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Stage of Organizational Decline and corresponding organizational action
Vak: International Economic Law (B001303)
6 Documenten
Studenten deelden 6 documenten in dit vak
Universiteit: Universiteit Gent
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Stage of Organizational Decline and corresponding organizational action
Organizational Decline occurs when companies don’t anticipate recognize, neutralize or adapt to the
internal or external pressures that threaten their survival. There are 5 stages of organizational
decline. Those stages are as followed:
1. Blinded
2. Inaction
3. Faulty Action
4. Crisis
5. Dissolution
In this presentation we will go in depth to explain further what organizational decline is and
elaborate on each stage while also giving examples of times when companies went through a certain
stage of organizational decline. Businesses operate in a constantly changing environment.
Recognizing and adapting to internal and external changes can mean the difference between
continued success and going out of business. Companies that fail to change run the risk of
organizational decline.
1. In the blinded stage, decline begins because key managers fail to recognize the internal or
external changes that will harm their organizations. This blindness may be due to a simple
lack of awareness about changes or an inability to understand their significance.
2. In the inaction stage, as organizational performance problems become more visible,
management may recognize the need to change, but still take no action. The manager may
be waiting to see if the problems correct themselves. Or, they may find it difficult to change
the practices and policies that previously led to success. Possibly, too, they wrongly assume
that they can easily correct the problems, so they don’t feel the situation is urgent.
3. In the faulty action stage, faced with rising costs and decreasing profits and market share,
management will announce belt-tightening plans designed to cut costs, increase efficiency,
and restore profits. In other words, rather than recognizing the need for fundamental
changes, managers assume that if they just run a tighter ship, company performance will
return to previous levels.
4. In the crisis stage bankruptcy or dissolution ( breaking up the company and selling its parts )
is likely to occur unless the company reorganizes the way it does business. At this point,
however, companies typically lack the resources to fully change how they run their
businesses. Cutbacks and layoffs will have reduced the level of talent among employees.
Furthermore, talented managers who are savvy enough to see the crisis coming will have
found jobs with other companies, often with competitors.
5. In the dissolution stage after failing to make the changes needed to sustain the organization,
the company is dissolved through bankruptcy proceedings or by selling assets in order to
pay suppliers, banks, and creditors. At this point, a new CEO may be brought in to oversee
the closing of stores, offices, and manufacturing facilities, the final layoff of managers and
employees, and the sale of assets. It is important to note that decline is reversible at each of
the first four stages and that not all companies in decline reach final dissolution.
An example for this stage can be portrayed by the recent shutdown of a popular show on BET. The
show has been on air for 14 years and though they aren’t shutting down completely I think this can
be described as an organization in the blinded stage. Its been become increasing unpopular for about
the last 5 years. The reason why is the fact that the show was once so popular and I think there was
a feeling of confidence that they will make it back on top. The fact is that music video tv shows are
