The 5 D's of Decline

by Steve McKee

Is 2020 a bump in the road or the beginning of the end? That’s not a trick question. For some companies, the virus and lockdown have been inconvenient and annoying, but navigable. For others they have been devastating. And the social unrest has troubled us all.

For nearly two decades, my firm has been studying corporate decline and renewal. Why do some companies survive and even thrive during tough times, while others go under? Is it entirely due to external circumstances and environmental considerations? What roles do marketplace dynamics and corporate culture play? How (and how much) does leadership affect the outcome? Is any of it preventable? Is there a proven way back from the brink?

The answers, as you might imagine, are complicated; every situation is different and every company unique. But there are certain predictable dynamics we see at play in almost every case of corporate decline -- sometimes mild and, at other times, acute. And there are also a handful of principles that, if followed, can greatly increase an organization’s chances of survival, regardless of the circumstances it faces.

Companies get derailed for a host of reasons but tend to follow a predictable trajectory:

Disruption

Most organizations operate reasonably well most of the time, until they are disrupted by an external event. It could be a widespread interruption such as a recession or a pandemic, or a localized disturbance such as a new competitor, a technological advancement or an industry regulation that gums up the works. Something knocks them off their game, and that’s when the trial begins.

Distraction

People within the organization respond differently to the disruption based on their unique backgrounds, personalities and life experiences. Some step into the crisis; others step back. Some see it as an opportunity; others view it as a threat. Some are emboldened; others are frightened. Changing circumstances brought about by the disruption create new frustrations and preoccupations, resulting in a loss of focus and lack of productivity, at both the corporate and personal level.

 

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Division

The disruption and its effects become a log in everyone’s eye around which it is increasingly difficult to see. It affects how, where, and when they do their jobs, and often has an impact on whether they’ll even have a job and be able to pay their rent or mortgage. They fear the future. They turn inward. Communication begins to break down and differences of opinion that were once considered minor and handled diplomatically now become more divisive.

Demonization

Healthy external perspective gives way to unhealthy internal friction. Frustration turns into suspicion. Gossip buds, and then blooms. Trust breaks down. Blame games begin. Factions form. An “us vs. them” mentality develops. Power struggles emerge. Left unchecked and with circumstances unresolved, what once was a collaborative environment can degenerate into “Lord of the Flies” conditions.

Destruction

Without intervention, the outcome is destruction. It doesn’t matter how noble the mission or smart your strategy if your people are misaligned--or worse, openly antagonistic towards leadership or one another. It’s even more problematic if the aggression is passive, like playing whack-a-mole with an invisible adversary.

Rarely do the five D's of decline unfold as quickly as you just read them; they typically materialize over a period of months or years. But rarely does anybody see them coming, either, making their ill effects even more likely. And as you may have experienced (or may be experiencing), they can easily become all-consuming.

With the coronavirus lockdown now extending into its fourth month and limited openings happening only in fits and starts, even companies with the healthiest cultures are under extreme stress.

But note the thread that runs through it all: culture. Peter Drucker’s famous admonition that “culture eats strategy for breakfast” is palpable in moments of significant disruption, when an unhealthy culture can become so ravished it not only wipes the plate clean but bites the hand that feeds it.

Related Article: Creating an Organizational Culture of Resilience 

Therein lies the clue to overcoming the five D's: If culture is the thread, agency is the needle that determines where the stitch should go. Leaders have agency; all human beings do -- not only hands that do the work but heads that reason and hearts with an awesome capacity for empathy.

People who are paying attention and willing to step into a disruptive moment with courage and humility can prevent or prevail over destructive internal dynamics, regardless of their formal position in the organization. Distraction can be overcome through determination. Division can be defanged with discussion. Demonization can be disarmed by goodwill.

You have agency. I have agency. We all have agency. We can stand by and watch as our companies devolve into chaos, or step in and hold them together. It’s our choice. And since a company is a microcosm of the broader culture in which it operates, the question also applies to society at large during this difficult time: Is what we’re experiencing as a nation a period of unrest or a permanent unraveling?

The answer is up to us. Decline is never inevitable.

 

 

Originally published on July 1, 2020 by SmartBrief

Strategic Management