The Atlantic - Why Companies Fail - Hard to Change Culture?

In our previous readings and live sessions, we’ve begun learning about organizations and their structures given a stable environment from which to operate their businesses. 

Now understanding more about Contingency Theory, we know that especially in this very unique time in our economic history, there are changes that can affect nearly every component of an organization.  For large companies, they do not possess completely a “pure functional structure or a pure divisional structure” (Nohria, 2002, p. 6). Because of multiple projects and/or product lines, these endeavors/groups may be placed over the functional structure so these groups may improve coordination across functions.

In the March 2012 of The Atlantic (“Why Companies Fail”), author Megan McArdle raises question of General Motors’ recent performance post-government bailout, suggesting that despite the promise for change (for the better) by organizations like GM, slight gains may not be long lasting.  She notes experts who say that GM, the Big Three, the UAW (and others) have had difficulty changing their ways to leaner, better coordinated groups:

Over the past few decades, GM’s ability to resist change has proved

almost uncanny. Why did the company wait so long and do so

little—not once, but time and again—before finally falling into

bankruptcy? And what, if anything, does that portend for its future?

The questions go beyond GM, a company that’s hardly unique. Why did Blockbuster idly watch Netflix destroy its business? Why did Kodak let digital cameras drive a once-mighty industrial giant into penny-stock territory? (McArdle, 2012)

McArdle quotes various turnaround specialists (who are doing great business these days, she adds), who say that unless the company’s crisis is extreme and serious, its not easy to enact change (McArdle, 2012). 

But turnaround experts aside, what if the companies just aren’t made to redesigned?  Certainly a person or group may want to change.  They are given plans, incentives both abstract and concrete.  But sooner or later we revert back to who we really are, says McArdle (McArdle, 2012):

One possibility is that firms don’t change because inertia is in their DNA—indeed, it’s a gene that once made many of them successful. In their 1989 book, Organizational Ecology, Michael Hannan and John Freeman argue that organizations are actually selected for inertia by their environment, and “rarely change their fundamental structural features.” Change is risky, after all, since it definitionally involves doing something that isn’t already working—and even product lines that have grown lackluster still have some customers. Firms that are prone to frequent large changes will probably have more opportunities to kill themselves off with bad choices than firms that resist big changes.

It seems like a very disturbing point, where the “larger and older the firm is, the heavier the selection for stability” (McArdle, 2012).  But turnaround specialists say that its got to be the entire company that has to really want to change.” (McArdle, 2012).  I suppose it has to be a constant, near-unanimous decision on the part of the organization’s employees.  Otherwise, slipping in the competitive market is a certainty.

  REFERENCES:

McArdle, M. (2012, March). Why Companies Fail. The Atlantic. Retrieved from

        http:/www.theatlantic.com

 Daft, R. (2007) Fundamentals of Organizational Structure, “ Organization

         Theory and Design. ( 9th Ed.), pp. 88-125

Nohria, N. (1991).  Note on organizational structure. Boston, MA:  Harvard

        Business School Publishing