Chapter 1 & 2

Organizational Decline
Cause factors
Internal
External
Early signals of decline
Stakeholder response

Internal factors
Organizational Inertia
Congenial niche-adopting safe product-market domain , high technology etc
Eg-TGB Ltd set up Penicillin-G plant. Could not sustain price competition &
demand supply imbalance.
Organizational rigid structure
Eg-MCFL was not able to rotate employees between departments
Bureaucratic control-management with loopholes

Internal factors ( contd.)

Cultural rigidity-brings conformist behaviour & lack of diverse ideas
One-man powerful leader
Evaluating a decision from different perspective is missing
Excessive initiatives-aggressive beyond capabilities
Lack of organizational slack No backup resources to adapt to internal

pressures or policy or strategy changes

Ownership-Family controlled vs Manager controlled Profit mindset vs
Long-term growth mindset

External factors
Instability in business environment
High velocity environment
Hostile creditors
Small investors withdraw & recover their stakes

Early signals of decline

Leadership signals
Autocratic & unbalanced top management
Marketing signals
Increasing customer dissatisfaction Complaints and reduction in customers
Low growth rate
HR signals
High attrition Key employee turnover poses a great threat
Frequent labour issues

Early signals of decline

Financial
Creative accounting
Liquidity issues & weak balance sheet
Strategic initiative
Lack of goals
Inferior technology
Repeated bad decisions on investment

Stakeholder response
Internal stakeholders
Employees-low morale, job insecurity, strikes & cases of indiscipline
Managers-attrition, voicing concern & experimenting by enterprising
managers
External stakeholders
Creditors-withdraw support, pressure on top management,bargaining
Suppliers-bargain for higher prices,advance payments,extension of credit
Customers-low loyalty,stop buying products

Thank you