The Stages of Decline

Complacency, the first step toward Irrelevance

“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. An institution can look strong on the outside but already be sick on the inside.”

James Collins, “How the Mighty Fall”

art image representing the greek myth of Icarus.

Welcome to a new edition of “Sebastian’s Leadership Reflection.” Today is about the perils of arrogance…

Success is a double-edged sword, while it propels people forward helping reach new heights, it also sows the seeds of decline. Jim Collins digs into this paradox in his book "How the Mighty Fall," less known than ‘Good to Great,’ but perhaps more important.

In this book Collins outlines a five-stage process that captures the descent of once-successful companies. This is a wake-up call for anyone that wants to develop a clear understanding of where risks are and how they unfold.

Stage 1: Hubris Born of Success

Hubris is an ancient Greek term that signifies excessive pride or arrogance, particularly toward the divine. In the context of business and leadership, hubris manifests as an inflated sense of invincibility. It can manifest as the belief that success is guaranteed because you're somehow special, smarter, or more deserving than others. Typically, when past accomplishments create a sense of invulnerability and the guarantee of future success, Hubris has set in.

The risk of Hubris is that it acts like a termite infestation; it eats away at the foundations of your success without you even noticing. It blinds you to the changing realities of your environment, the market you are in, the real needs of your team, the evolving needs of your customers, and the emergence of new trends or formidable competitors to which you need to act in different ways.

Hubris makes you complacent, and complacency is the first step toward irrelevance.

Watch outs

1. Stay Grounded: No matter how successful you become, remember that you're not infallible. Keep an open mind and be willing to listen to others.

2. Seek External Perspectives: Sometimes, it's hard to see the forest for the trees. External advisors can provide a fresh perspective that you might be lacking.

Stage 2: Undisciplined Pursuit of More

In this stage, the organization or individual, fueled by hubris, overreaches. Expansion becomes the name of the game, often without a clear strategy or understanding of the risks involved. Instead of focusing on what’s best for the organization, efforts are focused on the next best discovery without synergies to the core organization.

Also coincides with this stage the loss of key talent, or if we think individually, the loss of one’s focus on what matters most and on continuous development. “The right people” begin to leave because the organization has lost its north and mediocrity permeates performance.

Watch outs

1. Know Your Limits: Ambition is good, but recklessness is not. Understand your core competencies and stick to them, in fact evolve and strengthen them.

2. Quality Over Quantity: It's easy to get seduced by the allure of rapid expansion. However, it's often better to do fewer things exceptionally well than to spread yourself too thin.

Stage 3: Denial of Risk and Peril

Here, warning signs begin to emerge, but they are often ignored or rationalized away. The organization or individual may start to blame external factors for its setbacks, rather than looking inward. This stage begins the process of losing one’s center where the tendency is to amplify the positive and discount the negative. Big bets and bold goals without empirical validation lead to blunders and failures accelerating the decline.

Watch outs

1. Face Reality: The first step in solving a problem is acknowledging that it exists. Don't bury your head in the sand.

2. Be Transparent: If you're in a leadership position, it's crucial to communicate openly with your team about challenges and setbacks.

Stage 4: Grasping for Salvation

In this stage, the decline becomes more evident. Organizations often resort to desperate measures like mergers, acquisitions, or dramatic shifts in strategy, hoping for a quick fix.

Grasping for salvation suggests the organization has lost awareness of the soul of its own greatness. Change for change sake through a series of “silver bullets”, such as leaps into new technologies, new markets or new businesses become the thread of searching for the “home run,” instead of hunkering down to acknowledge its dying state and re-establish its core. Rarely can “what was” be a determining factor of “what can be” because it acts as the “black hole” that sucks all energy from blinds the necessary blunt conversations and radical actions needed to reestablish the course.       

Watch outs

1. Avoid Knee-Jerk Reactions: In times of crisis, it's essential to remain calm and think things through rather than making hasty decisions.

2. Consult Your Team: Your team is your most valuable resource. Leverage their insights and expertise when considering significant changes.

Stage 5: Capitulation to Irrelevance or Death

By this point, the organization has lost its way entirely. It either becomes irrelevant, gets acquired, or goes out of business.

excerpt from the book: “Generally, the board and leadership become locked into a “group-think” stalemate that feels like a catch-22—damned if you do and damned if you don’t which eventually unites around abandon ship. Once this occurs, the organization has lost it humility and fierce resolve of level five leadership and has regressed into a level three or lower. At level three, leadership organizes people and resources toward the effective and efficient pursuit of predetermined objects typically of how to establish the best funeral procession.”

Watch outs

1. Learn from Failure: Even if you've reached this stage, it's not too late to learn valuable lessons for your next venture.

2. Know When to Fold: Sometimes, the best decision is to cut your losses and move on. There's no shame in admitting defeat if it means avoiding further disaster.

Three areas to focus on to avoid the slippery slope of decline:

1. Continuous Learning: The world is always changing, technologies growing exponentially, accelerating and converging creating new worlds. Make a strong habit of continuous learning not for the sake of acquiring new skills and knowledge, but to see the curves bend so you can jump and stay ahead of them. If you are not learning you are falling behind, that’s the real problem.

2. Networking: Build a robust professional network. It can provide you with invaluable insights and opportunities that you wouldn't have otherwise. It is the only way for you to calibrate in real time, to tap into for mentorship. Create your own sounding board.

3. Self-Reflection: Regularly take time to assess your performance, goals, and strategies. Be willing to pivot when necessary. Put as much effort as needed to build strong self-awareness, to look in the mirror and avoid lying to yourself. Make sure you take the time to think so you can make wise decisions about what to learn and who to spend your time with (points 1 and 2)

By understanding these stages of decline and implementing proactive strategies, you can safeguard your leadership trajectory from the pitfalls of overconfidence and complacency.

Remember, the higher you rise, the harder you fall. But with humility, discipline, and continuous improvement, you can defy gravity and continue to soar.

Bonus Track

Read the initial observation by Jim Collins and now reflect on the implications if you extrapolate to every other aspect of life.

“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. An institution can look strong on the outside but already be sick on the inside.”

Replace INSTITUTIONAL and INSTITUTION with

• team

• person

• family

• couple

• marriage

• friendship

Take the time to pause often and reflect on the state of affairs of every aspect of your life worth doing early detection of decline. Make sure things are strong on the inside and don’t let superficial appearances cloud your judgement.

P.S. Before I go, here you have “The Treat,” where I share some of the music that kept me company while writing … Enjoy as you bid farewell to this post

“Lead yourself, Learn to live. Lead others, Learn to Build.”

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