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Fight the Nine Symptoms of Corporate Decline

How do you know a team, company, or country is on the slippery slope of decline and needs a culture shift? I found nine universal warning signs of change-in-the-wrong direction in research for my book Confidence, which compared downward spirals with the momentum of success. The good news is that they are all reversible. Watching out for these behaviors is the first step toward building better habits.

First, the signs that there is more trouble ahead:

Communication decreases. The first seeds are sown when information stops flowing, People avoid conversation and close their doors. Decisions are made in secret. People mistrust official statements. Gossip substitutes for the full facts.

Criticism and blame increase. People are dressed down in public. They make excuses for themselves and point their fingers at someone else. Scapegoats are sacrificed. Self-doubt is masked by attack. External forces are blamed, personal responsibility avoided.

Respect decreases. Constant criticism makes people feel surrounded by a bunch of losers. They feel that low performance is common, and deadwood is tolerated. Everyone expects the worst of everyone else — and says so.

Isolation increases. People retreat into their own corners or subgroups, suspicious of others and unwilling to engage with them. Withdrawing from contact further isolates them, encouraging others to back away too. Silos harden.

Focus turns inward. People become self-absorbed and lose sight of the wider context — customers, constituencies, markets, or the world. What's going on inside becomes more important than any external goal.

Rifts widen and inequities grow. Internal rivalries escalate into gang warfare. A few stars become a privileged elite, claiming disproportionate attention, resources, and opportunities. Power differentials and social distance between groups and levels make collaboration difficult. People hoard resources for their own use. The less there is to go around, the greater the temptation to play favorites or get more for one's own group.

Aspirations diminish. People stop believing that progress is possible. They are willing to settle for mediocrity. They want to minimize risk rather than to look for big improvements. "Defensive pessimism" sets in; that is, lowering expectations to cope with anxiety in risky situations. You might not see absenteeism, but there is "presenteeism," which means the body is there but the mind is absent.

Initiative decreases. Discredited and demoralized, people become paralyzed by anxiety. Believing that nothing will ever change, people go passive, following routines but not taking initiative even on small things, and certainly not seeking innovation or change. Policies and processes are perceived to be ingrained and inevitable, shutting off new ideas.

Negativity spreads. In an emotional chain reaction, pervasive negativity fuels further decline. The culture permits selfishness, greed, mistrust, disrespect, petty turf battles, and excuses instead of action.

It's easy to get discouraged by the doom and gloom of downward spirals, as I've seen in declining companies, low-performing inner city schools, marriages falling apart, developing countries with wide social divides, and problems with U.S. competitiveness. But I've also worked on the opposite: turnarounds that create habits that fuel success. I've observed and helped leaders who care about positive relationships set the stage for positive outcomes. Here's what leaders — official or emergent — do to shift a culture from the behaviors of decline to the habits of success:

  • Keep communication open and information flowing. Foster widespread problem-solving dialogue. Face facts openly and honestly.
  • Emphasize personal responsibility. Refuse to listen to attacks on others and ask each person to take responsibility for his or her part of a problem.
  • Model respect for talent and achievements at every level. Offer frequent public thanks. Praise those who meet high standards while helping poor performers improve (or weeding them out if they don't).
  • Convene conversations across groups. Involve diverse cross-cutting teams in problem-solving.
  • Stress common purpose. Communicate inspiring goals larger than any individual or group. Find a grand challenge to unite people.
  • Work on reducing inequities and status differences. Require the privileged to mentor and help others. Spread extra resources to many groups, and encourage joint projects or shared service. Provide opportunities for learning and growth.
  • Raise aspirations. Use small wins to show the potential for bigger successes. Encourage realistic stretch goals and offer people the help to reach them.
  • Reward initiative. Provide time or small grants to work on new ideas. Make brainstorming a habit.
  • Reinforce the positive by saying and demonstrating that change is possible. Ignore the voices of negativity.

Leaders can guide productive, inclusive, and empowering actions that build winners' habits. Even when the signs of decline are all around us, it's still possible to shift the culture. Heeding the warnings is a good first step.

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