5 Tips To Keep Your Clinic's Doors Open
Revenue is up. Client visits are up. But could your practice actually be failing? Would you recognize the signs? Can you ever reverse decline?
Jim Collins confronts those very questions in his book, How the Mighty Fall and Why Some Companies Never Give In. Collins, best-selling author of Good to Great and Built to Last: Successful Habits of Visionary Companies, explores the warning signs that cause companies to collapse. Decline, he says, is much like disease. The outside may appear strong and healthy, but cancer is fiercely spreading on the inside.
“That’s what makes the process of decline so terrifying,” Collins writes. “It can sneak up on you, and then – seemingly all of a sudden – you’re in big trouble.”
To find out why great institutions fall, Jim Collins studied 11 major companies, including Bank of America, Circuit City, HP, Merck, and Motorola. From his research, he identified 5 stages of decline.
Is your clinic failing? View the markers for the 5 Stages of Decline
Stage 1: Hubris Born of Success
The first sign your practice could be failing is arrogant neglect, or hubris. There are many forms of hubris: pursuing growth beyond what you are capable; bold decisions in the face of conflicting evidence; and denial that the practice is at risk.
The rise to greatness, Jim Collins says, involves a sustained, cumulative effort. He compares that effort to a giant flywheel. Each effort is built upon previous work and momentum is gained from one turn to the next.
Once a company successfully creates and maintains one flywheel, it might create a second, or third. But for each flywheel to remain successful, you have to maintain the same level of intensity as when you first began. That’s where companies fall into trouble. Their attention is diverted and they end up neglecting their primary flywheel.
Companies in Stage 1 often confuse what and why. They fail to distinguish between current trends and the enduring principles of their success. They focus on the specific practices and strategies that worked, but not the fundamental reasons for success.
“There’s nothing wrong adhering to specific practices and strategies, but only if you comprehend the underlying why behind those practices,” Jim Collins explains.
To combat this problem, leaders should remain students of their work. They should constantly be asking why, why, why.
Veterinary practices consistently strive for growth and, as a result, often generate new ideas in hopes of realizing positive results. In order to avoid stage 1 of decline, it is necessary for a practice to have a clear vision and create their mission statement. Developing a mission statement states “who we are, what we do, and why we are here.” The vision focuses on the organization’s future and “where we are going”. Consistently referring to the practice mission statement and vision provides checks and balances for decision-makers thus reducing failure through hubris or arrogant neglect.
Stage 2: Undisciplined Pursuit of More
We assume companies fail because they become complacent. That’s not completely accurate. In the 11 companies Jim Collins studied, only one (A&P) showed evidence of complacency. The others were full of ambition, creativity, energy, and innovation.
So how did they fall? Jim Collins suggests they were guilty of over-reaching; they went too far, took too much risk, and were too aggressive.
Companies in Stage 2 of decline are also obsessed with growth. Leaders in these companies view growth as the end goal, not as the outcome of pursuing the company’s core purpose. It’s important to note that problems don’t stem from growth itself, but the undisciplined pursuit of growth.
“The greatest leaders do seek growth – growth in performance, growth in distinctive impact, growth in creativity, growth in people – but they do not succumb to growth that undermines long-term value,” says Collins.
One of the most damaging indicators of Stage 2 decline is what Jim Collins calls “Packard’s Law.” Named after David Packard, co-founder of HP, Packard’s Law states that “no company can consistently grow revenues faster than its ability to get enough of the right people to implement that growth and still become a great company.”
“If I were to pick one marker above all others to use as a warning sign, it would be a declining proportion of key seats filled with the right people,” Collins stresses.
As a leader in your practice, that means you must constantly be asking: what are the key seats in my practice? What percentage of those seats are filled with the right people?
The right people see themselves as having “responsibilities,” whereas others see themselves as having “jobs.” “Every person in a key seat should be able to respond to the question ‘What do you do?’ not with a job title, but with a statement of personal responsibility,” Jim Collins explains.
Another indicator of Stage 2 decline is the problematic succession of power. In other words, a leader cannot sustain success if he or she does not comprehend what to do and what not to do.
“While no leader can single-handedly build an enduring great company, the wrong leader vested with power can almost single-handedly bring a company down,” Collins writes.
Effective practice leaders realize that it takes a team to help make the vision and growth strategies happen and, more importantly, it takes the right team. An example of stage 2 can be seen when team members do not support or buy-in to the practice mission and vision.
In addition to having the right team members’ onboard, practice leaders need to have the skills and understanding of how to effectively lead teams towards the vision.
