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Organizational Change: Understanding the Causes of Failure

The prime cause of a failed reorganization is a form of self-deception by leaders.

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Tue Sep 02 2014

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The prime cause of failure is a form of self-deception by leaders. When contemplating reorganization, most benefits are tangible and can be estimated rather easily. If an organization merges with another company, their market share may increase. There may be new products to sell. These benefits are tangible and visible, but they may be overstated. On the cost side, things are not as precise. Costs can be reduced by cutting redundant staff, but failures in cultural integration can increase costs in ways that are hard to predict. We know that integration is going to take time and cost money to accomplish. We can make some vague estimates of how long it will take to merge the cultures. We can try to figure out how much additional training is required. The problem is that the things that affect these intangible costs are more hidden than the hard financial benefits, so the true cost of cultural integration is hard to predict.

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