Book Critique

MGT 5015 - Leadership Leadership Book Critique Alexis Lake | March 28, 2017

The book, How the Mighty Fall and Why Some Companies Never Give In, by Jim Collins begins with a statement from the author’s professor and mentor Bill Lazier, who said, “Don’t try to come up with the right answers; focus on coming up with good questions,” (Collins, 2009, p.

2). This statement inspired the foundation for the book, which asks why businesses fail and is there a way to prevent it? Collins structures the answers to these questions through a “framework [that] is helpful for understanding, at least in part, how great companies can fall…[and how leaders can] prevent, detect, or reverse decline,” (Collins, 2009, p. 20). Collins defines the framework through five-stages: Hubris Born of Success, Undisciplined Pursuit of More, Denial of Risk and Peril, Grasping for Salvation, and Capitulation to Irrelevance or Death (Collins, 2009, p. 22-25). Each Stage exhibits different signals of decline as well as shifts in leadership and group dynamics based on Collins’ “Good-to-Great” principles for defining successful leaders and companies built to last. These Stages and principles are strengthened when applied to leadership concepts such as servant leadership, leader-member exchange, transformative leadership, or path-goal theory, starting with the first Stage, or Hubris Born of Success.

In order for a company to fail, it must first experience success. Collins outlines that leaders in Stage 1 become infected with hubris, or an “excessive pride…[and] outrageous arrogance” (Collins, 2009, p. 29). The leaders pine for further innovations, further profits, further dominance in the market and this creates an entitlement for success. This arrogance blinds business leaders from maintaining what Collins defines as a “primary flywheel,” or the core

competencies, values, or ideas that made the company successful. Stage 1 leaders “fail to renew [the primary flywheel] with the same creative intensity that made it great in the first place,” (Collins, 2009, p. 43).

The solution to overcome Stage 1 is in Collins’ principle of “Level 5 Leadership,” where leaders “are ambitious first and foremost for the cause, the organization, the work - not themselves.” (Collins, 2009, p. 180-181). To help illustrate this concept, in the appendix Collins shares how Daniel DiMicco, the former chief executive officer of Nucor, a steel company, “displayed a long-term dedication to Nucor and its culture…in which management was in service to employees, and not the other way around.” (Collins, 2009, p. 68-169). This concept is strengthened by the servant leadership approach explored by Robert Greenleaf. Servant leadership “has strong altruistic ethical overtones in how it emphasizes that leaders should be attentive to the concerns of their followers and should take care of them and nurture them,” (Northouse, 2016, p. 343). Greenleaf outlines that effective servant leaders emphasize “listening, empathy, and unconditional acceptance of others” (Northouse, 2016, p. 343). By maintaining a mindset of servant leadership and a responsibility to others, business leaders can better avoid the Hubris of Success. If not, the leaders will drive their company into the Stage 2, or the Undisciplined Pursuit of More.

Business leaders in Stage 2 continue to ignore their primary flywheel in an “unsustainable quest for growth,” (Collins, 2009, p. 63). Teams are pressured to “find more growth, setting up a vicious cycle of expectations” (Collins, 2009, p. 63) which strains individual employees, the company’s culture, and group dynamics. Key people begin to leave the company and there is a “declining proportion of [the] right people in key seats,” (Collins, 2009, p. 63). Leadership

transitions within the company weaken and the personal interests of the leader come increasingly before the organization.

To solve the problems of Stage 2, Collins prescribes his idea of “First Who, Then What,” (Collins, 2009, p. 181) principle which focuses on how an effective leader will build a strong team before trying to tackle or solve a tough problem (Collins, 2009, p. 181). To explain this concept, Collins provides a metaphor around filling a bus. The leader ensures that the seats are filled with the right people who can fix the bus before even starting the engine and moving down the road (Collins, 2009, p. 181). This reinforces the leadership concept of the trait approach, which “suggests that organizations will work better if the people in managerial positions have designated leadership profiles.” (Northouse, 2016, p. 29) Essentially, organizations must specify the characteristics or traits that are important “for particular positions and then use trait assessment measures to determine whether an individual fits their needs” (Northouse, 2016, p. 29). While Collins does not make this clear recommendation for the trait approach and instead simply focuses on the phrase “the right people,” defining the specifics skills and traits needed is an essential leadership concept that begins with trait assessment.

Assessing and finding the right skills, allows leaders and followers to develop stronger interactions, a concept that ties into the leader-member exchange (LMX) theory. This theory outlines that high-quality “leader-member exchanges produce less turnover, more positive performance evaluations, higher frequency of promotions, greater organizational commitment… and more better job attitudes,” (Northouse, 2016, p. 140). If the right people and leaders are not found and cultivated within the organization, the company could fall into a Denial of Risk and Peril, or Stage 3.

As Stage 3 begins to settle into a company, warning signs of decline seep through declining profits and business setbacks. Instead of analyzing the results and looking for ways to improve, leaders “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,” (Collins, 2009, p.

76). Business teams amplify the positive and discount the negative, while downplaying any ambiguous data and shifting blame to external factors. Team structures erode and give into lackluster consensus or dictatorial management (Collins, 2009, p. 81).

In order to stop Stage 3 from turning into Stage 4, Collins demands that business leaders “confront the brutal facts of [the] current reality, whatever they might be,” (Collins, 2009, p. 81).

This speaks to the concepts from business ethics consultant, Barbara Toffler, who advised leaders at Cornell University to engage and find out information from across their companies, but also accept that information whether good or bad (BrightSightGroup, 2009). While accepting reality may seem like an intangible leadership concept, it directly corresponds with aspects of authentic leadership, specifically balanced processing. This “self-regulatory behavior” (Northouse, 2016, p. 203) is demonstrated through the leader soliciting various viewpoints, especially from those who disagree, and fully considering all opinions before taking action, (Northouse, 2016, p. 203).

