This paper applies Jim Collins' five-stage model of organizational decline to Smith Management, LLC, a booking and entertainment management agency based in Kansas City. Beginning with an overview of the company's services, stakeholders, and corporate culture, the paper works through each decline stage — from hubris born of success and undisciplined pursuit of more, through denial of risk, grasping for salvation, and capitulation — using SWOT analysis, PEST analysis, and balanced scorecard perspectives. The paper identifies the company's strengths, weaknesses, opportunities, and threats, and examines financial and non-financial performance indicators to assess Smith Management's path toward rehabilitation and sustainable growth.
How the Mighty Fall is an episodic research work by Jim Collins that examines great organizations through the course of their making. Contemporary organizations generally operate on the ongoing assumption that they will function profitably and indefinitely. Yet many mature organizations make decisions that ultimately devastate them and push them into a phase of decline. Collins adapted a five-stage model to depict this decline in contemporary organizational settings.
Rather than treating decline as the ultimate step at which an organization dissolves, Collins stratifies the stages of decline. The beneficial outcome of this stratification is that organizations can locate themselves along the spectrum of changes and deformations occurring in their development, and use that knowledge to plan corrective action. The following paper discusses the remedies adopted by Smith Management, LLC to reestablish the organization to full operational health by reference to each of these decline stages.
Smith Management, LLC is a booking and management agency developed to help consumers find and hire live entertainment for weddings, corporate events, private parties, nightclubs, fraternity functions, grand openings, and professional athletes for speaking and promotional events. Recently, Smith Management, LLC expanded its offerings to include additional entertainment services such as voice-over artists, comedians, dancers, caterers, and photographers.
The Smith Management, LLC booking agency leverages the Internet's ability to organize and connect fragmented information about entertainers and professional athletes into a searchable, consumer-focused, and easy-to-use database. The company's long-term commitment to survival, growth, and profitability aims to establish it as a recognized leader in contract negotiation, booking, and management for entertainers and professional athletes. The company believes that extensive planning and promotion can enhance the careers of both entertainers and professional athletes.
The primary philosophy of Smith Management, LLC is to be a good steward in the communities where it conducts business. The company offers support through organized volunteer efforts, music events, and athletic sponsorships. Its vision is to become a well-recognized name in the personal service industry.
Smith Management, LLC was created as a for-profit business to offer contract negotiation, booking, and management services to entertainers and professional athletes. The initial concept emerged when the founders were undergraduate students; they served as volunteers on Homecoming and Spring Feast committees and had the opportunity to network with professional booking and management agents at well-known companies to recruit musicians, entertainers, and professional athletes for student events.
Smith Management, LLC arranges bookings and manages personal appearances for entertainers and professional athletes in the State of Washington. The services offered include:
• Confirming guest appearances
• Making travel arrangements
• Multi-media advertising
• Reminder service
• Legal representation
• Contract negotiation
The principal product offering is contract negotiation, booking, management, and legal services. Smith Management, LLC also offers its services to individuals who are not represented in the primary market segment, or who reside outside the target market.
There is an increasing need for personal management services both domestically and internationally as more people enter the entertainment and professional sports industries. These industries require legal representation and booking managers. Smith Management, LLC removes the burden from a client's busy schedule by taking care of all the details, allowing clients to reserve their energy, skills, and talents. Their long history of extensive planning and promotion enhances the careers of entertainers and professional athletes through personalized, professional service. Regardless of how advanced a client's career is, even an amateur can benefit from their services.
Smith Management's long-term commitment to survival, growth, and profitability positions the company to be recognized as a leader in contract negotiation, booking, and management for entertainers and professional athletes. The company believes that extensive planning and promotion can enhance the careers of both entertainers and professional athletes.
The corporate culture at Smith Management, LLC is professional, dynamic, and committed to rewarding employees and clients as much as shareholders. What matters most at Smith Management, LLC is investing in their clients — they see the greatest value in the people they serve. Their leadership model is horizontal, meaning they prize teamwork. The company can only succeed to the degree that the people it serves succeed.
This philosophy explains why working collaboratively — with clients, businesses, and partners alike — is so central to the organization. Smith Management, LLC works around the clock to ensure clients receive everything they ask for, and more, because the company's output is directly tied to the effort and commitment it brings to every relationship.
The key stakeholders at Smith Management, LLC are every customer and client who inquires about or requests their services. The company values each client as highly as it values its Board of Directors, as each plays a central role in the company's success. The primary responsibility of the board of directors is to protect shareholders' assets and ensure a decent return on investment. In the booking and management industry, however, many directors consider it their primary responsibility to protect employees first and shareholders second.
The board of directors is the highest governing authority within the for-profit and non-profit business structure. It is the board's responsibility to select, evaluate, and approve appropriate compensation for the company's chief executive officer (CEO); evaluate the attractiveness of dividends and recommend stock splits; oversee share repurchase programs; approve the company's financial statements; and recommend or discourage acquisitions and mergers (Askegaard & Ger, 1998).
