Schadenfreudian Slips

You would expect a book about epic business failures to be a delicious, gloating, satisfying kind of fun; a long, slow, I-Told-You-So Waltz. But Jim Collins’ book, How The Mighty Fall: And Why Some Companies Never Give In* takes a much higher moral road than, say, I would.

Collins had the misfortune to be attempting to document falling companies right in the middle of the 2008 meltdown, which means that he was both spoiled for choice and missed out on some implosions that were taking longer than others. Wisely, he focused on less recent corporate face-plants, including A&P, Bank of America, Motorola, Zenith, and Rubbermaid. The book identifies and documents the stages of corporate demise, illustrating lavishly with plenty of examples.

 If you’re starting to sweat a little just looking at the diagram, Collins does offer us a Field Guide to Corporate Doom with lists of warning signs for each stage. In case this all sounds too depressing, he actually demonstrates that not only is corporate decline survivable well into the late stages, it’s not really all that hard to pull off if you focus. “Great companies can stumble, badly, and recover. While you can’t come back from Stage 5, you can tumble into the grim depths of Stage 4 and climb out.” This book has a wistful, almost sad tone to it. Collins documents the decline and fall of the venerable, the lucky, the talented and the deluded in the same way most of us discuss not-terribly-bright dogs. Yet he doesn’t, for a minute, let them off the hook, noting, “…organizational decline is largely self-inflicted, and recovery largely within our own control.”

Hubris, the hallmark of which is arrogant neglect, happens faster than you might expect. Motorola and Circuit City both fell in a matter of a few years, primarily by believing their own publicity and jumping on the Icarus Express while shooting at the donkey that got them to the top of the mountain in the first place. The stories of A&P and Zenith, while they took longer to play out, are also excellent examples of a romp in the humus of hubris. And speaking of Apple, well there you go.

If Stage One is the sin of Pride then Stage Two is definitely Gluttony’s day. Growth-obsessed CEOs who believe they can fly seem able to convince otherwise-bright directors and officers to play right along as they spend recklessly on some pretty dumb stuff. Like Rubbermaid’s exponential product catalogue growth in the mid-1990s or Merck’s relentless and, ultimately, humiliating focus on Vioxx. And in the end, Collins lays the blame right at the feet of lousy leaders everywhere: “…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.”

Stage Three is probably the strangest of the lot and the one where smart people make inexplicably dumb decisions in a “culture of denial”. Motorola’s doomed Iridium phone system and Nasa’s O-rings are stark demonstrations of organizations choosing “minimal upside over catastrophic downside.” There is an excellent chart on page 77 that compares teams on the way up and those on the way down. If your team is in column A you may want to update that resume a little because it would appear that many Corporate Overlords respond to competition, difficult choices or vanishing markets with, you guessed it, a reorganization.

Stage Four is as sad as Stage Three is baffling. This is the point where things are obviously in big trouble and the perpetrators have left the building while the survivors snatch extinction from the jaws of salvation by getting desperate. HP and A&P, for example, hired the wrong CEOs. Circuit City and Scott Paper hired the wrong consultants. But Stage Four doesn’t have to end with a damp tissue. Lou Gerstner pulled IBM out of its nasty spiral by staying calm, playing to the company’s strengths and refusing to be drawn into risky acquisitions, short-sighted small gains or compulsive chocolate habits.

The final stage is just depressing, but Collins’ focus is more about how unnecessary it is. “The path to recovery lies first and foremost in returning to sound management practices and rigorous strategic thinking…If you’ve fallen into decline, get back to solid management disciplines – now! And if you’re still strong, be vigilant for early markers of decline. But above all, do not ever capitulate to the idea that an era of success must inevitably be followed by decline and demise brought on by forces outside your control.”

If you are looking for something as vigorously researched as Good to Great: Why Some Companies Make the Leap…and Others Don’t*, you won’t find it here. In fact this book, the meat of which is a little over 100 pages, reads more like a paper that got a little out of hand, which Collins acknowledges in the introduction. The Appendices are another 100 pages and don’t offer much in the way of additional insight, though they support the central ideas. Bottom line: Not a bad read and somewhat instructive. Worth leaving on your shelf for a few years to see how accurate it proves to be.

BizMarketer is written by Elizabeth Williams
I help organizations build their brands through great conversations with employees and customers

Drop me a line at ewilliams(at)candlerchase.com
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