Why Good Companies Go Bad: Seven Questions Every Executive Team Should Ask

In 2010, we hosted Professor Don Sull at a conference in South Africa. I had the privilege of spending time with him in the lead-up to the event and during his visit.

Professor Don Sull. South Africa. May 2010.
At the time, Don was Professor of Management Practice at London Business School.

Don wrote a book with a title that has always stayed with me: Why Good Companies Go Bad and How Great Managers Remake Them.

Sixteen years later, as I sit with executive teams, I often find myself returning to the first part of that title:

Why do good companies go bad?

Not because the companies are necessarily in trouble. Many are successful, respected and profitable.

But that is precisely the point.

Good companies seldom go bad because their leaders suddenly become incompetent or stop working hard. Often, they go bad because the thinking, habits and relationships that produced success in the past become increasingly difficult to question.
Sull called this active inertia.

When the world changes, the organisation responds energetically – but largely by doing more of what worked before. Everyone becomes busier. New initiatives are launched. Targets are raised.

Yet beneath all the activity, the company remains trapped inside its old assumptions.

In later work, Sull offered seven questions that provide a powerful diagnostic for executive teams.

1

Do you miss opportunities that others spot?
Is important information moving quickly enough from the market and the frontline to the executive table? Or does inconvenient evidence get filtered out because it challenges the prevailing view?
2

Are your organisational hydraulics broken?
Can people translate strategy into a small number of clear priorities? Or is the organisation overwhelmed by competing initiatives, conflicting messages and constantly shifting demands?
3

Do you reward mediocrity and call it teamwork?
Does your organisation distinguish clearly between exceptional contribution, dependable performance and chronic underperformance? Or has avoiding discomfort become more important than maintaining standards?
4

Are your core values a joke?
Do your values describe how people genuinely behave – especially under pressure? Or do employees see a growing gap between the words on the wall and the behaviour that is rewarded, tolerated or ignored?
5

Are you talking about the wrong things?
Executive teams spend enormous amounts of time in conversation. But are you discussing the issues that will determine the organisation’s future? Are you making real choices, securing commitments and correcting course – or merely sharing information?
6

Have your Vikings become farmers?
Every organisation needs farmers: people who build systems, create stability and protect what has been established. But where are the Vikings – the people still searching for new territory, challenging convention and moving with urgency? Has success made the organisation more interested in protecting what it has than pursuing what comes next?
7

Do you rely on heroic leadership?
Does progress depend upon a few senior leaders personally driving every important initiative? Or has the organisation built the leadership depth, clarity and accountability required to succeed without constant executive intervention?

These are uncomfortable questions. They are also worth discussing before declining performance makes the answers obvious.

For an executive team, the practical starting point is simple:

Which of these seven warning signs is most visible in our organisation today?

Then go further:

How might we, as the executive team, be contributing to it?
What must we now confront, stop or change?

This is how active inertia is broken. Not through more activity, but by recognising where the assumptions, habits and practices that once served the organisation are now holding it back.