The organizational life cycle is a model of the way a business changes through its life. Its four stages are startup, growth, maturity and decline. When organizations are about to slide into the decline stage, they experience warning signs, such as a potentially damaging fall in revenue, resources, market share and profitability. A sustained period of decline can take the organization to a point where it is impossible to recover, so it is essential to recognize the warning signs and take action to reverse the trends.
If your business is in the maturity phase, you are concentrating on consolidating your position and improving costs and efficiency. To identify trends that could lead to decline, start by auditing your business. Review your sales records and market share to identify areas where revenue is falling. Analyze your product portfolio to compare the proportion of old products to new models. Assess the capability of your workforce by measuring the number of recent highly qualified recruits and the number of employees taking training programs.
Before you develop an action plan, investigate the reasons for decline. Falling market share could reflect strong competitive activity or decreasing demand because of changing customer requirements or the availability of newer products. A product portfolio with a high proportion of old products reflects a lack of investment in new product development or overreliance on existing products. A static or shrinking workforce could reflect lack of investment in training and recruitment or natural wastage through employees retiring and leaving.
Your strategy for change must focus on the key factors in your decline. You also need to make your employees aware of the need for change. In communicating and sharing your strategy, emphasize the importance of innovation and demonstrate your commitment to growth by allocating funds for investment in new products. Set sales force and marketing targets for expanding your customer base and increasing market share.
Innovation plays an important role in your change program, so it’s essential to create an environment for innovation. Break down rigid departmental barriers by encouraging teamwork and collaboration, and set up a forum where employees can contribute ideas for new product development and other improvements. Identify training requirements and set up programs to improve workforce performance. Analyze your workforce to identify gaps in essential skills, and fill those gaps by training or recruiting to key positions.
A new product development program is key to regaining market share. Research customers’ requirements and develop new products aligned to those requirements. Collaborate with customers to strengthen relationships and ensure that you continue to meet their changing needs. Communicate your change program to customers and suppliers to build understanding and recognition of your long-term viability as a business partner.