ORGANISATIONAL DECLINE CAUSES
CAUSES OF ORGANISATIONAL DECLINE OR DECAY:
Organizational Slack
Slack is uncommitted or
committed (but underutilized) resources that are at the disposal of the
organization. The existence of uncommitted slack (especially in the form of
cash and liquid assets) is considered a necessary strategic factor for the
survival of the declining organization because during decline, there are not
enough sales to generate sufficient cash. On the other hand, slack may be a
handicap during growth period and it may represent a high opportunity cost
causing a drag on performance. While organizations in decline require high
discretion and flexibility in using slack, in more stable or growing markets,
high levels of slack (especially in the form of cash) may reduce performance.
Hence, critical to the choice and the timing of retrenchment strategies and the
likelihood of survival, is the amount of slack within the organization. Unfortunately
this situation does not exist in many organizations facing decline or decay. In
particular, while exercising retrenchment strategy as a strategic option, the
existence of critical slack, will give the organization more flexibility in
dealing with internal and external adversity.
Leadership
