Decline in organisation’s performance takes place when both gross revenue and net results after tax shows a significant downward trend on year to year. A decline in performance is a red flag or an indicator to management that all is not okay with an organisation. The decline in performance puts management under pressure to take immediate remedial action to reverse the trend. Management must, before taking action, establish the causes of decline in performance in order to avoid the possibility of going into a fire fighting and blame game mode. The causes for the decline in an organisation’s performance are quite many and the following are the key ones;
Lack of an effective strategic plan
Lack of an effective plan can lead to the decline in an organisation’s performance. I have come across a number of organisations which prepare both strategic and business plans for the sake of satisfying the board and regulators and not to guiding management of how to move forward. The plans are put on the shelf to gather dust as soon as they are approved by the board. It is extremely difficult for the organisation to attain its mission if it does not own a plan to take it from its current state to its desired future state. Without an effective plan it is extremely difficult for an organisation to assess its performance.
Lack of talented staff
An organisation has to compete with other organisation for the market share. It cannot effective compete on the market if it lacks talented and result oriented staff team. The staff should also work under favourable environment in order to deliver at their optimal level. It must be noted that having a team of talent staff on board is a deliberate effort by management to recruit, train and retain committed talented staff team. Without talented staff the organisation cannot establish profitable relationships with its current and potential customers.
Lack of quality of customers
The organisation will be negatively impacted if it does not have the capacity to attract, serve and retain quality customers. Quality customers can afford to pay for goods and services without a lot of follow ups and reminders from the organisation. Quality customers if properly handled by staff will always recommend other quality customers to the organisation. Poor quality customers make it extremely difficult for the organisation to offer quality goods and services as they tend to have a high default rate.
Lack of quality products
Customers pay for the value or benefits they receive through consuming the goods and services produced by an organisation. They are willing to pay a price for quality products and services provided the goods and services meet their needs. New innovative products should be introduced to address the changing needs of customers. An organisation will lose its customers if it is not prepared to offer quality products at all time.
Lack of innovative ability
The focus of most organisations is on serving customers with the available products and services not caring so much on the changing needs of customers. Serving customers under the established policies and practices without looking for innovative way of doing business is not smart at all. If an organisation lacks innovative ability its products and services will not effectively compete on market.
Successful businesses are led by effective leaders who have the capacity to compete on the market through adoption of innovative ways of doing things. Effective leaders have the capacity to develop the staff team to take the organisation to another level. Effective leaders tend to attract staff that are interested in working in a competitive environment. For sure an organisation will decline in performance if it lacks effective leaders.
Inadequate technology and processes
Many organisations are quite hesitant in taking advantage of modern technology in order to reap the efficiencies and effectiveness brought about by modern technology. With modern technology an organisation can produce better products and services and serve its customers in a more effective way. There are also advantages of superior quality and fast processing capacity when the latest technologies are adopted. Without technology it is extremely difficult to guarantee the quality of goods and services produced by the organization
The decline in performance of an organization can also be caused by external factors beyond the control of management. The examples include deterioration in the security of the country and introduction of unfavorable policies.
The key reasons leading to decline in performance of most organizations are a result of internal factors which are under the control of management . This makes management responsible for failure of most organizations when it fails to take prompt action to address the factors causing the decline in performance.
John Muhaise Bikalemesa
Director: Big Drum Advisory Services Limited