A new Jim Collins book is an event. This is the author who, with Jerry Porras, explained how the best companies are ‘built to last’. Then, flying solo – but supported by his research team – Collins tried to show how businesses could go ‘from good to great’. Now he is tackling ‘How the Mighty Fall’. It is a good moment to ask how and why this happens. But Collins productions do not appear overnight. When research started on this project, Lehman Brothers, Fannie Mae and Royal Bank of Scotland were all flourishing – or so it seemed. That is the point. ‘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,’ Collins writes. ‘An institution can look strong on the outside but already be sick on the inside, dangerously on the cusp of a precipitous fall.’

He describes a five-stage process of how corporates rise and fall, with the following headings: Hubris born of success, Undisciplined pursuit of more, Denial of risk and peril (this may come at the moment of greatest apparent success), followed by Grasping for salvation, and Capitulation to irrelevance or death. His main point is that great companies avoid disaster by rejecting complacency. Best of all is Collins’s description of a leadership team that is heading for problems in the third stage of decline, denying risk and peril. In such teams, he says, people shield those in power from grim facts. Meetings contain too many statements and not enough questions. Members of these top teams acquiesce in a decision but do not work together to make the decision successful or, worse, undermine the decision afterwards. People seek as much credit as possible for themselves yet do not enjoy the confidence and admiration of their peers. They argue in order to look smart or improve their interests rather than to support the overall cause. They conduct ‘autopsies with blame’. 

But, Collins adds: ‘If I were to pick one marker above all others to use as a warning sign, it would be a declining proportion of key seats filled with the right people’ – a sure sign of an ‘undisciplined pursuit of more’. Although short, this is an extremely useful book. It cannot tell the complete story of why businesses fail but there are enough sharp insights to make for a thought-provoking read. Moderate paranoia may be a positive outcome. ‘The best leaders we’ve studied never presume that they’ve reached ultimate understanding of all the factors that brought them success,’ Collins writes. ‘They retain a somewhat irrational fear that perhaps their success stems from luck.’ They stick to what they know: relentless hard work. Turbulence in the outside world is good – that is when you can pull even further ahead. And this above all: never give up. ‘Success is falling down, and getting up one more time, without end.’

Discussion questions

1. Using appropriate concepts from the chapter, explain the problems that Collins identified within leadership teams of ‘failing’ organisations.

2. Suggest some techniques which could be used by leadership teams to ensure that they remain effective in the longer term.