Methods of avoiding stage 2 include:
1) Establish clear expectations
2) Hire for fit
3) Provide team development
Stage 3: Denial of Risk and Peril
One of the key characteristics of companies that enter Stage 3 is making big decisions despite conflicting evidence.“The greatest danger comes not in ignoring clear and unassailable facts, but in misinterpreting ambiguous data in situations when you face severe or catastrophic consequences,” Jim Collins explains.
Great companies do make big bets. But they avoid decisions that can cause irreparable damage.
So how do you make a final decision? Ask 3 questions:
1) What’s the upside, if events turn out well?
2) What’s the downside, if events go very badly?
3) Can you live with the downside? Truly?
Another common behavior of Stage 3 is blaming other people or external factors. Jim Collins found externalizing blame in 7 of the 11 cases he analyzed. Leaders point to a range of factors rather than facing reality that business is in trouble.
Obsessive reorganization can also indicate Stage 3 decline. While some reorganization is likely, constant reorganization should be a red flag. “Companies are in the process of reorganizing themselves all the time; that’s the nature of the institutional evolution,” he writes. “But when you begin to respond to data and warning signs with reorganization as a primary strategy, you may well be in denial.”
In order to avoid falling into stage 3, practice leaders should consider incorporating strategic thinking into their planning system. A tool that is helpful with strategic thinking is S.W.O.T. analysis. This analysis assesses practice strengths, weaknesses, opportunities, and threats. It also allows opportunities to answer the three questions Collins recommends asking when making final decisions. S.W.O.T. analysis and strategic thinking helps develop accountability systems and more clearly identifies if reorganizing is truly necessary.
Stage 4: Grasping for Salvation
Stage 4 of decline begins when an organization reacts to a slump by searching for a “silver bullet.” That can happen in a variety of ways: by betting big on an unproven technology, relying on the success of a new product, or gambling on a brand-new image. These companies go for a quick solution rather than focus on rebuilding.
“Companies in Stage 4 try new programs, new fads, new strategies, new visions, new cultures, new values, new breakthroughs, new acquisitions, and new saviors,” Jim Collins writes.
Panic and desperation also begin to set in during Stage 4. Instead of reacting frantically, take time to breathe, remain calm, think, and focus. Otherwise, you will accelerate your own decline.
“The very moment when we need to take calm, deliberate action, we run the risk of doing the exact opposite and bringing about the very outcomes we most fear,” he explains.
In these very interesting times, it’s critical for veterinary teams to remain mindful of established core values and vision, while also being open to change and innovative thinking.
In order to avoid the decline in stage 4, practice teams must have a clear understanding of how they can do more of what they do best. The S.W.O.T. analysis used to avoid stage 3 will help identify areas to build on as well as areas to develop. Doing more of what a practice does best will help avoid desperate measures and grabbing on to a far-out strategy, idea, or silver bullet. Focusing on what a team does best produces longer-term results than what is realized with fads that come and go.
Stage 5: Capitulation to Irrelevance or Death
There are two types of companies in Stage 5. First, there are those that believe defeat offers a better overall outcome than continuing to fight. Second, there are those that continue the struggle, but eventually run out of options. So when do you continue to fight or when is enough really enough?
“Once a company has moved through Stage 1, 2, 3, and 4, those in power become exhausted and dispirited, and eventually abandon hope. Once you abandon hope, you should prepare for the end,” Collins describes.
Can You Reverse Decline?
Jim Collins points out that all companies go through ups and downs. Many show signs of Stage 1 or 2, even Stage 3 or 4. The good news is the path doesn’t inevitably lead to Stage 5. “Just because you may have made mistakes and fallen into the stages of decline does not seal your fate,” he writes. “So long as you never fall all the way to Stage 5, you can rebuild a great enterprise worthy of lasting.”
So how do you climb back on the ladder once you’ve fallen into decline? Collins offers two suggestions: don’t panic and don’t make careless investments or decisions.
“The path to recovery lies first and foremost in returning to sound management practices and rigorous strategic thinking,” Collins writes.
Perhaps just as important to recovery is returning to your core values. Be willing to change, be willing to evolve, but never – ever – give up on the principles that define your practice. It’s one thing to suffer defeat and another to give up on your values, Collins points out.
“The signature of the truly great versus the merely successful is not the absence of difficulty, but the ability to come back from setbacks stronger than before,” he explains.
“Great companies can fall and recover. And great individuals can fall and recover,” he adds. “As long as you never get knocked out of the game, there always remains hope.”