In the case of failing companies, leaders push away from the authentic, transparent leadership style and instead amplify the positive and discount the negative information. This creates, as Collins describes, a “culture of denial,” (Collins, 76) fueled by failing leadership-team dynamics.

As a company begins to tumble into Stage 4, it is now in serious peril and sharp decline is clear to all employees and managers. The company leaders begin to panic and “make dramatic, big moves, such as a ‘game-changing’ acquisition or a discontinuous leap into a new strategy or

an exciting new innovation,” (Collins, 2009, p. 100). All of these fast-action silver bullets lead way to initial growth, but they often do not last. Confusion descends through the ranks of the company as “the organization becomes ‘just another place to work,’ or a place to get a paycheck,” (Collins, 2009, p. 101). An external leader may be brought into the company to help shake up change or become the charismatic, savior leader the management or executive board feel is needed. However, without a clear understanding the company’s primary flywheel, this external, seemingly charismatic leader falls flat.

In response to Stage 4, Collins advises leaders to build greatness over time through his principle of “Clock Building, Not Time Telling,” which highlights that leaders should “build catalytic mechanisms to stimulate progress and do not depend upon having a charismatic personality to get things done,” (Collins, 2009, p. 176). While this principle underscores the importance of an internal leadership pipeline and understanding a company’s unique culture, it fails to identify a truly transformative leader and how that leader could inspire and create change within the organization. Transformative leaders “often have a strong set of internal values and ideals,” (Northouse, 2016, p. 167) and a “focus [on] group members’ efforts to achieve more than they would in their own self-interest,” (Northouse, 2016, p. 169). Additionally, transformative leader rely on hard facts and evidence, versus exaggerated statements or claims. By identifying a leader with these transformative skills, a company is more likely to reverse a decline through intellectual stimulation versus employees giving into lackluster agreements or consensus.

Transformative leaders will “[stimulate] followers to be creative and innovative and to challenge their own beliefs,” (Northouse, 2016, p. 169). Without a truly transformative leader, the company will inevitably fall into Stage 5, also known as the “Capitulation to Irrelevance or

Death” (Collins, 2009, p. 22-25) phase.

In this final Stage, the company is running low on operating cash, likely facing employees cutbacks, and grasping for salvation. The leaders face decision to “give up the fight” and sell the company out to competitors or dismantle the company all together. Collins offers that business leaders ask themselves “what would be lost and would the world be worse off if [the company] ceased to exist” (Collins, 2009, p. 111). While this question could be easy to answer, some leaders “retain faith that they can find a way to prevail in pursuit of a [greater] cause” (Collins, 2009, p. 112) of the organization, while also maintaining the perseverance to take the necessary actions needed for the sake of the cause. These notions from Collins correlate back to the previous concept of servant leadership and maintaining a responsibility to others, however, it more directly speaks to path-goal theory.

In order to emerge from Stage 5, a leader should look not for silver bullets and innovations, but to “motivate followers to be productive and satisfied with their work,” (Northouse, 2016, p.

135), despite the challenges ahead. In path-goal theory, and specifically the achievement-oriented leadership concept, leaders exhibit “a high degree of confidence that followers are capable of establishing and accomplishing challenging goals,” (Northouse, 2016, p. 118). A leader focused on the path-goal theory will understand that he or she will need to “help followers to define their goals and the paths they want to take in reaching those goals,” (Northouse, 2016, p. 122), whether it means selling out or fighting on as a company. While the organization may be on the cusp of failure, it should rally its core flywheel and employees in order to succeed.

While at surface value, Jim Collins’ book seems to present only managerial guidance or stages for business decline, it underscores many leadership concepts and theories from this

graduate course, including servant leadership, leader-member exchange, transformative leadership, and path-goal theory. However, Collins does not clearly present these theories and concepts, but rather ignores them or assumes that the reader has previously learned and understood them. Also, Collins does not thoroughly present and incorporate his own “GoodGreat Concepts” throughout the book, leaving them to the book’s final appendix. By pushing back and even ignoring other leadership theories, the reader is less equipped to prevent a decline and organizational failure. Additionally, Collins does not clearly separate the concepts of management versus leadership, but uses the terms almost interchangeably throughout the book.

This leaves the reader wondering whether positive change begins with key leaders throughout the organization or only C-suite level management. Despite these pitfalls, Collins does offer concrete behaviors and leadership styles to recognize and correct in order to prevent a decline.

Collins also demands that in order for a company to be successful it must focus on its primary flywheel, maintain an employee-first mindset, and ensure the leadership team understands that core values should never change and operating strategies and cultural practices must adapt to change” (Collins, 2009, p. 182). While business decline can be slow or rapid, the Stages outlined

by Collins remove any guesswork and define the negative leadership behaviors that are easy to identify and correct. By applying these Stages along with demonstrated leadership concepts of path-goal theory, leader-member exchange, transformative leadership, and servant leadership, companies, followers, and leaders can become more effective and endure the challenges of decline.

References: BrightSightGroup. (2009, June 4). Ethical Leadership. Retrieved from: https://www.youtube.com/watch?v=kmA--yq5eq0 Collins, Jim. (2009). How the Mighty Fall and Why Some Companies Never Give In. New York, New York: Harper Collins Publishers, Inc. 
 Northouse, Peter G. (2016). Leadership: Theory and Practice (7th ed.). Los Angeles, California: Sage Publications.