changing demographics and the aging workforce/marketplace is impacting most organizations); workers’ needs change; business models and competitors change (Uber completely changed the taxi industry; same with Amazon for retail).  Organizations that can’t (or just aren’t willing to) effectively listen to their stakeholders, identify and respond to those changing requirements will probably find themselves in a reaction mode.  Or, worse, irrelevant.

So the trick is to have systematic listening posts (surveys, focus groups, market studies, etc.) to pick up on changes early, and then for goodness sake, do something about it when you detect a shift!  Analyzing and using that information to change products, services, employee benefits or their work environment, or business models usually is the difference between a successful and failing organization.  Listen, learn, adapt.

Inconsistent Deployment.  Oftentimes, good organizations have good processes or practices, but only in parts of the organization.  Think of your own organization and its various “pockets of excellence” — a department, a team, a facility or a specific location, a service line that usually outperforms the rest.  The better organizations try to spread those good practices.  Not only does this elevate performance throughout the organization, but it promotes more consistency in output.  Think about the benefits of consistency for a second.  As a customer, you want to know that the Big Mac you buy from a McDonalds in Miami is the same as the one you’ll buy in Memphis.  As an employee, you want to know that the performance management system that is used to evaluate, reward, and recognize your performance is the same one used to evaluate, reward, and recognize employees on other teams.  And as a leader, you want to know that your processes produce predictable outcomes, because predictability implies efficiency, standardization, reliability, and more control.

The trick is in finding those pockets of excellence — those best practices, those truly effective processes — and then replicating them throughout the organization.  Which means organizations need a way to judge “goodness” (through metrics and/or assessment) and then a way to transfer that knowledge to other areas.  The goal is to take what’s working well and make it work everywhere else, causing all boats to rise, so to speak.

Lack of Alignment.  Similar to consistent deployment, I’ve seen many organizations lose their way due to lack of alignment — inconsistency of plans, processes, information, and decisions.  Alignment is the glue that holds high performing organizations together.  Or, said in reverse: lack of alignment is what leads to sub-optimized resources, reactive firefighting, organizational waste, and employee (and customer) frustration.  When good organizations start to fail, it could be because their operations are out of alignment — decisions are being made that are inconsistent with mission or values; products or services are being offered that are inconsistent with customer preferences or expectations; strategies are being pursued that don’t address strategic challenges or leverage strategic advantages; operations are designed in a way that doesn’t leverage core competencies.

Better alignment requires a common understanding of organizational purpose and goals throughout the organization.  It also requires the use of complementary measures and information for planning, tracking, analysis, and improvement at three critical levels: the organizational level, the key process level, and the work unit level.  Alignment is like magic: when you have it, organizations are in synch, momentum builds, and results are more easily achieved.  But when you don’t, it sometimes feels like you’re driving a car with only three wheels.

Ineffective Leadership.  Much has been written about the importance of having effective leadership (actually, many of my columns focus on this).  In truth, leadership is the number one predictor of performance excellence within any organization (followed by a focus on customer and high workforce engagement, in case you’re wondering).  To prove the point, think of an organization that has had great success, but then starts to go sideways after a change of leadership at the top (Hewlett Packard, Volkswagen, Motorola are some examples).  Same organization; same products or services; same workers.  But leadership can make all the difference in the world in keeping good organizations good.

Organizations need visionary, authentic, capable leaders throughout the organization.  Which means they need strong processes to either find, recruit and hire them and/or strong processes to develop and groom them from within.  They need effective leadership training and development, effective succession planning, effective performance management and accountability systems.  Good leadership doesn’t just happen: it’s the result of effective processes that consistently produce effective leaders.  Good organizations will eventually fail if they lose sight of the importance of continuous leadership development.

There are many reasons organizations succeed, and there are just as many reasons why good organizations sometimes fail.  But if your organization guards against those six deadly sins above, you’ll have a much better shot at achieving and sustaining great performance — of keeping your good organization good (or better yet: making it better).

What comments do you have regarding organizational success and failure?  Participate in a discussion on this topic: visit our LinkedIn group to post a comment.  And follow me on Twitter @LassiterBrian!

Yours in Performance Excellence,

Brian S. Lassiter

President, Performance Excellence Network


Catalyst for Success Since 1987!

Photo credit monster.com, inc.com, todayslifeline.com, davidmmasters.com

[this article modified from an original post June 2019]