Are organizations destined to fail?

Abstract

Purpose

The purpose of this paper is to explore the non-financial causes of organizational success or failure, provide a better understanding of the symptoms of financial distress and improve the predictive capacity of financial failure models.

Design/methodology/approach

The paper utilizes exploratory case studies in investigating the relationship of non-financial factors to organizational success or failure across a sample of sector-specific Australian firms listed on the Australian Stock Exchange. A two-tailed study was designed, in which seven cases from both extremes were chosen from three Australian business sectors: finance, property and manufacturing.

Findings

Non-financial factors associated with the organizations studied impacted their success or failure. These factors included management skill, experience and involvement in organizational strategy, feedback and resultant activity, together with board of director composition. The identification of financial and non-financial factors and sound internal processes could be utilized for the development of an early warning predictor of organizational success or failure.

Research limitations/implications

The use of this method is very time-consuming but is highly valuable in case study research, providing a more in-depth understanding of how non-financial factors impact organizational success or failure.

Practical implications

The research will provide a better understanding of the symptoms of financial distress and improve the predictive capacity of financial failure models. The improvement in prediction of organizational failure will reduce the costs of failure to all areas affected, from the large corporation to the small business. The inter-connectivity of all businesses to each other often results in a knock-on effect of failure with the cost being borne by all members of the community in some manner. The level of social impact and cost of failure can only be seen by the enormous costs of the Global Financial Crisis failures.

Originality/value

This paper contributes to the literature on effective qualitative research and explores important areas of consideration for those conducting qualitative multiple-case studies. It is intended to be of use to researchers investigating the area of predictors of organizational failure or success.

Citation

Purves, N., Niblock, S. and Sloan, K. (2016), "Are organizations destined to fail?", Management Research Review, Vol. 39 No. 1, pp. 62-81. https://doi.org/10.1108/MRR-07-2014-0153