Jim Collins Applied to Ireland

“Every institution, no matter how great it is, is vulnerable to decline. Anyone can fall, and most eventually do” (Collins, 2009). Ireland, like any other country, is also affected by this premise. It would be difficult to assume that big firms such as Guinness or Dunnes Stores might fall. However, some wrong decisions, strategic failures or the adverse economic climate can lead to disaster.

It is not easy to apply the five stages framework that explains the different phases that a company goes through before falling created by Collins, -Hubris Born of Success, Undisciplined Pursuit of More, Denial of Risk and Peril, Grasping for Salvation and Capitulation to Irrelevance or Death- (Collins, 2009), without knowing in depth the circumstances that any Irish company went through prior to falling.
A clear example of the fall of an Irish mighty can be found not in a firm, but in a person: Sean Quinn.

In 2007, at the top of his success, Quinn was the richest man in Ireland with an estimate fortune of €3.74 billion. In December 2011 he declared himself bankrupt before a Belfast courtroom. At this point he leads a new list: The biggest bankrupt in Irish and UK history (Fitzpatrick, 2011).

1. Hubris Born of Success
Quinn Financial Services, which includes Quinn Direct insurance business, made €123 million profit in the first half of 2006. The following year, the Quinn Group buys BUPA for €150 millions. This movement could consolidate the group’s position on the insurance field while already playing a leading role in the hospitality and building sectors. Here starts Quinn’s arrogance (Fitzpatrick, 2011).

2. Undisciplined Pursuit of More
However, Quinn also increased in €570 millions his share holding in the Anglo Irish Bank, financed through the Group’s equity in a deal with Credit Suisse. Quinn is pushing the group into the banking sector, a field he barely knows (Wikipedia, 2012).

3. Denial of Risk and Peril
Hoping to make a quick gain, he gambled on derivatives. Quinn invested on what are known as “contacts for difference”, financial instruments used in order to speculate on the price of a particular asset. The shares of Anglo Irish were the chosen asset.
This movement turned to be wrong. However, Mr Quinn argued that the loans from Anglo Irish were invalid. He said that the bank gave out money recklessly hoping that Mr. Quinn’s movement would help to raise the price of the bank shares. According to Sean Quinn, Anglo Irish, not himself was the one to be blamed (Carvajal, 2012).

4. Grasping for Salvation
In order to save what was left of his empire, Mr Quinn lent €288 million from Quinn Direct to other firms of the group, most of them in Poland, Bulgaria and Russia. A number of Quinn’s Group boards were restructured to reflect those of a public company.

5. Capitulation to Irrelevance or Death
Sean Quinn’s failure to notify the financial regulator on the loans among the group firms resulted in a €3.25 million fine for the Group and a personal fine of €200,000 to Mr Quinn (Wikipedia, 2012).

In 2009 the Anglo Irish Bank is nationalised and taken over by the Irish Banking Resolution Corporation. The IBRC claims that the Quinn family owes to it more than €2 billion (BBC, 2012).

Quinn Insurance was placed into administration by the High Court in March 2010. Sean Quinn declared himself bankrupt in December 2011.

Collins suggests that it is possible to skip a stage. However, most of the companies go through all of them in sequence (Collins, 2009). Sean Quinn’s businesses seem to have passed through all the stages in the Collins’ framework.

References

Collins, J. (2009) “How the Mighty Fall” pp19-31 Random House Business Books. London, UK

Fitzpatrick, J. (2012) “Sean Quinn – The Fall of Ireland’s Richest Man” BBC News Northern Ireland. [online] Published on 26 June 2012. Available at http://www.bbc.co.uk/news/uk-northern-ireland-18593037 Accessed on 5 January 2013.

Carvajal, D. (2012) “The Fall of Ireland’s Mighty Quinn” The New York Times [online] Published on 7 January 2012. Available at http://www.nytimes.com/2012/01/08/business/sean-quinn-and-irelands-boom-and-bust.html?pagewanted=all&_r=0 Accessed on 5 January 2013.

BBC (2012) “Former Billionaire Sean Quinn Begins Nine-Week Jail Term”[online] Published on 2 November 2012. Accessed on 5 January 2013.

Wikipedia (2012) “Sean Quinn” [online] Available at http://en.wikipedia.org/wiki/Se%C3%A1n_Quinn Accessed on 6 January 2013.