Jim Collins recently published "How the Mighty Fall" where he outlines his framing of early warning signs to the collapse of once mighty companies.
He likens the decline and collapse of a company to a staged disease infecting a person (in this case his wife who was diagnosed with breast cancer).
"I've come to see institutional decline like a staged disease: harder to detect but easier to cure in the early stages, easier to detect but harder to cure in the later stages. An institution can look strong on the outside but already be sick on the inside, dangerously on the cusp of a precipitous fall"
Collins then outlines 5 stages of Decline including:
Stage 1: Hubris Born of Success - or "We're so great, we can do anything!"
Stage 2: Undisciplined Pursuit of More - or "more scale, growth, power"
Stage 3: Denial of Risk and Peril - or "We can explain away weak results"
Stage 4: Grasping for Salvation - or "Looking for Silver Bullets to save us"
Stage 5: Capitulation to Irrelevance - or "Atrophy into utter insignificance"
When in Stage 3, Collins identified ways to look at the dynamics of the leadership team to determine if the Company is "on the way up" vs. "on the way down".
Leadership Dynamics of Teams on the Way Down
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People shield those in power from grim facts or brutal honesty for fear of penalty
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People assert strong opinions without providing data, evidence, or a solid argument
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Team leader has a very low questions-to-statement ratio and enabling sloppy reasoning
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Team members acquiesce to decisions but do not support them or worse, undermine them
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Team members seek as much credit as possible for themselves yet are not respected by peers
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Team members argue to look smart or improve their own interests
Leadership Dynamics of Teams on the Way Up
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People bring forth unpleasant and brutally honest facts
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People bring data, evidence, logic and solid arguments to the discussion
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Team leader employs a Socratic style with high question-to-statement ratio
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Team members unify behind a decision once made and work to make decision successful
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Each team member credits other people for success and enjoys the confidence of peers
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Team members argue and debate to find best answer, not improve their personal position
The 5 Stage framework offered by Collins is interesting and helpful in understanding company and team strategy.
In the critical Stage 3 of decline, being able to look at how leadership teams behave and the dynamic of their interactions could send early warning signs of where the company is headed... Up or Down.
