How the Mighty Fall

I have become a fan of Jim Collins ever since I laid my hands on Good to Great and I have tried implementing some of the concepts in my company. I must admit though that the success of the implementation is not as good as what I would have liked it to be and that is because of my own weakness in following through and persevering. For example, I have tried to implement Stop Doing List in order to streamline some of the redundant work processes but I did not follow through and make it a part of the company's internal system. I find Stop Doing List very useful as companies usually rush to implement new work procedures and very seldom spent time at simplifying or omitting outdated or redundant policies and as a result, as a company grows, it also becomes more bureaucratic and less efficient. I have the impression that somehow we feel more secure if there are more processes irregardless of whether the process actually add values or not. Anyway, back to the review of Jim Collins' relatively new book titled How the Mighty Fall which was released after the 2008 financial crisis. The book is concise and is easy to read. What is appealing is that it teaches us to avoid some of the common pitfalls of failed companies and I always believe that it is important to learn from mistakes and learn from history. The book also enables us to do a "self-check" and assess for our own whether our company is on the way to greatness or heading towards oblivion.

The following are some excerpts from the book which I find useful and I hope you will find it useful too:

1) "All happy families are alike; each unhappy family is unhappy in its own way".

2) There are five stages of decline as defined by Jim Collins:

a) Stage 1 (Hubris born of success) kicks in when people become arrogant, regarding success virtually as entitlement, and they lose sight of the true underlying factors that created success in the first place.
b) Companies in Stage 2 (Undisciplined pursuit of more) stray from the disciplined creativity that led them to greatness in the first place, making undisciplined leaps into areas where they cannot be great or growing faster than they can achieve with excellence, or both.
c) In Stage 3 (Denial of risk and peril), leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data.
d) In Stage 4 (Grasping for salvation), when the enterprise is being thrown into a sharp decline visible to all, the critical question is, How does its leadership respond? By lurching for a quick salvation or by getting back to the disciplines that brought about greatness in the first place?
e) Stage 5: Capitulation to irrelevance or death.

3) Motorola's founding culture which instills a belief that past accomplishment guarantees nothing about future success and an almost obsessive need for self-initiated progress and improvement.

4) ........ concept of hubris is defined as excessive pride that brings down a hero, or alternatively (to paraphrase classics professor J. Rufus Fears), outrageous arrogance that inflicts suffering upon the innocent.

5) ........ innovation can fuel growth, but frenetic innovation - growth that erodes consistent tactical excellence - can just as easily send a company cascading through the stages of decline. (Personally, I think this is an important point. We must ask ourself whether we are losing focus and is pursuing growth without a clear and defined vision. With limited resources, we must use our resources wisely. Sometimes, we also have the tendency to undertake many new ventures without ensuring its successful implementation. A product which is not implemented is wasted energy and resources!)

6) ....... those who resisted the pressures to succumb to unsustainable short-term growth delivered better long-term results by Wall Street's own definition of success.

7) Packard's Law states that no company can consistently grow revenues faster than its ability to get enough of the right people to implement that growth and still become a great company. (Are your organization attracting talent for your company to continue to grow?)

8) Any exceptional enterprise depends first and foremost upon having self-managed and self-motivated people - the #1 ingredient for a culture of discipline. (This should be the goal of all managers or leaders, i.e. the ability to create a team of self-managed and self-motivated people. Imagine the wasted energy if as a manager/leader, you have to spent countless hours managing and supervising your people to perform their tasks to the best of their abilities and most of the time, the results are inferior compared to works performed by self-motivated people)

9) When bureaucratic rules erode an ethic of freedom and responsibility within a framework of core values and demanding standards, you've become infected with the disease of mediocrity.

10) ......... need to build an excecutive team and to craft a culture based on core values that do not depend upon a single heroic leader. (Does the industry or client recognise you or your company? If it is the former, you still have a lot to do in terms of building a great company)

11) ......... 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.

12) When making risky bets and decisions in the face of ambiguous or conflicting data, ask three questions:

a) What's the upside, if events turn out well?
b) What's the downside, if events go very badly?
c) Can you live with the downside? Truly?

13) For businesses, our analysis suggests that any deterioration in gross margins, current ratio, or debt-to-equity ratio indicates an impending storm.

14) One common behavior of late Stage 3 (and that often carries well into Stage 4)  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.

15) Stage 4 begins when an organization reacts to a downturn by lurching for a silver bullet. (Great managers/leaders realise that the recipe for a fast turnaround or silver bullet is "There is NONE. It takes consistent effort over a duration of time in order to turnaround a company to set it up for future growth. Short-term measures only give the company some breathing space in order for it to pursue sustainable long-term growth).

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

17) "Never forget," Lazier (Professor Bill Lazier of Stanford Graduate School of Business) would say. "You pay your bills with cash. You can be profitable and bankrupt".

18) ......... the right leaders feel a sense of urgency in good times and bad, whether facing threat or opportunity, no matter what.

19) The right people will drive improvement, whether standing on a burning platform or not, and they never take well to manipulation.

20) ....... culture isn't just one aspect of the game - it is the game.

21) Nucor's CEO, DiMicco's philosophies:

a) ....... culture in which management was in service to employees, not the other way around.
b) ....... it is better to hire people with the right work ethic and character and teach them how to make steel than to hire people who know how to make steel but lack the Nucor work ethic and character traits. (I support this statement whole-heartedly. What is important is Attitude!)
c) Instead of focusing on employee rank and status, Nucor emphasized performance (This is important. With this, managers/leaders are sending out a message: If you are good, you will be appreciated. With this, everyone will work towards excellence. To me, good work performance, of course, with good moral/ethics, should be the sole criteria in rewarding employees).

In summary, this is a book which should be in every aspiring managers/leaders' reading list. If you feel that you don't need to read, couldn't be bother or are too busy to learn, you are already in Stage 1 of decline!

YNWA - Carling League Cup 2012 Champion!