The Organisational Leader and Sustainable Organisational Performance

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Stage 3: Denial of Risk and Peril

Collins said: “When those in power begin to imperil the enterprise by taking out-sized risks and acting in a way that denies the consequences of those risks, they are headed straight for Stage 4.”

Stage 3

Denial of Risk and Peril

Markers

Issues

Drivers

Amplify the positive, discount the negative

Explaining away negative data which actually indicate something is wrong. Leaders highlight external praise and publicity

Participating in arrogant neglect.

Big bets and bold goals without empirical validation

Audacious goals are set and big bets without accumulated experience or facts

Making bets and decisions without , evaluating the upside or downside and can the organisation survive it.

Incurring huge down risk based on ambiguous data

When faced with ambiguous data and decisions that have a potentially severe or catastrophic downside,

Leaders take a positive view of the data and run the risk of blowing a hole “below the waterline” (bad decision beneath can make the ship sink)

Erosion of healthy team dynamics

Decline in the quality and amount of communication which cause a consensus or dictatorial management

The leader has very low questions-to-statements ratio, avoiding critical input and/or allowing sloppy reasoning and unsupported opinions.

Externalizing blame

To not accept full responsibility for setbacks and failures

When leaders fail to deliver exceptional results, they often blame other people or outside factors for setbacks, mistakes and failures.

Obsessive reorganization

By not confronting the brutal realities, the organisation chronically reorganised. Thus people are preoccupied with internal politics rather than external conditions.

Reorganization to feel they're actually doing something and to used it as responds to data and warning sign (being in denial).

Arrogant detachment

Those in power become more domineering and detached

New office building can may disconnect executives from daily life.

Impact and consequences

Audacious goals stimulate progress, but big bets without empirical validation, or that fly in the face of mounting evidence, can bring companies down, unless they’re blessed with unusual luck. And luck is not a reliable strategy. It plays a role in the deterioration in gross margins, current ratio, or debt-to-equity ratio. Thanks to declining customer engagement, erosion in inventory turns and a loss in pricing power

Stage 4: Grasping for Salvation

When it’s clear the enterprise is in trouble, the 64-million-dollar question becomes: How does management react? If they lurch from one dubious idea or strategy to another, seemingly desperate to try any remedy, it becomes almost impossible to break out of the downward spiral (Collins, 2009).

Stage 4

Gasping for Salvation

Markers

Issues

Drivers

A series of silver bullets

Tendency to make dramatic moves, discontinuous leap into a new strategy or exciting innovation all to quickly catalyse a breakthrough

Pin hopes on unproven strategies- discontinuous leaps into new technologies, new markets, new, businesses – often with much hype and fanfare.

Grasping for a leader-as-saviour

When the boards actually responds to the threats and setbacks

Search for a leader-as-saviour, with bias for selecting a visionary from the outside who’ll ride in and galvanize company

Panic and haste

People exhibit hasty, reactive behavior, bordering on panic

Make panicky, desperate moves in reaction to threats that can imperil the company even more, draining cash and further eroding financial strength.

Radical change and "revolution with fanfare

New programs, new cultures, new strategy

Embark in a program of radical change a revolution, to transform or upend nearly every aspect of the company, jeopardizing or abandoning core strengths.

Hype precedes results

Leaders hype their visions and "sell the future" causing over-promising and under-delivering

Sell people on the promises of a brighter future to compensate for poor results

Initial upswing followed by disappointments

Dash hope follows dash hope there's no build-up, no cumulative momentum.

Gasping to produce a brief improvement but the results do not last

Confusion and cynicism

Core values have eroded to the point of irrelevance. People lose faith in their ability to triumph and prevail. They become distrustful towards the organisation.

To seek a big "game changer" acquisition (often based on hope-for, but as yet unproven, "synergies") to transform the company in a single stroke.

Chronic restructuring and erosion of financial