How the Mighty Fall - Jim Collins

And Why Some Companies Never Give in

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Jim Collins,
Publisher: Jim Collins
ISBN: 0977326411 

 

 

This is a synopsis only.  RESULTS.com recommends you buy the original book.

 

Every institution, no matter how great, is vulnerable to decline.

 

There is no law of nature that the most powerful will remain at the top. Any company can fall and most eventually do.

 

Decline is largely self-inflicted, and the path to recovery lies largely within our own hands.  Whether you prevail or fail, endure or die, depends more on what you do to yourself than on what the world does to you.  

 

Some companies do indeed recover - in some cases coming back even stronger

 

Decline can be avoided.  Decline can be detected. Decline can be reversed.

 

By understanding the symptoms of these 5 stages of decline, leaders can use them as a diagnostic to take remedial actions to reduce their chances of falling to the bottom.

 

The 5 stages of decline:

 

Stage 1: Hubris Born of Success

 

Stage 2: Undisciplined Pursuit of More

 

Stage 3: Denial of Risk and Peril

 

Stage 4: Grasping for Salvation

 

Stage 5: Capitulation to Irrelevance or Death

 

 

Stage 1: Hubris Born of Success

 

 

Success, Entitlement, Arrogance 

• Success is viewed as “deserved” rather than fortuitous, fleeting, or even hard earned in the face of daunting odds

• People believe that success will continue no matter what the organization decides to do, or not to do.

 

Neglect of a primary flywheel 

• Company becomes distracted by extraneous threats and opportunities

• Neglects to focus on keeping a primary flywheel turning

 

“What” replaces “Why” 

• Thinking, “We’re successful because we do these specific things”

  • When they should be thinking, “We’re successful because we understand why we do these specific things - and under what conditions they would no longer work”

 

Decline in learning orientation 

• Leaders lose their inquisitiveness and learning orientation

  • Great leaders, no matter how successful they become, maintain a learning curve as steep as when they first began their careers.

 

Stage 2: Undisciplined Pursuit of More

 

 

Unsustainable quest for growth / confusing big with great 

• Success creates expectations for more and more growth

• Puts strain on people, culture, and systems

• Firm is no longer able to deliver excellence consistently

 

Undisciplined, discontinuous leaps 

• The firm makes dramatic moves that fail at least one of the following three tests:

1. Do they ignite passion and fit with the company’s core values?

2. Can the company be the best in the world at these activities?

3. Will these activities help drive the company’s economic or resource engine?

 

Declining proportion of right people in the right seats 

• Losing the right people and/or

• Growing beyond the organization’s ability to get enough of the right people to execute with excellence

 

Easy cash erodes cost discipline 

• The organization responds to increasing costs by trying to grow revenues rather than increasing its financial discipline.

 

Bureaucracy subverts discipline 

• Bureaucratic rules subverts the ethic of “freedom and responsibility” that marks a culture of discipline

• People increasingly think in terms of “jobs” rather than responsibilities.

 

Problematic succession of power  

• Leadership - transition difficulties

• Poor succession planning

• Failure to groom excellent leaders

 

Stage 3: Denial of Risk and Peril

 

 

Amplify the positive, discount the negative 

• Tendency to discount or explain away negative data

• Failing to see that the data indicates something may be wrong with the company;

• Leaders highlight and amplify external praise and publicity.

 

Big bets and bold goals without empirical validation

• Leaders set audacious goals and/or make big bets that aren’t based on accumulated experience,

• Or worse, they make bets that fly in the face of the facts.

 

Incurring huge downside risk based on ambiguous data 

• When faced with ambiguous data and decisions that can have a potentially severe or catastrophic downside, leaders take only a positive view of the data and ignore the downside risks

 

Erosion of healthy team dynamics 

• Decline in the quality and amount of dialogue and debate

• Shift toward either consensus or dictatorial management

  • Rather than the ideal which is a process of argument and disagreement followed by unified commitment to execute decisions.

 

Externalizing blame 

• Rather than accept full responsibility for setbacks and failures, leaders point to external factors or other people to affix blame.

 

Obsessive reorganizations  

• Rather than confront the brutal realities, the firm chronically reorganizes

• People become preoccupied with internal politics rather than external conditions.

 

Stage 4: Grasping for Salvation

 

A series of silver bullets 

• Tendency to make dramatic, big moves, such as:
  

  • a “game changing” acquisition

  • a discontinuous leap into a new strategy

  • an exciting innovation, in an attempt to quickly catalyze a breakthrough

  • lurching about from program to program, goal to goal, strategy to strategy, in a pattern of chronic inconsistency.

 

Grasping for a savior leaders 

• The board responds to threats and setbacks by searching for a charismatic leader and/or outside savior.

 

Panic and haste 

• Instead of being calm, deliberate, and disciplined - people exhibit hasty, reactive behavior, bordering on panic.

 

Radical change and “revolution” with fanfare  

• The language of “revolution” and “radical” change characterizes the new era

• New programs! New cultures! New strategies!

• Leaders spending a lot of energy trying to align and “motivate” people, engaging in buzzwords and taglines.

 

Hype precedes results 

• Instead of setting expectations low - underscoring the duration and difficulty of the turnaround - leaders hype up their new visions

• They “sell the future” to compensate for the lack of current results, initiating a pattern of overpromising and under delivering.

 

Initial upswing followed by disappointments 

• There is an initial burst of positive results, but they do not last

• The organization achieves no buildup, no cumulative momentum.

 

Confusion and cynicism 

• People cannot easily articulate what the organization stands for

• Core values have eroded to the point of irrelevance

• The organization has become “just another place to work” or get a paycheck

• People lose faith in their ability to triumph and prevail.

• People become distrustful, regarding the company visions and values as little more than PR and rhetoric.

 

Chronic restructuring and erosion of financial strength 

• Each failed initiative drains resources

• Cash flow and financial liquidity begin to decline

• The organization undergoes multiple restructurings

• Options narrow & strategic decisions are increasingly dictated by circumstance.

 

 

Stage 5: Capitulation to irrelevance or death

 

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APPENDIX 5: What Makes for the “Right People” in Key Seats?

 

The right people fit with the company’s core values 

• Great companies build almost “cult-like” cultures

• Those who do not share the institution’s values find themselves surrounded by antibodies and are ejected like a virus

• People often ask, “How do we get people to share our core values?” The answer: you don’t.  You hire people who already have a predisposition to your core values, and hang on to them.

 

The right people don’t need to be tightly managed 

• The moment you feel the need to tightly manage someone, you have made a hiring mistake.

• If you have the right people, you don’t need to spend a lot of time “motivating” or “managing” them.

• They’ll be productively neurotic, self-motivated and self-disciplined, compulsively driven to do the best they can because it’s simply part of their DNA.

 

The right people understand they do not have “jobs”; they have “responsibilities” 

• They grasp the difference between their task list and their true responsibilities.

• The right people can complete the statement, “I am the one person ultimately responsible for…”

 

The right people fulfill their commitments 

• A culture of discipline

• People view commitments as sacred - they do what they say they will do

• Equally, this means that they take great care in saying what they will do, careful to never over commit or to promise what they cannot deliver.

 

The right people are passionate about the company and its work 

• Nothing great happens without passion, and the right people display remarkable intensity and passion.

 

The right people display “window and mirror” maturity 

• When things go well, the right people point out the window, giving credit to factors other than themselves

• They shine a light on other people who contributed to the success and take little credit themselves

• Yet when things go wrong, they do not blame circumstances or other people for setbacks and failures; they point in the mirror and say, “I’m responsible.”