If an association is successful in satisfying its mission, it will establish and grow. The founders and their early supporters will age or die and will be changed by new leaders who have been endorsed from within the organization or have been brought in from the outside. Ownership by founders or founding families will evolve into public ownership and domination by boards of directors. The decision whether or not to hold private ownership or “go public” may appear to be principally a financial decision, but it has huge cultural significances.
With private ownership, the leaders can continue to enforce their own values and assumptions through all of the instruments. After governance has shifted to an encouraged CEO and a board of directors, the leadership role becomes more diffuse and temporary, because CEOs and board members usually have limited terms of office and are more answerable to shareholders.
At the same time, the culture that the society has evolved thus far will be professed as the source of the organization’s achievement and will, therefore, limit the high-quality of new CEOs to individuals who follow to the basic assumptions of that culture. Whereas leadership created a culture in the founding stage, that culture now creates criteria and boundaries within which encouraged leaders to need to function.
Organizational failure may result from inactivity or changes in the situation. Inaction increases due to risk hate, the desire to maximize prizes and an overly governmental culture. Weitzel and Jonsson’s model of organizational failure has five phases: blinded, inaction, faulty action, crisis, and dissolution. Directors must act to reverse the tendency of decline, but once the conclusion stage begins, the result is organizational death.
Some corporations are successful whereas others fail; various consequences occur because different policies, structures, and cultures are used to create value. Organizations answer differently to problems. Investigators propose that organizations go through expected stages.
Organizational failure occurs when a firm fails to succeed calamities in the growth stage or fails to adapt to compressions. Irrespective of the time or cause, the decline stage decreases the ability to attract resources. Moreover, an organization’s decline may result from too much growth.