How the Mighty Fall, the new book from Jim Collins (author of Good to Great), addresses the question asked of him by a CEO of one of the world's great companies: "How would we know if we are in decline?"  Collins underscores the importance of being able to answer this question, observing that life-threatening organizational illness can be masked by external signs of health, much like an undetected cancer in the body of a great athlete.
 
This is a crucial and timely topic.  While most companies are suffering from the general effects of the global recession, some are simultaneously (and often unknowingly) afflicted by much more serious and potentially fatal internal failure.  Knowing the difference between the two is essential; fighting a life-threatening disease with a generally-available over-the-counter remedy is a recipe for disaster.  Similarly, applying standard recession-coping strategies to an organization that should be addressing its long-term decline could well accelerate the organization's ultimate demise.
 
Collins classifies the five stages of organizational decline as follows:
1. Hubris born of success
2. Undisciplined pursuit of more
3. Denial of risk and peril
4. Grasping for salvation
5. Capitulation to irrelevance or death
 
Systemic Organization Failure During a Recession
The depth and breadth of the current recession will likely mitigate or even reverse Stages 1 and 3 of failure within many organizations.  The foolhardiness of hubris or denying risks is more readily apparent in bad times than in good times. 
 
Equally likely, however, the recession will accelerate Stages 2 and 4 (and therefore also Stage 5).  Stages 2 and 4 are, in fact, mirror images of one another: two different ways that organizations delude themselves by making errors of strategy in the name of progress or survival.  
 
Is Your Organization Unhealthy?
So how would you know if yours is an unhealthy organization - one in which your personal and professional well-being is at risk?  

 

For those struggling to survive in organizations that are in advanced-stage decline (Stages 4 or 5), the answer is probably painfully obvious.  For other unhealthy organizations, however, the answer may not yet be evident.  The failure process is a subtle one, and requires nuanced and precise diagnostic capabilities. 

 

That is what we work on day in and day out at McBassi & Company.  Give us a call - we have proven methodologies for diagnosing organizational failure and improving health.