Mirror, mirror on the wall…
So when was the last time you looked at your organization in the proverbial mirror on the wall? Did you see the wrinkles? Slivers of white hairs? Is its beauty fading? More importantly, did it look dynamic to you? Does it have the energy to achieve higher goals? Did you like what you see?
The Trigger
While in an ODLab, a delegate, an original Board member of a large 27 year old HR-intensive firm overseeing OD and HR functions shared his insights with me. The firm has remained relatively stable since inception. So good that a foreign firm acquired a 32% equity stake, some 5 years back. He asked me if from an OD lens, organization decay can (or has) creep-in despite its growth trajectory and the positive impact of the equity stake acquisition? Could organization decay be so imperceptible and difficult to diagnose?
I cited NASA’s case. Despite its 50 years of consistent efforts, technology advancements, huge leaps in computing power, talent development, participation of the private sector (e.g., Space X Blue Origin Virgin Galactic United Launch Alliance and others) and generous budget endowments, it has never brought back any human to the moon since the 70s. Meanwhile, the Soviet Union as well as newer players like China, India, and Japan have already landed probes in the lunar surface.
Decay is Real. It can Happen
Organization decay is characterized by widespread deterioration and systemic ineffectiveness. In this stage, organization experiences the loss of customers or even entire markets, products and services become irrelevant, operations plummet, know-how become obsolete, talents drift away and partial or complete closure of isolated plants and operations. There can be erosion of innovation and adaptability and vitality. With time, this may give way to bureaucratic structures and difficult resistance to change affecting the organization’s performance and to stay relevant in a rapidly evolving environment.
Decay (in organizations) and aging (in humans) share intriguing parallels. Both unfold imperceptibly and subtly. Both represent the gradual wear and tear on the organization as well as wrinkles, diminished energy, and cognitive slowdowns on the body. Both decay as they age. And once it comes, both do not know (and feel) when the process started. And when they do, they immediately deny its presence. Or wrongly concludes that it is easy to resolve.
Modelling Decay
I recalled the simplistic decay model consisting of X (for time) and Y (for “alignment”) and the 5 general stages of organization “life cycle” (e.g., startup, growth, success, bureaucracy, decay and shutdown). Alignment refers to the “fit” and harmony between the organization’s “capabilities” (e.g., its products, services, talents, technologies, processes, digital assets, and others) and its “environment” (needs of its customers, publics, competitors, and others).
With time and its actions, organizations can narrow or widen its alignment depending on how it engages with its defined environment. Wide mis-alignments can usher to organization decay. Signs and possible causes may include: (a) lack of awareness of environmental threats and internal weaknesses leading to blinded decay, (b) use of unreliable information and data, (c) prolonged inaction, (d) faulty action (or lack of corrective action), (e) crisis (clueless about cost pressure), and (f) dissolution. Wide misalignment may impair the organization’s ability to function and enter the final shutdown stage.
Some Tell-Tale Signs
Organizations will feel if they are experiencing decay through various signs. OD practitioners should look into tell-tale signs. The most frequent of which is a general lack of dissent, which may indicate a denial of reality (“what is…”) and an inability to make appropriate alignment decisions. The organization might have shifted from coping with reality to presenting a façade (what could be…), leading to systemic ineffectiveness and flawed decision-making. Other signs may include: (a) the loss of knowledge and experience due to staff turnover; (b) the importation of old (and undesirable) habits by the new recruits; (c) the inability to adapt to or cope with changes and disruptions including changing technology (Digital and AI) and work arrangements (remote work, incentivization among others).
Causes of Organization Decay
Back to NASA’s case. As early as the 80s, Howard Schwartz in his Organizational Disaster and Organizational Decay: the Case of the National Aeronautics and Space Administration, posited that organization decay can be attributed to various factors, including:
This decline may unfold gradually over an extended period or happen suddenly and dramatically. At this point, the alignment between the organization and its environment becomes questionable, and the organization's overall fitness is visibly impaired.
(a) A refusal to acknowledge reality (what is) and an accompanying attachment to fantasy (what could be).
(b) Initiative decay occurs when knowledge and experience with new practices are lost through staff turnover, making it difficult to maintain the same level of expertise and train new individuals. increasing employee turnover rates causes firms to lose valuable insights and learnings.
(c) Undesirable habits may be imported by recruits from less dynamic organizations hindering progress and innovations.
(d) Commitment to bad decisions and denial of reality can also contribute. This can lead to the advancement of employees who are detached from the organization's actual state, furthering its deterioration.
Action Points
By recognizing these signs, OD practitioners can take proactive actions to prevent organization decay. They can examine the factors that contribute to its development, take steps to prevent or mitigate its effects and (eventually) help organizations maintain their effectiveness, adapt to changing circumstances, and protect their competitive edge.
OD Practitioners can: (a) revisit and finetune their organizational assessment and diagnosis templates to focus on realism rather than over- and under-optimistic scenarios and assumptions, (b) longevity studies of the centenarian corporate citizens [], (c) through structured open-space intervention, develop a 5-stage rubric of your organization decay profile punctuating key tell-tale signs to watch for, and (d) in tandem with the decay rubric, discuss possible default decay response strategies (e.g. for startup [entrepreneurial], growth [stability], success [resilience], bureaucracy [agile], decay [process innovations] and shutdown [product innovations].
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Organizational Decay is Inevitable In this episode, you will learn about organizational decay and what to do.