Jim Collins: How the Mighty Fall & To Do Lists

Note: This post is the second in a series of Servant Leadership Lessons from the Chick-Fil-A Leadercast 2010.

At the 2010 Chick-Fil-A Leadercast, Jim Collins’s talk referenced much of his work in the revolutionary books Built to Last and Good to Great. However, most of the discussion centered on his latest work: How the Mighty Fall. I looked forward to this talk, because the Level 5 Leadership model from Good to Great is frequently referenced as really another name for servant leadership. In addition, when studying leadership, we need to focus not only on success, but also comparative failures, such as those reflected in his latest book.  Below are servant leadership highlights from Collins presentation:

How the Mighty Fall

How the Mighty Fall is Collins’ latest book and focuses on how some of the greatest companies failed and defining the stages consistent across these failures. There are five stages that he and the research team identified. He walked us through each. Below are highlights by each stage.

Stage 1: Hubris Born of Success

• They found, in many highly successful companies, cases of outrageous arrogance that inflects damage on innocents
• The issue at stake was not that the failed companies lacked some form of strong leadership, but that… “…the Great companies had a different type of leader”
  • They had Level 5 Leaders (see Good To Great)
  • For the record, many of us in the Servant Leadership proponents corner, believe Level 5 Leadership is really just another term for Servant Leadership. Collins addressed this in GtG by stating something along the lines of not wanting to give the reader the wrong idea by calling it Servant Leadership.
  • “The signature of the greatest executives we studied is their humility.”
• “If you become complacent, you will fall.”

Stage 2: Undisciplined Pursuit of More

• Packard’s Law (Cofounder of HP):
  • If you allow growth in scale…. to exceed your ability to have all key seats filled with the right people, you will fall.
  • “It’s not first what, it’s first who.”

Stage 3: Denial of Risk and Peril

• In this stage, the warning signs begin to accumulate
• People who raise financial weaknesses and other concerns may be perceived as “negative” or not “team players”
• The companies may still look good on the outside
• You must have “the discipline to confront the most brutal facts.”
  • Marry that with the faith that we will prevail – that is the Stockdale paradox
  • You need to be brutally honest with the facts, yet have the courage, determination, will and faith that you will succeed in surmounting the challenges.

Stage 4: Grasping for Salvation

• The company begins to respond to signs of falter by “grasping for salvation”
• This often takes the form of hiring charismatic, external leaders
• 2/3 of the failures studied tried to fix the situation by bringing in “savior” CEOs from the outside
  • Initially, this produces a burst of hope, but it doesn’t have the staying power
  • “Greatness never gets built with a single event, single leader or single program.”
  • Examples of Success to Remember:
    • Sam Walton did not add his second store until 7 years after opening the first
    • Starbucks did not establish their 5^th store until 13 years into their development
    • Most overnight success stories are 20 years in the making
    • If you stay in stage 4 long enough you erode financial capital and cultural capital
      • Cultural capital was a key and often overlooked principle
      • The idea is that these swings up and down, of fleeting moments of success, erode the will and faith of the people that the next upswing will work and you lose energy and momentum as a result.

Stage 5: Capitulation to Irrelevance or Death

• As Collins put it, he did not want to spend much time on this, because there’s not much to say – it’s over.
• Key point to remember: Just because we haven’t yet fallen, doesn’t mean we can’t – some of the Good to Great companies fell all the way

Built To Last Comparison to the Fallen Companies

Collins reflected that all 18 companies from the Built to Last study, still remained independent entities 20 years after the study. They had not “fallen”. In fact, the probability of a random sampling of S&P 500 companies being in the same boat, is 5 standard errors – so remote, that it may be considered statistically impossible.  As he put it, you had to understand this contrast – what made them so great? How did they avoid falling when other, seemingly great companies, did not?  His conclusions included:

• You must have a reason to fight, beyond just making money
  • Disney Example:
    • Disney faced a takeover battle at one point
    • The board and management thought that was unthinkable, even though the company was worth more for its assets than the company as a whole
      • Note: “Storming the Magic Kingdom” book has more on this
      • The company determined there was a reason for them to be here and it is not just financial
        • The kids, the families, what would they think? What would be lost if they weren’t here anymore?
        • Every great company can answer this question: “Why would it matter if we disappear?”
        • Every great company is built upon core values that are not open for discussion or for change – that sustain you when you are hit with shock, after shock, after shock.
        • All great companies existed in the middle of depression
          • P&G Example:
            • Was pressured to cheapen quality during depression, the answer was still no
            • “If we lose our values we lose our soul. If we lose our soul, we lose it all… We will not abandon our values.”
            • There is still this paradox: You also have to be flexible to adapt in a changing world
              • This is the genius of the “and”
              • “Preserve the Core and stimulate progress.”…“What is in the core is those values that do not change.”
              • “All great leaders we studied embraced the genius of the ‘and’.”
              • “How do you get people to share the values? You don’t. You select the people who already share the values.”
              • 90% of Good to Great CEOS came from inside the company
              • “In the end what you have to have is core values and BHAGs. You have to have both.”

To Do List

So based on this research, what are the actions we should take? Collins proposed the following list of 10 items “To Do”:

1. Build a pocket of greatness
   1. Take responsibility for making your “minibus” (your realm of responsibility) great
   2. It will grow bigger and bigger
2. Do your diagnostics (JimCollins.com for free examples and diagnostic tools)
3. Before this year is over answer:
   1. What are the key seats on your bus?
   2. What percentage are filled with right people?
   3. What are your plans to get to 100%
4. Build your own personal Board of Directors
   1. Who do you allow to be your mentors?
5. Create pockets of quiet
   1. Block time to zoom out and think
   2. Turn off electronic gadgets
6. What is your questions to statements ratio?
   1. Can you double it in the next year?
7. Get the right people
8. Ask the right questions
   1. Take Disciplined Action
9. Most people have a “To Do List”
   1. You also need a stop doing list too
   2. Great leaders are clear first on what we should stop doing
   3. Experiment with removing titles
   4. The right people realize they do not have a job, they have responsibilities
   5. “Spend more time being interested than being interesting.”
   6. Articulate the Core Values
   7. This will enable you to rebuke the next wave of shocks
10. Set BHAGs (Big Hairy Audacious Goals)
    1. Marry Values to BHAGs

Before exiting the stage, Collins told a great, personal story. He met the late, great Peter Drucker, who saw in Collins concerns about the future and whether or Collins’ career would be a success. Drucker responded to him, “The question is not how to survive or how to succeed. Why don’t you think about how to be useful.” Collins simply looked at the audience and ended by saying, “Go out and make yourself useful.”

If you have not read all of Collins’ books, you owe it to your teams and your employers to do so. The results of their studies are some of the best business cases for the implementation of Servant Leadership.

More From Jim Collins

Website: http://www.jimcollins.com/
Latest Book: How the Mighty Fall
Free Downloads:

• The 10 Greatest CEOs of All Time PDF
• The Secret of Enduring Greatness PDF