Complacency is the sense of security and comfort that derives from the belief that the business success that’s taken place in the past will continue indefinitely.

Complacency – Success Breeds Failure | Business Culture

When companies rise to excellence, they often unwittingly develop self-destructive habits that eventually undermine their success. Just as with people, such habits are learned and not innate parts of their business culture. Sometimes they get worse over time, and thus become addictions; however, they can be broken and overcome, and the companies can be returned to the straight and narrow path leading to success. In a nutshell, good companies fail when they are unable or unwilling to change when their external environment changes significantly. Sometimes leadership is directly responsible for the self-destructive habits their companies develop.

Complacency is the sense of security and comfort that derives from the belief that the success that’s taken place in the past will continue indefinitely. It prefers the status quo and is fostered by the illusion of “sturdy genes” – which states that bad things can’t happen in a “good” company.

1The Self-Destructive Habits of Good Companies … And How to Break Them AUTHOR: Jagdish N. Sheth PUBLISHER: Wharton School Publishing 2010

Things that lead to the habit of complacency:

  • The company’s past success came via a regulated monopoly.
  • The company’s success was based on a distribution monopoly.
  • The company was “chosen” for success by the government.
  • The government owns or controls the business.

The warning signs of complacency:

  • The company is in no hurry to make decisions. Its entire culture is geared towards moving slowly – speeding up goes against the grain.
  • The company’s processes are overly bureaucratic. Decision-making is done (and limited) by whole number of committees.
  • The company has a bottom-up, decentralized, consensus-based culture. Everybody has to get on board before a decision is made.
  • The company is completely vertically integrated. Everything is done internally.
  • Enormous cross-subsidies are in place – by functions, by products, by markets, by customers. Average costing and average pricing prevail.

How to break the complacency habit:

  • Reengineer to achieve high quality, eliminate waste, and reduce inefficiency.
  • Reorganize. Decentralize profit and loss by creating and molding business units around products or geographies.
  • Outsource – contract out all non-core functions.
  • Reenergize – consider a new leader with a positive, opportunity-oriented vision.

How to prevent the complacency habit:

  • Develop strong metrics to judge the level of complacency.
  • Institute performance-based compensation.
  • Rotate leaders from function to function.
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