July 29, 2010
Spitzer, Collins See Eye to Eye on How the Mighty Fall
One test of the strength of any idea is seeing how closely it corresponds to the real world. The strength and real-world relevance of the Spitzer Center’s message can be seen in the pages of How the Mighty Fall.
The best-seller is the latest in a series of books by Jim Collins that explore why some companies thrive while others decline. Collins has aimed his spotlight at organizations Built to Last and described how others have made the journey From Good to Great. By contrast, How the Mighty Fall looks at companies that reached great heights, then stumbled. It pinpoints the patterns of thought and behavior that lead to decline, swift or gradual, and these patterns match what Fr. Robert Spitzer calls a defensive Level 2 culture.
Five stages of decline
A dominant Level 2 culture, like a dominant Level 2 person, tends to make winning an end in its own right instead of a means to some higher purpose. When you have higher purpose, the joy of success comes from knowing you’ve made the world a better place. When you’re stuck in a Level 2 outlook, success is pursued for personal power, prestige, and rewards.
Moreover, Level 2 dominant people respond to success quite differently when it comes. They see triumphs, corporate or personal, as evidence of their inherent superiority. The result is Collins’ first stage of decline: “hubris born of success.”
Success is viewed as “deserved” rather than fortuitous, fleeting, or even hard-earned in the face of daunting odds. People begin to believe success will continue almost no matter what the organization decides to do or not do.
This arrogant mindset leads to the second and third stages of decline – the “Undisciplined Pursuit of More” and “Denial of Risk and Peril.” In the first of these stages, companies “confuse big with great.” They make ever-increasing growth their primary purpose, and in doing so they forget the purpose and practices that made them great in the first place.
Collins notes that three companies profiled in Built to Last – Merck, Motorola, and Hewlett-Packard –suffered later declines that earned them a place in How the Mighty Fall. In Fr. Spitzer’s framework, they let their Level 2 goals overshadow their Level 3 mission. Here’s how Collins expresses it:
Their founders had built their companies upon noble purposes far beyond just making money. George Merck II passionately sought to preserve and improve human life. Paul Galvin obsessed over the idea of continuous renewal through unleashing human creativity. Bill Hewlett and David Packard believed that HP existed to make technical contributions, with profits serving only as a means and measure of achieving that purpose. … They [all] viewed expanding and increasing scale not as the end goal, but as a residual result and inevitable outcome of pursuing their core purpose. Later generations forgot this lesson. Indeed, they inverted it.
Collins’ “Undisciplined Pursuit of More” echoes Fr. Spitzer’s description of the treadmill that Level 2 winners can’t escape. In The Spirit of Leadership, he writes
If winning is an end in itself, then to have a sense of progress I have to win more. Even if I should be tremendously successful, say the CEO of the tenth largest corporation in the world, I still have to achieve more to get a sense of self-worth … It is the “more” that gives me my sense of meaning and purpose. Hence, I raise the stakes (the expectations) of myself with each success.
The same mindset driving the quest for undisciplined growth gives rise to the third stage of decline, “Denial of Risk and Peril.” Observers inside and outside the organization start to see problems, but the leadership and the corporate culture reject advice and warnings.
This denial of flaws is a symptom of Level 2 ego sensitivity. People whose purpose in life is winning hate to admit they’re capable of mistakes – mistakes are for losers! Instead of admitting flaws and seeking feedback, “they create facades to make it look like they’re winning, even when they’re not,” says Fr. Spitzer. “They exaggerate and hype their results to make sure no one will doubt how great they are.” Collins calls it a tendency to “discount or explain away negative data” and “highlight and amplify external praise.”
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Fr. Spitzer recommends Collins' book at a luncheon talk last fall hosted by Umberto Fedeli in Cleveland.
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Eventually, reality intrudes and the facts of decline can no longer be denied. Sometimes, that realization prompts a return to an older, sounder business philosophy (as happened with Merck and HP). More often, a Level 2 outlook produces Collins’ fourth stage of decline, “Grasping for Salvation.” The grasping aims to achieve a game-changing solution – a big acquisition, a new charismatic leader, a new strategy or product line, or less imaginatively, a major restructuring.
When this “silver bullet” depletes resources but fails to halt decline, companies enter Stage 5, “Capitulation to Irrelevance or Death.” Once great companies – Zenith, Ames Department Stores, Scott Paper, Circuit City, and Rubbermaid – went bankrupt or were sold. Companies like Motorola and A&P went from industry leadership to second-tier status.
The Power of Humility
Throughout the book, Collins contrasts the mistakes of the companies that fell with the practices of industry peers who thrived. There’s a wealth of practical business advice and one piece of age-old wisdom: great leaders are humble.
Humble, in Collins’ lexicon, doesn’t mean self-deprecating. It means knowing your weaknesses as well as your strengths, and knowing that you can never afford to stop learning from people around you. One of the book’s most memorable anecdotes concerns a group of Brazilian investors who were seeking American advice to help run a chain of retail stores they had purchased. The only company that agreed to host them was Wal-Mart.
When the Brazilians deplaned at Bentonville, Arkansas, a kindly, white-haired gentleman approached them, inquiring, “Can I help you?”
“Yes, we’re looking for Sam Walton.”
“That’s me,” said the man. He led them to his pickup truck, and the Brazilians piled in alongside Sam’s dog, Ol’ Roy.
Over the next few days, Walton barraged the Brazilians with question after question … often while standing at the kitchen sink washing and drying dishes after dinner. Finally, the Brazilians realized, Walton – the founder of what may become the world’s first trillion-dollar-per-year corporation – sought first and foremost to learn from them, not the other way around.
In his own book, Fr. Spitzer calls humility “an absolute prerequisite to inspired leadership.” He defines it as “the ability to pursue higher goals while being detached from conflicting lower-level rewards” and as having the right priorities “not merely in thought but also in action.” In his talks, Fr. Spitzer has given Collins great credit for helping to warn that Level 2 isn’t only a way to forfeit your happiness, but your company.
– John Keenan, Editor
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Last changed: Apr 07 2010 at 10:22 AM