Jim Collins, author of How the Mighty Fall, did an important study of why great organizations fail. He examined 11 corporations that at one time were considered top performers, but had subsequently fallen badly. The sample included Motorola, Merck, HP and Circuit City.

Many leaders know implicitly that their strategies for managing an aging workforce and developing younger employees are not making the grade. But they don’t know how to articulate these risks to their top team or how to make the case for investing differently.

Here are three things leaders in apparently successful companies do that can cause catastrophic failures. Identifying these dysfunctional behaviors is a key step to successfully developing the leadership and workforce capabilities needed to drive growth.

1. Excessive Self-Confidence.

There are multiple forms of hubris that can lead to decline, but the main problem is implicitly believing that your past successes ensure future growth. As former Intel CEO Andy Grove liked to say, “Only the paranoid survive.” And the lack of commitment to continuous self-improvement is the first step in what Collins identified as the road to failure.

Are you implicitly assuming:

• “We’ll continue to be successful almost no matter what the organization does.”
• “We have talent management processes in place and we know what we’re doing. We don’t have a lot to learn about developing workforce capabilities.”
• “We’ve been successful because of decisions our leaders have made and luck hasn’t played a significant role.”

Just keep acting on these assumptions and your competitors will be very happy. The first stage of decline is over confidence. Andy Grove said, “Some fear is healthy, especially in organizations that have a history of success.”

2. Overextension. Undisciplined growth.

Most of the chief executives I interview in advance of my keynotes and workshops don’t hesitate to tell me that their current strategy is to grow the business. Often their plans are quite aggressive. But it is the rare leader who offers a caveat that these strategic objectives can only be met if the right talent is in place.

One exception is the president of a large construction-engineering firm who I interviewed for our book “The Executive Guide to High Impact Talent Management.” He said whenever his executives come to him with a strategic proposal to enter a new market, his first question is, “Who are you going to hire?” This leader knows in his industry there is a very limited supply of talent who can deliver on a specific global strategy. Failing to anticipate this recruiting risk would be fatal to any new initiative.

Ironically, research done by Collins shows the vast majority of companies don’t fail because they refuse to innovate and grow. Indeed, they try to grow too fast and in the process they break a law attributed to HP founder David Packard.

“Packard’s law states that no company can consistently grow revenues faster than it’s ability to get enough of the right people to implement that growth,” says Collins.

Is your company making unrealistic assumptions about it’s ability to recruit, develop and retain the talent you’ll need to support the levels of innovation and growth you’re committed to? What assumptions about securing and retaining key talent underlie your current strategy? These are key questions you should be asking.

3. Denial…Ain’t Just a River in Egypt

Executives frequently confess to me the challenges they face in securing the essential talent they need. Almost everybody in business today is aware of changing workforce demographics. The retirement of millions of aging Baby Boomers and the continued decline in the labor force participation rate means the U.S. workforce is essentially not growing in the next decade. (Similar patterns exist in other developed countries.) Yet, most companies continue to plan for growth as if a talent shortage is not a factor.

Of course, the strategic implications of changing workforce demographics are confusing and open to interpretation. But given the penchant of human beings to deny the evidence, Collins implies the greatest danger for companies when interpreting talent risks is not ignoring clear facts, but misinterpreting ambiguous data when the consequences will be severe. In other words, just because the situation is unclear doesn’t mean you can ignore the risks.

Executives often seem to reason that, “We don’t have conclusive evidence that a talent shortage will hurt our company, so why take it into account when planning growth?” The more appropriate question should be: Can we be sure we’ll have the skilled staff and leadership we need to meet our growth objectives?

When making risky bets in the face of ambiguous data about the talent supply, Collins’ research suggests three questions:

1. What’s the upside if we have the talent needed and events turn out well?

2. What’s the downside if we suffer serious talent shortages and events go badly?

3. Can we truly live with the downside?

Answering these questions will reduce the risks that changing workforce demographics and the growing shortage of highly skilled talent will cause major economic hardship for your organization.

As Collins says,” “It turns out that a company can, indeed, look like the picture of health on the outside yet already be in decline, dangerously on the cusp of a huge fall…. And that’s what makes the process of decline so terrifying. It can sneak up on you.”

That’s why it’s essential to be addressing the threat of critical skill shortages before it’s too late. Is your company doing enough? Do you believe these risks are real. Let me know what you think.