I like the series of books written by Jim Collins, "Built to Last", "From Good to Great" and "How the Mighty Fall". This series of books has it's content based on solid extensive research of examples of companies that succeed and fall. It gives a good insight into how some companies can become great and long lasting well known names, while others go into oblivion.
In this book, "How the Mighty Fall", I am impressed again by how Jim shared about their team's research findings of how every company, whether small or large enterprises can suffer the fate of becoming obselete and non-existent if they are not careful about continuing to be commited to being great.
The fall of any company, small and great alike according to Jim Collins seems to go through five stages (though some companies may not encounter all of 5 stages before capitulation to death), namely:-
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)
A search of the word 'Hubris' from Wikipedia comes up with the following meaning, " extreme haughtiness, pride or arrogance. Hubris often indicates a loss of contact with reality and an overestimation of one's own competence or capabilities, especially when the person exhibiting it is in a position of power."
These are various symptoms of stage 1 (Hubris Born of Success) in any organisations. Organisations may not display all of the symptoms, but many of them may be found in this early stage 1 of decline. Symptoms include people in an organisation taking success in their organisation for granted, believing that success in their organisation will continue indefinitely, no matter what they do or not do.
Leaders in an organisation become distracted from constantly strengthening and improving upon the core business that the organisation is already strong in doing. Leaders get distracted by pursuing new adventures, opportunities or being too absorbed in thinking about non-essential threats to their organisation.
The people in the organisation may also tend towards the "what and how" their success came about instead of cherishing "why" they got their success. People lose focus on their core values, mission and purpose of their organisation that got them successful in the first place and instead just base their success on their ability to carry out specific things or tasks in their organisation.
There is also a loss of learning culture in such organisations in stage 1 of decline. Since understanding of success is now based on what things and tasks to carry out, there is no longer any growth in pursuing learning. The organisation can only maintain status quo, and be at most as good as when their learning last stopped. Keep in mind that there is no such thing as 100% complete knowledge. The World contains a vast amount of knowledge beyond measure. The only successful individual or organisation is one that is constantly learning new things and value adding to themselves and others they serve.
Furthermore, such organisation in stage 1 of decline thinks highly of themselves, that they owe their success solely to the superior qualities of their organisation and leadership, instead of adopting humility and acknowledging that their success may have also arised from good circumstances and turn of events.
Stage 2 (Undisciplined Pursuit of More)
Organisations that proceed to stage 2 of decline confuse growth with becoming great. Such organisations in a bid to become great overstretch their people, systems and operations beyond what they can bear. Often, the dramatic actions such organisations carry out do not fit into their core values and do not enhance their core business.
Such organisations also lose the right people in important positions that ensures the success of the organisation. When pursuing undisciplined growth, organisations may also not be able to fill up enough right people into important positions as they grow and expand.
Such organisations in pursuit of undisciplined growth, may also respond to increasing cost of operations by increasing their prices of products or services to maintain profit margin instead of increasing their discipline at questioning carefully whether their growth is good growth or bad growth.
There is also an increase in bureaucracy in such organisations marked by rules governing actions, instead of maintaining a culture of freedom of expression fueled by strong cherished responsibility of every individual in the organisation, seeing that they do their best to be responsible for their work rather than seeing their work only as a 'job' they have no choice but to complete.
Furthermore, such organisations also face poor succession of leadership. There is no excellent succession plan in mind, no grooming of talented individuals within the organisation who live out the core values and purpose of the organisation for taking over the helm of the organisation.
People in organisations facing stage 2 decline may also look to their own personal interests more than the organisational interests. People pursue personal fame, popularity and power in the organisation more than investing their time in building up their organisation towards greatness for the long term.
Stage 3 (Denial of Risk and Peril)
In organisations facing the next stage of decline, there is a tendency to ignore the negative warnings (in the form of any negative data) that surface within the organisation. Leaders tend to also highlight every positive results to receive praises and publicity while ignoring or discounting any potential negative warnings in their organisation.
Leaders also tend to pursue big ambitious goals that are not founded on good analysis and past experiences. When presented with vague data that do not support well the pursuit of an ambitious goal or decision, leaders choose to ignore the potential significant downside while taking an overly optimsitic view of their decision which is not founded on good thought and analysis.
There is also a tendency towards a dictatorial style of leadership for organisations in stage 3 of decline. There is no evidence of much healthy debate or discussions when making decisions. People become mere followers of one or two leaders, and there is no generation of much ideas and opinions to ensure the best ideas and opinions can benefit the organisation.
Leaders in such organisations also push failures and mistakes to being caused by external factors and other people. They do not take any blame for their poor leadership.
When organisations are faced with stage 3 decline, they do not confront their problems and external conditions face on. Instead, people in such organisations are entangled in politics while their organisation keep reorganising in a bid to deal with their problems.
Furthermore, leaders in such organisations also face much detachment from their people in the organisation. They may get caught up with their executive status (good bonuses and nice offices) more than cherishing their commitment and responsibility to build their people and organisation.
Stage 4 (Grasping for Salvation)
Organisations in stage 4 of decline keep trying out different strategies and programs or acqusitions in a bid to get themselves back on progress. The leaders indulge in ways to motivate their organisation with buzzwords or taglines. However, they do not have a solid recovery long term plan in mind. So, there is inconsistency in that their strategies for salvation keep on changing in a series of highly-sought after silver bullets.
Often, such organisations employ an outside leader (CEO) as a saviour who is charismatic in a bid to help the organisation turn around.
The people in such organisations often display habits of panic and uncertainty instead of discipline and a calm resolve to support their organisation to make a turn around.
Leaders refuse to acknowledge their current underperformance. Instead, they try to sell their people the vision of a bright future admist the difficult times that the organisation is currently facing that may potentially lead to their permanent downfall.
There may be some respite when the series of random silver bullets are carried out in a bid to save the organisation, but these positive changes are not lasting. There is no real build up of recovery momentum in the organisation.
When an organisation has reached this stage of decline, the people in the organisation have lost their cherished core values in the organisation. They no longer remember and understand what is the values, mission and purpose of their organisation, why their organisation exist in the first place.
In a bid to save such organisations by administering random inconsistent strategies and programs, together with organisational restructurings, with each strategy being carried out, the resources (financial and manpower etc.) of the organisation are further drained out. This accelerates the decline of the organisation.
Stage 5 (Capitulation to Irrelevance or Death)
As organisations reach stage 5 of decline, the certainty of death of an organisation is pronounced. Organisations in this stage of decline keep deteriorating as cash continues to tighten and hope disappears.
Such organisations should prepare for their death by doing what is best for their employees and shareholders with whatever limited resources left. This may involve returning whatever left over cash as compensations to their employees and shareholders after settling all debts. Some organisations facing impending death may seek a take over by another suitable company. Hopefully, with the take over, the already fallen organisation may be injected into good hands of the acquirer.
Conclusion
The rise and fall of great enterprises is fascinating. Any organisation should continue to exist and seek to become great in fulfiling their values, mission and purpose. Once an organisation can no longer serve great meaningful mission and purpose (in the provision of their products and/or services to value add to their market they are serving) thus securing their competitive advantage as market leaders, the organisation will proceed with most certainty the path of decline followed by death. This happens when another organisation which is better able to live out their values to serve similar meaningful mission and purpose takes over from the dying organisation.
All creatures (or organisations) small and large can fall when they do not tread each step carefully. It is alright to encounter small slips sometimes when each slip provides a learning lesson. The danger comes when one ignores the slips and never learn to walk properly which eventually leads to a great fall to one's death.
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