Why Organizations Fail?

William Allen, MBA, MLT

In business, it’s important to address the following question as it something which appears to happen fairly often, much more than someone would expect; if business schools can Flow Chart the Strategy Process, why do major firms sometimes fail to produce extraordinary performance or even survive? (MBA 6010, week 4 assignment). In answering this, a few other questions come to mind;

 Are schools failing their students?
 Why are students not to utilizing what they’ve learned?
 Do others in the organization without a business degree refuse to recognize the
    education and abilities of those who have one?
 Does this have anything to do with change management?

While there are many other questions of why organizations may fail, the above questions are a good place to start.

Long before the first business school ESCP Europe was founded in 1819, (escpeurope.eu), Niccolò Machiavelli who was an Italian lawyer, Political and philosopher about five hundred years ago was writing about leadership and what a Prince or Ruler should do to best lead their kingdom, (The Prince, 1532). The interesting thing is, Machiavelli wrote about topics which are still being discussed/ taught and debated today, such as leadership, followers, and planning for successes. When it came to leading and planning, Machiavelli believed an important aspect was, “for a prince to have his foundations well laid, otherwise it follows of necessity he will go to ruin” (Machiavelli, 1532, ch. 12, para. 2), to be successful, a leader needs to plan ahead and have things put into place which will help them achieve their goal.


Are Schools failing their students? 

A question posed by Paul Barrett (Barrett, 2010, para 1) “What are we teaching these people before they head off to the executive suite?”  In this New York Times article, “Are Business Schools Failing?”, Barrett (2010) reviews the book “Rethinking the MBA; Business Education at a Crossroads”, by David A. Garvin, Patrick Gerard Cullen, and Srikant Datar. These seven Harvard Business School scholars criticize the education students receive from some of the best schools and conclude “recipients, according to this book, haven’t learned the importance of social responsibility, common-sense skepticism and respect for the dangers of taking risks with other people’s money”, (Barrett, 2010, para. 2).

Business schools develop curriculum based the teachings and track records and past performance by great leaders and scholars. Five hundred years ago Machiavelli saw the benefit of looking to those who have succeeded and believed “A wise man ought always to follow the paths beaten by great men, and to imitate those who have been supreme…” (Machiavelli, Ch.6, para. 1). This is very enlightening as it can be related to, looking back many years ago when I was an Assistant Manager for Wal-Mart. The Head Office Executives would come for a store visit and spend very little time in the store. Instead, they would do a quick tour of the store and be more interested in checking out the competition. Back then it was somewhat puzzling why they wouldn't want to spend more time at their own store instead.  I can remember a regional manager saying "it's more important we find out what our competition is doing right.” He didn’t care what they were doing wrong, but since they had customers, they were doing something right.

All through history, we have looked to the great ones for lessons on how to achieve greatness, business schools do just that and help to bring this knowledge to their students, the troubling part is why students fail their organizations? With the increase in MBA student enrollment, organizations clearly see a benefit to this level of education, which further raises other questions such as, if the schools are delivering the education organizations, students, and society desire, why are organizations not utilizing these newly acquired skills?

Why are students failing to utilize what they’ve learned? 

This question brings to light the possibility of a Business school graduate maybe not agreeing with or understanding the concepts covered in the MBA programs. Those who disagree will simply return to their organizations and continue to manage or lead in the same manner in which they did before with little or no change. Some of the key components of MBA programs include not only leading but also strategizing. An organization first needs vision than to be able to create a strategy which helps them achieve the desired vision. The definition of strategy, “A company’s strategy is the set of actions that its managers take to outperform the company’s competitors and achieve superior profitability” (Thompson, Peteraf, Gamble & Strickland, 2016, p.3). The key part of this definition is the actions carried out by the managers, what is it they need to do to reach their vision; this is where many organizations fail. Some organizations don’t craft an effective strategic plan and there are those who do a poor job at it, here are “10 reasons why strategic plans fail” according to Aileron (2011);

