Organon of business failure: phase model of organizational decline

Abstract

This study defines and measures a multi-phase model of organization failure in medium to large size publicly held firms older than five years in a nationwide sample of manu facturing, communications, transportation, finance, insur ance, real estate and services industries. The utility of the progressive phases is demonstrated by their capability for discriminating with 23 variables (adapted from Miller's Failure Syndromes) the propensity toward business decline and to distinguish regular variation on a continuum of 16 measures widely used to evaluate the quality of financial performance and cause of failure. The analysis supports Miller's earlier notion of a stepwise movement in clustering of syndromes from impulsiveness to stagnation to leader lessness in heightening the likelihood of bankruptcy and demonstrates concurrent validity of progressive phases associated with perceived deterioration in the quality of business organization.