Smith Management, LLC brings considerable experience in marketing through print advertisement. Various forms of media — including print, email, radio, and the Internet — are used to advertise its services. However, the company believes that the most effective approach for contacting customers or potential clients is person-to-person communication.
The greatest strength is the personal approach Smith Management, LLC has taken to create individualized services for customers and clients. Other key strengths that drive repeat business include (Badrl, 2005):
• Respect for clientele
• Reliable sourcing of musical artists and professional athletes for booking and management
• Professional image development
• Professional consultants
• Professional legal representation
• Time management
Because of its relatively small size, Smith Management, LLC is not yet a household name among residents in Kansas City, Missouri. As a newer company, a substantial amount of hard work is necessary during the first two years of operation to ensure future success.
In 2008, the United States began to experience a recession comparable in severity to the Great Depression, with a steady decrease in business activity occurring during a period when such activity had generally been increasing. The recession had a moderate effect on the entertainment and professional sports industries. Historically, entertainment has proven remarkably resilient during economic downturns — the public's appetite for entertainment in both the musical and sporting arenas tends to persist even through financial hardship. Nevertheless, the economic downturn may lead to decreased CD sales, lower concert ticket purchases, or cancellations of performances.
Due to the recession, contract negotiation, booking, and management companies faced growing concern about recruiting and retaining top talent. According to reporting by Ben Bellingham, talent management was identified as the second-largest key threat by 67 percent of companies in 2010, up from 60 percent in 2009. Some booking and management executives were also concerned about employee morale, instability at senior leadership levels, and the ability to maintain corporate culture, with 46 percent concerned about managing remote staff efficiently. Globally, nearly two-thirds of management executives cited competition as their top threat, followed by the health of the global economy, inability to attract and retain top talent, company reputation (62%), and inability to develop new products and services (Broder, 2006).
New technologies are also transforming the scope and nature of work, the skills demanded, the manner in which work is sourced globally, and the ways in which people collaborate. As booking and management companies expand into new markets, their success will depend on streamlining global operations and differentiating their products and services (Galbraith, 2009).
The current economic difficulties have also prompted individuals who lost jobs or were placed on part-time hours to enter talent competitions as a means of supplementing income. Talent show coordinators have reported a sharp increase in applicant numbers over recent years, and there has been a notable rise in participants from white-collar professions such as architecture, engineering, and accounting. Talent competition events represent one of several factors that will support the survival of booking and management companies in the twenty-first century.
The global economic recession has spared no industry, including professional sports — one of the most consistently profitable sectors in the world. Despite the multi-million dollar salaries and long-term contracts enjoyed by professional athletes, the sports industry has also been affected, as rising unemployment and tight credit conditions constrain consumer spending across all sectors (Chisik, 2003).
Smith Management, LLC holds an important niche in the market that enables it to co-venture with other professional companies. Entering into co-venture business relationships allows the company to display its management skills and expose its client roster to major Fortune 500 companies. For example, Smith Management, LLC identified an opportunity to enter into a co-venture relationship with Crown City Mall in downtown Kansas City — the city's most populated shopping location — which houses Fortune 500 tenants such as Target, Sears, Macy's, Famous Footwear, and Hallmark. This co-venture would involve a series of free public concert performances, autograph signings, and photo opportunities with entertainers and professional athletes pre-arranged by Smith Management, LLC. Such free public events can boost name recognition and increase sales revenue for all parties involved (Cooksey, 2007).
New entertainment management companies entering the market pose a competitive threat to Smith Management, LLC. The emergence of similar companies in Missouri can also affect the company's profits. Industry analysts and executives have noted that further consolidation in the music industry may be necessary, and that the biggest ongoing risk is a bidding war for artists that inflates talent and marketing costs — already roughly 36 percent of overall budgets. As noted by Phillip Greenwald, professor of finance at Columbia Business School, "The music business has always been difficult to manage because of the amount of money paid to develop and market artists. Whenever there has been a drop in revenue, the industry has faced problems because it cannot control its costs."
In the professional sports arena, a potential strike by the Screen Actors Guild poses a further threat to athletes who appear in television commercials. Both the Screen Actors Guild and the American Federation of Television and Radio Artists together represent approximately 135,000 actors, and any labor action affecting advertising could have a significant negative impact on athlete endorsement revenue (Dinnie, 2004).
The following PEST analysis highlights key interdependencies between the broader environment and Smith Management LLC's business operations.
Political: The regulatory environment governing entertainment contracts, labor relations, and athlete representation creates compliance obligations that Smith Management LLC must monitor continuously.
"Political, economic, social, and technological risk factors"
"Balanced scorecard and performance indicator framework"
"Reporting limitations, accounting myths, and recovery outlook"
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