Organizational success and failure:: an empirical test of a holistic model

Abstract

This paper provides an empirical test of a holistic model of organizational success. It builds upon previous work by Flamholtz (Flamholz, 1995) Managing organizational transitions: implications for corporate and human resource management, European Management Journal 13(1), 39–51.] to develop a model of organizational success and failure. The initial model proposes that there are six key factors or `strategic building blocks' of successful organizations, and the six key variables must be designed as a holistic system, which has been termed `The Pyramid of Organizational Development'. The current paper proposes a link between the organizational development model and the financial success of organizations. To test this hypothesized relationship, we have analyzed financial and non-financial information relevant to the hypothesized model for eight pairs of companies in different industries. Each company was evaluated in terms of the six key strategic building blocks, and scores were assigned to indicate the degree of the organization's development. This organizational development score and measures of financial performance were used in a Friedman two-way analysis of variance as well as in a regression analysis to test the predictive validity of the framework. The results of both the Friedman and regression analysis suggest that there is a statistically significant relationship between the development of the six critical success factors and overall financial success of organizations. This has significant implications for both management theory and practice.