Free to Fail

Free to Fail

Creative Destruction Revisited

Hugh van der Mandele and Arjen C. van Witteloostuijn

This challenging book tackles one of the most fundamental questions in economics: Why are commercial organizations more efficient than organizations in the public domain?

Chapter 10: When left to its own devices

Hugh van der Mandele and Arjen C. van Witteloostuijn

Subjects: business and management, organisation studies, strategic management, economics and finance, industrial organisation


For outside observers trying to diagnose the ‘illness’ of a failing organization, it is not always very easy to know when the problem has external and when it has internal roots. Of course, it does happen that an organization is running smoothly internally, but still is unable to repair its fortunes after an external shock. However, organizations themselves tend to blame external changes for whatever quagmire they enter, even if the cause is clearly an internal one. The advantage of this blaming strategy is threefold, at least: it saves a lot of internal hassle, it avoids managerial reputation damage, and it is a useful excuse when begging for outside help. Often, however, external change is only the last shove for an organization already in disrepair for internal reasons. In Chapter 9, we described the situation in which outsiders, such as governments, protect or save failing organizations, even if the roots of the failure are located within the organization. However, outsiders are not always willing or able to do so. Then, the failing organization is left to its own devices. The question we will answer in this chapter is when an organization can adapt to the external or internal changes that endanger its very effectiveness, and when this is no longer possible or economically viable.

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