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.

Organizational decline occurs when companies don’t anticipate, recognize, neutralize, or adapt to the internal or external pressures that threaten their survival. Eventually, these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly. In other words, decline occurs when organizations don’t recognize the need for change.

There are five stages of organizational decline: blinded, inaction, faulty action, crisis, and dissolution. 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.