While on vacation I was able to read “How the Mighty Fall” by New York Times Best Selling Author, Jim Collins. This is a follow-up to his “Good to Great” as he studied companies that had been “great” but have since ceased to exist. He notes 5 stages of decline that he saw in these organizations who fell.

Here are some highlights from the book:

:::: Stage One: Hubris Born of Success :::::

Hubris is the excessive price that brings down a hero, or alternatively, outrageous arrogance that that inflicts suffering upon the innocent.

Companies that change but without any consistent rationale will collapse just as sureley as those that change not at all. You have to comprehend the underlying “why” behind those practices, and thereby see when to keep them and when to change them. (38)

Be a student of your work relentlessy asking “why.” being a “knowing person” (“I already know everything about why this works, and let me tell you”) differs fundamentally from being a learning person. The “Knowing People” can set companies on the path to decline. (39)

Markers for Stage One:

:: Success Entitlement, Arrogance
:: Neglect of Primary Flywheel
:: “What” replaces “Why”
:: Decline in Learning Orientation
:: Discounting the Role of Luck (I would put in the role of Holy Spirit)

::::: Stage Two: Ubdisciplimed Pursuit of More :::::

Innovation can fuel growth, but frenectic innovation – growth that erodes consistent tactical excellence – can just as easily send a company cascading through stages of decline. (49)

What are the key seats in your organization? What percentage ofthose seats can youbsaybwith confidence are filled with the right people? What are your plans for increasing that percentage? What are your backup plans in the event that a right person leaves a key seat? (57)

The right people see themselves having a responsibility and not a job.

Leaders who fail the process of succession set their enterprises on a path to decline.(60)

While no leader can single-handedly build an enduring great company, the wrong leader vested with power can almost single-handedly bring a company down. (62)

Markers for Stage Two

:: Unsustainable quest for growth, confusing big with great
:: Undisciplined discontinuous leaps
:: Declining proportion of rightpeople in key seats
:: Easy cash erodes cost discipline
:: Bureaucracy subverts discipline
:: Problematic succession of power
:: Personal interests placed above organizational interests

::::: Stage Three: Denial and Risk of Peril :::::

When facing irreversible decisions that have significant, negative consequenses if they go awry, the case for launch should require a preponderance of empirical evidence that it’s safe to do so. (74)

Avoid taking big chances on ideas that could blow a hole below the “waterline” (below the waterline could sink the ship, above it can be patched)

A common behavior of late stage three is when those in power blame other people or external factors – or otherwise explain away the data – rather than confront the frightening reality that the enterprise may be in serious trouble. (78)

Reorganizations and restructurings can create a false sense that you are actually doing something productive. When you begin to respond to data and warning signs with reorganization as the primary strategy, you may well be in denial. (80)

Markers for Stage Three:

:: Amplify the positive, discount the negative
:: Big bets and bold goals without emperocal validation
:: Incurring huge downside risk based on ambiguous data
:: Erosion of healthy team dynamics
:: Externalizing blame
:: Obsessive reorganizations
:: Imperious detachment

::::: Stage Four: Grasping for Salvation :::::

The signature of mediocrity is not an unwillingness to change. The signature to mediocrity is chronic inconsistency. (92)

Rebuilding greatness requires a series of intelligent, well-executed actions that add up one on top of another. Some decisions are bigger than others, but eventhe biggest decisions account for only a small fraction of the total outcome tha makes a great company. Most overnight successes are about twenty years in the making. (94)

Markers for Stage Four

:: A series of silver bullets
:: Grasping for a Leader-as-Savior
::Panic and haste
:: Radical change and “revolution” with fanfare
:: Hype precedes results
:: Initial upswing followed by dissapointments
:: Confusion and cynicism
:: Chronic restructuring and erosion of financial strength

::::: Stage Five: Capitulation to Irrelevance or Death :::::

When you begin abandoning hope, you should begin preparing for the end. (107)

::::: Well Founded Hope :::::

The right leaders feel a sense of urgency in good times and bad, whether facing a threat or an opportunity. (117)

Winsylton Churchill: “This is the lesson: never give in, never give in, never give in, never, never, never, never – in nothing, great or small, large or petty – never give in except to convictions of honor and good sense. Never yield to force; never yield to the apparently overwhelming might of the enemy.”

What makes for the right people in the key seats?
1) The right people fit with the companies core values. (hire people who already have a predisposition to your core values, and hang on to them)
2) The right people don’t need to be tightly managed.
3) The right people understand that they do not have jobs; they have “Responsibilities.”
4) The right people fulfill their commitments.
5) The right people are passionate about the company and it’s work.
6) The right people display “Window and Mirror” Maturity. When things go well, they point out the window, giving credit to factors other than themselves. When things go awry, they do not blame circumstances or other people for setbacks and failures; they point to the mirror and say “I’m responsible.”

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