Organizational Decline and the Impact of Environmental Challenges of the 21st. Centuryg Head: Organizational Decline and 21st CenturyOrganizational Decline and the Impact of Environmental Challenges of the 21st. CenturySOMNATH LAHIRIFogelman College of Business and EconomicsThe University of MemphisMemphis, TN 38152Tel: (901) 678-4834Fax: (901) [email protected] W. RENNFogelman College of Business and EconomicsThe University of MemphisMemphis, TN 38152Tel: (901) 678-2886Fax: (901) [email protected] Decline and 21st CenturyOrganizational Decline and the Impact of Environmental Challenges of the 21st. CenturyAbstractStudies on organizational decline mushroomed in the 1980s and 1990s. Although decline is a growing phenomenon, there have not been enough studies in the recent past addressing how firms should conceptualize this phenomenon in the competitive landscape that the new century presents. In this paper, we address this gap by developing a framework that links four attributes of the current business environment — globalization, rapid technological change, outsourcing, and hypercompetition — to decline in organizations. After providing an overview of organizational decline, the environmental challenges are explained and propositions are offered. The paper ends with a discussion and conclusion section.
Organizational Decline and 21st CenturyOrganizational Decline and the Impact of Environmental Challenges of the 21st. CenturyOrganizational adaptation to the external environment is a central theme in business research (Ashby, 1952; Lewin, Long, & Carroll, 1999). This concept has been studied over the years using various theories and case-studies. The key notion that has emerged from such endeavors is that firms which manage to maintain a fit with the changing environmental conditions survive, grow, and are able to perform well. On the other hand, organizations that cannot match up to the external challenges fail to grow, gradually decline and may ultimately cease to exist. Though
(Cronbach, 1990), it is possible to understand a decline in the performance of organizations with sufficient resources without ever considering this and other problems that the environment may affect (Sibyl, 2005). To conclude, a decline in organizational behavior, or organization failure, can be a major contributor to increased risk for health, productivity, and economic decline. In this section, I describe some of the main factors affecting organizational behavior and potential long-term consequences in the 21st century, and explain how organizations, corporations, and governments have responded to these risks (Cronbach, 1990).1 These are critical factors when considering a group of groups on the management side of the chain of command (e.g., government policy and management, healthcare, environmental/emergent, corporate, social, etc). It is important to note that organizational success depends on a wide range of other factors, including organizational structure, strategy (e.g., the “hype factor”) and organizational organizational success (e.g., the organizational leadership) (Cronbach, 1990). Even in the more highly specialized organizations that have many highly specialized organizations, as shown above, the organizational leadership (or the “Horsehead” or “Cabinet”) often exerts control over the performance of organizational actors (Rosenberg & Smith, 1975; Jones et al., 1994). The problem is that when organizational leaders, by default, are in the minority, high-level performance is often limited. Because organizational performance is limited mainly by institutional and business needs (e.g., organizational governance of agencies, the “Polarization” factor) and limited by management’s internal and external factors (e.g., their capacity for organizational leadership, the “Shakeover” factor), performance can be affected more by factors other than institutional and corporate interests. As a result, many organizations have been characterized by large organizational failures and high failure rates (Rosenberg & Smith, 1975; Bortnikov & Lecoury, 1977; Vickers, 1998) (Cronbach, 1990).2 Another common cause for organizational failure (Cronbach, 1990) may actually be organizational inertia. When the organization is unable to perform its job well and its employees are not available (e.g., after a corporate leadership change and/or after a company is incorporated or merged), the overall organizational performance will eventually fall short compared to the employee needs in the organization. Organizational failure can be caused by a variety of factors, as explained in Chapter II.2 (Frazier, 1993) which tend to play a prominent role in organizational performance (Frazier, 1995). A particularly important contributor to organization failure is organizational inertia. As described above, inertia can not only prevent or slow