Why Organization's Fail

Organization failure begins at the top. Rotary did not stop growing because people were not interested in joining local Rotary clubs. The number of people joining Rotary clubs proves that. It stopped growing because its leaders assumed it was in the business of supplying humanitarian services rather than in the business of creating Rotarians; they were product oriented instead of member oriented.

Red Text Note

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Thursday, May 29, 2014

Fatal Fantasies

Several earlier Rotatorials referred to three fantasies that are often fatal to organizations, be they for-profit businesses, not-for-profit businesses (like Rotary International and each of its member clubs) or charitable organizations (like The Rotary Foundation.)      

As you read this, please remember that your organizations' existence depends on retaining and attracting supporters, be they dues-paying members, donors, customers, or clients.  As you continue reading, ask yourself if your business and/or club have fallen under the spell of one or more of these fantasies.  (These fantasies, according to the likes of Howard Schultz, Phillip Kotler, Jack and Suzy Welch, Sarah Sladek, John Kotter, Peter Drucker, Matt Ridley, Theodore Levitt, Sheri Jacobs, and Jared Diamond, are rampant in the histories of failing or failed organizations.)

Potentially Fatal Fantasies

One – By getting better at what they are doing, organizations believe their supporters will continue to demand their product or service.  Organizations, believing that they are the best at what they are doing, tend to become arrogant, lazy, and gravitate toward mediocrity.  These conditions will become their enemy because supporters will eventually find a way to achieve higher levels of value and satisfaction.  As the famed psychologist Abraham Maslow concluded, “Humans are needy, achievement oriented organisms.”

Two – It costs too much.  A fundamental principle of any successful marketing campaign is that if the product satisfies the supporters’ needs, they will find a way to pay for it.  Obviously there has to be a reasonable cost/value ratio, but cost is seldom the primary reason people do not buy what an organization markets.  Supporters are lost primarily because they do not believe they will receive, or are not receiving, value proportional to what they are being asked to contribute in time, treasure, and/or talent.  (Author’s note:  Between 1930 and 1950, Rotary membership more than tripled.  From 1995 through 2007, years of tremendous economic expansion and increases in personal wealth, North American Rotary club membership declined more than 10%.  The cost of Rotary is not the primary reason clubs lose members.)

Three – An increasingly affluent society will ensure the organization’s growth.  In this type society, organization’s leaders often assume that they do not have to be creative about what they deliver to the supporters.  Instead they tend to concentrate on improving what they are already doing.  What actually happens is that they get better at what they have been doing rather than improving the value of what they are doing to their supporters, which relates directly back to fantasies one and two.

Is one or more of these fantasies mesmerizing any organizations you are in, support, own, or are an officer or director?  If so, what, if anything, are you willing to do about it?  And if you don't know, why don't you?