By organizational failure is usually meant failure against some measure of performance, or failure to achieve a goal that is normally expected. Thus, a company can be identified as failing if it is not profitable, or a school if it does not educate students to a required level, or in sufficient numbers. Clearly, such measured organizational failure might be purely nominal (and/or imposed), an artifact of the application of performance criteria, rather than a substantive failure of organization as such. Thus, the internal working of an organization might be highly efficient given the resources available; but, nonetheless, because it does not reach a prescribed level of performance, it is deemed to fail. If the price of an indispensable commodity suddenly makes production at a saleable price impossible for a firm, failing profitability is almost inevitable and, for a small or new organization, bankruptcy (the most commonly used indicator of failure) is likely.
Of course, it may be also that an organization that is failing to perform against the customary criteria of success is also failing in some more fundamental way. If there are organizational problems that management has failed to resolve and which detract from measured performance, then there is a correspondence between measured and substantive organizational failure. But failure to perform against particular criteria is a customary or legal definition of failure, and may or may not indicate that there is some more fundamental problem of organization.
Many writers on management have conveniently conflated the distinction between measured and substantive organizational failure. The early or classical theorists of management asserted that an efficient organization, which followed the best practices as they prescribed them, would not fail. Later it was argued that the appropriate modes of organization and management might vary a good deal according to circumstances, but this was merely a more subtle version of the idea that reproducing the features prescribed would lead to the avoidance of failure. Only in the final years of the twentieth century, after considerable development of the sociology of institutions, did awareness emerge that organizations may survive despite judgments that they have failed. In 1989 Meyer and Zucker argued that many ”permanently failing organizations” could be identified and their attributes analyzed.
However, even today the features of substantive or actual organizational failures are not seriously analyzed. Today, organizational failures, as indicated by particular measures, are nonetheless thought of as opportunities for learning (Cannon & Edmonson 2005). But when and whether failures are also substantive failures of organization is seldom discussed. It is, obviously, possible to find examples of organizations that have failed in a basic way. A routed army is one. However, instances in which an organization has disintegrated, without some compelling (and usually external) cause, are rare. It is a feature of social organizations that they tend to adapt themselves, despite incipient tendencies to entropy. Because of the evolutionary advantages it confers, a capacity for cooperative activity as well as conflict is deeply rooted in the human psyche. Because this is so, basic organizational failure is unlikely except in extreme or unusual circumstances.
References:
- Cannon, M. D. & Edmonson, A. (2005) Failing to Learn and Learning to Fail (Intelligently): How Great Organizations Put Failure to Work to Improve and Innovate. Long Range Planning 38 (3): 299 319.
- Meyer, M. M. & Zucker, L. (1989) Permanently Failing Organizations. Sage, Newbury Park, CA.
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