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How the Mighty Fall

Author Jim Collins’ book, How the Mighty Fall: And Why Some Companies Never Give In, was published earlier this year. This book is a follow-up to his earlier book, Good to Great.

In Good to Great, Collins laid out the attributes of great companies, which include:

• Level 5 leadership—Ambition for the “cause” and getting the right people in “the right seats on the bus”
• Disciplined thought—Willingness to confront the brutal facts and the “hedgehog” concept
• A culture of discipline
• The flywheel effect
• Building greatness to last

While the focus of Good to Great was on large, public companies, the concepts have since been applied across public and private organizations of all sizes.

In How the Mighty Fall, Collins looks at some of the companies profiled in his earlier work and describes their fall from market leadership. He describes the five stages of a fall, which are as follows:

1. Hubris Born of Success
2. Undisciplined Pursuit of More
3. Denial of Risk and Peril
4. Grasping for Salvation
5. Either: Irrelevance or death, or Recovery or renewal

As with the lessons from Good to Great, the cautionary tales in How the Mighty Fall are applicable to organizations of any size. It’s not just publicly traded companies that can fall into these traps. Every organization should continually self-assess to ensure that they are not setting themselves up for failure.

Planning and a strategic direction are the starting points for getting your organization where you want it. Diligent execution of the plan is another element. But even a well-intentioned and well-executed plan, based on some of the markers Collins identifies, might ultimately lead to the downfall of a business.

So what can you do to prevent a fall?

First, determine if your company has any of the negative attributes associated with the path toward failure by asking specific questions, keeping the five stages in mind. Hubris Born of Success

• Does your team understand that they need to work to achieve success?
• Do they understand that “build it, and they will come” only works in the movies?
• Do you still characterize yourself as a learning organization in which exploration is encouraged and celebrated?

Undisciplined Pursuit of More

• Is “Growth at any cost” your organization’s mantra?
  
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• As your company has grown, have you been able to continue to attract and retain the right people and place them in the right seats?
• Has bureaucracy overtaken responsibility?

Denial of Risk and Peril

• When bad things happen, are they always the result of “external factors”?
• Do you view reorganization as progress?

• Are you looking only at the good things that are going on and ignoring the bad?
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Grasping for Salvation

• Are you looking outside your company for a “savior”?
• Is your success contingent on one event occurring?
• Have you moved from proactive to reactive—or even panicked reactions?
• Are you making “bet-the-farm” decisions that depend on a silver bullet and then changing course to make the next bet?

What should you do if any, or too many, of your answers to these questions indicate that your company could be headed for a fall?Recognizing that you are on a path to failure is the first step toward avoiding it. You don’t have to go all the way to the bottom to move back into positive, planned growth. The key is for your leadership team to ask itself the hard questions and, just as importantly, listen to and act on the answers.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.