 Having a plan simply for plans sake. Creating the plan, but not utilizing it.
 Not understanding the environment or focusing on results. Not looking at the
    competition or creating a strategy which doesn’t reflect the goals of the organization.
 Partial commitment. People responsible just don’t see the point of the plan.
 Not having the right people involved. People need to own the plan, therefore those
    responsible for executing the strategy need to be involved.
 Writing the plan and putting it on the shelf. Doing nothing with the plan, creating it
     and then forgetting about it.
 Unwillingness or inability to change. Need to be able to change as the environment
     changes.
 Having the wrong people in leadership positions. Does the organization have the right
    managers in place, those who are truly leaders?
 Ignoring marketplace reality, facts, and assumptions. Need to keep looking at the
    competition, and continuously change as you plan for the future.
 No accountability or follow-through. Lack of follow-up.
 Unrealistic goals or lack of focus and resources. The goals need to be obtainable.

If students are utilizing their educations, or want to and are trying to better their organizations, this suggests other question as to why organizations are failing. Do others in the organization without a business degree refuse to recognize the education and abilities of those who have one?

Do others refuse to recognize the education and abilities of those with an MBA? 

Not everyone has a business degree, and there are organizations with very few individuals with one. There are even CEO’s who don’t agree with this type of education, “A degree that typically requires two years of extreme dedication, virtually every ounce of brainpower and free time, and a pretty penny or two (or thousands) holds no worth, no value, no use, no importance” (Hastings, nd, para 2). Yes, there have been some great leaders who didn’t have an MBA such as; Warren Buffett, Steve Jobs, and Bill Gates, however, it’s leaders such as these we need to learn from.

It’s possible to have an organization in which the managers do not have their MBA or any kind of post-secondary education. Situations such as this would make it very difficult for someone who newly acquires their MBA to convince those managers of the benefits of change, especially in an environment where the managers and leaders are resistant to change, to begin with.

Conclusion 

Throughout history, there are many lessons to be learned, who was successful and why who had failed and what could they have done better. Many successful organizations understand the importance of not only learning from others mistakes but also learning from your own. This is what business schools do; they help students develop critical thinking allowing them to analyze the competition as well as themselves.

“There are two roads to the reformation for mankind—one through misfortunes of their own, the other through the misfortunes of others; the former is the most unmistakable, the latter the less painful…the knowledge gained from the study of true history is the best of all educations for practical life.” (Liddell Hart, 1971, para.7).

Some people such as Steve Jobs had figured out early on how important it was to watch the competition closely. This is where a strategic plan is born, and the crafting process begins. Unfortunately, many organizations don’t feel it’s important to look outside of their firm for solutions. Without learning from history we are destined to make the same mistakes.

References
Aileron, (2011), 10 Reasons Why Strategic Plans Fail, retrieved from             http://www.forbes.com/sites/aileron/2011/11/30/10-reasons-why-strategic-plans-fail/#7a650d4f3e33

Barrett, P. (2010), Are Business Schools Failing? Retrieved from     http://www.nytimes.com/2010/04/18/education/edlife/18books-t.html?_r=0

escpeurope.eu, (nd), ESCP Europe, The World's First Business School, Retrieved from       http://www.escpeurope.eu/escp-europe/history-of-escp-europe-business-school/

Hastings, B. (nd), MBAs Are Worthless Believes One CEO — Why I Disagree, retrieved from   https://medium.com/@WritePrecisely/why-i-disagree-with-the-ceo-who-believes-  mbas-are-worthless-6924464f91b2#.q3n949ukz

Liddell Hart, B.H. (1971), Why don't we learn from history? Retrieved from   http://infohost.nmt.edu/~shipman/reading/liddell/c01.html

Machiavelli, N. (1532), “The Prince”. www.gutenberg.org,

Thompson, A. A., Peteraf, M. A., Gamble J. E., & Strickland, A. J. (2016). Crafting and   executing strategy: The quest for competitive advantage, concepts, and cases, (20th ed.).   The United States of
America: McGraw-Hill Education.