Joe Lamantia.com

A few months ago I came across a pre­sen­ta­tion titled Orga­ni­za­tions in Cri­sis and Decline, by Ran­dall Dun­ham. After giv­ing exam­ples of orga­ni­za­tions in cri­sis and decline that include Kmart, Gen­eral Motors, United Air­lines, and Michael Jack­son. (inter­est­ing exam­ple of an enter­prise…), Dun­ham goes on to sum­ma­rize typ­i­cal symp­toms of cri­sis, the strate­gic con­se­quences of decline, and 10 behav­iors of unhealthy orga­ni­za­tions.
I came across this while doing some research on how the struc­tures and cul­tures of orga­ni­za­tions influ­ence modes of think­ing, resilience, and deci­sion mak­ing, so this is related to some of my post­ings on enter­prise soft­ware. It might be a while before I have the chance to write up all the ideas, so I’ll share Dunham’s mate­r­ial now.
Why is this of note to IAs? Quite a few Infor­ma­tion archi­tects (prac­ti­tion­ers, not just those with the title…) are actively look­ing for effec­tive tools and modes of under­stand­ing to help frame and man­age enter­prise prob­lems.
Under­stand­ing the signs of decline and cri­sis in orga­ni­za­tions can help infor­ma­tion archi­tects and other change agents under­stand the envi­ron­men­tal con­text of a sit­u­a­tion in the crit­i­cal early stages of set­ting expec­ta­tions and roles, and before it’s “too late”, when every­one at the man­age­ment table has strong opin­ions they must defend. In other words, before mak­ing a leap is into an active project, a plan­ning and bud­get­ing cycle, a strate­gic vision ses­sion, etc.
I see (at least) two very impor­tant aspects of a sit­u­a­tion that Dunham’s warn­ing signs could help iden­tify; how healthy an orga­ni­za­tion is, and what lat­i­tude for activ­ity and change is avail­able. Build­ing on this, these cri­te­ria can help iden­tify sit­u­a­tions to avoid or be wary of. Of course, orga­ni­za­tions in cri­sis and decline can present oppor­tu­ni­ties as well as risks, but some­times the ship is going down no mat­ter how much you try to patch the holes…
For those with­out pow­er­point, I’m going to present some of the mate­r­ial here as text, with acknowl­edg­ment that I’m bor­row­ing directly from Dun­ham, who him­self cred­its this source: Mis­che, M.A. (2001). Ten warn­ing signs of strate­gic Decline. In Strate­gic Renewal: Becom­ing a High-Performance Orga­ni­za­tion (pp. 25–30). Upper Sad­dle River, NJ: Pren­tice Hall.
Typ­i­cal Symp­toms of Crisis/Decline

• Lower earn­ings & revenues
• Increased employee turnover
• Reduced mar­ket presence
• Decrease in cus­tomer sat­is­fac­tion & interest
• Increas­ing costs & high struc­tural costs

Strate­gic Con­se­quences of Crisis/Decline

• Lower mar­ket value
• Incon­sis­tent strategies
• Mis­align­ment of inter­nal strate­gies & exter­nal goals
• Dimin­ished capac­ity to attract top talent
• Increased vul­ner­a­bil­ity

10 Behav­iors that Sig­nal Decline

• The orga­ni­za­tion exhibits a lack of under­stand­ing the envi­ron­men­tal and eco­nomic real­i­ties con­fronting it, or is in denial
• The man­age­ment of the orga­ni­za­tion is arro­gant with regard to its view of the world & assess­ment of its inter­nal com­pe­ten­cies. Ex: Icarus Paradox
• The orga­ni­za­tion has lost per­spec­tive with respect to cus­tomers, prod­ucts, sup­pli­ers, and competitors
• Man­age­ment and employ­ees have an insu­lar focus or pre­oc­cu­pa­tion with inter­nal processes, inter­nal mea­sure­ments, and politics
• The orga­ni­za­tion has lost its sense of urgency and lacks an atti­tude of self-determination
• The orga­ni­za­tion is rely­ing on his­tor­i­cal and poorly con­cep­tu­al­ized or inap­pro­pri­ate busi­ness strate­gies and tra­di­tional man­age­ment meth­ods to address new & dif­fer­ent challenges
• The orga­ni­za­tion has the propen­sity to repeat mis­takes and fails to learn from past experiences
• The orga­ni­za­tion has low or slow inno­va­tion prac­tices and is late to mar­ket with new products/services
• The orga­ni­za­tion has a ten­dency to recy­cle mar­gin­ally per­form­ing managers
• The orga­ni­za­tion relies exclu­sively on inter­nal tal­ent as a source of leadership

Key Fac­tors that Con­tribute to Decline

• Age of the orga­ni­za­tion: Older, more estab­lished firms may rely on legacy practices
• Size of the orga­ni­za­tion: Large firms with many ver­ti­cal lev­els can have trou­ble adapting
• Finan­cial suc­cess and past per­for­mance: Past suc­cess can lead to desire to fol­low same path in hopes of future success
• Own­er­ship and equity struc­ture: Is there account­abil­ity at all times to out­side agents?
• Envi­ron­men­tal influ­ences: Exter­nal shocks
• Abil­ity to learn and dis­cern pat­terns: Lack of learn­ing orga­ni­za­tion culture
• Certainty/uncertainty: Effec­tive­ness of change management
• Lead­er­ship: Young & inex­pe­ri­enced with­out desire to learn

Suc­cess Can Drive Crisis

• The same processes that lead to suc­cess in an orga­ni­za­tion can also lead to failure
• This is because suc­cess pro­motes rigid­ity, resis­tance to change, and habit­ual response
• Biggest prob­lem — peo­ple learn the ‘right’ way to solve a prob­lem and do that over and over again, even if that way will no longer solve the problem

It’s true these are quite gen­eral. Nat­u­rally, the art is in know­ing how to apply them as cri­te­ria, or inter­peret what you found. As a quick test of accu­racy, I’ve used the behav­iors and warn­ing signs to ret­ro­spec­tively review sev­eral of the orga­ni­za­tions I’ve seen from the inside. When those orga­ni­za­tions showed sev­eral of the behav­iors and warn­ing signs at an aggre­gate level (not nec­es­sar­ily my group, but the whole enter­prise) then the strate­gic con­se­quence dun­ham men­tioned were vis­i­ble at the same time.
From a prac­ti­cal per­spec­tive, a rat­ing scale or some indi­ca­tors of rel­a­tive degree would be very use­ful. In order to gauge whether to stay or go, you need to under­stand the inten­sity of the decline or cri­sis and what action you can take: for exam­ple, do you have time to go back to the cabin to save your hand­writ­ten screen­play before the ship sinks?