JIM soeprolrendiele.gq Discussion Guide. Gain a deeper understanding of the ideas presented in the books “Built to Last" and "Good to Great" by using. Where are you on your journey from Good to Great? Good to Great™ Diagnostic Tool. Developed by Jim Collins. Individual Worksheet Packet. Release Version. PDF | In his book Good to Great, Jim Collins indicates that in order to become great you need great ideas, have the correct people on the bus.
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PDF | The book consists of nine chapters explaining the concept of Good emphasizing that “good is the enemy of great”, Jim Collins provides. Why Some Companies Make the Leap and Others Don't. Book By Jim Collins. Slides by Ryan Battles. COLLINS, JAMES C. GOOD TO GREAT: WHY SOME. 4 Jim Collins Cumulative Stock Returns of $1 Invested, - Good-to- Great Companies: $ Dtrect Compar~son $ Compan~es$93 0 .
Modest and willful, humble and fearless. At the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly. Look for situations where extraordinary results exist but where no individual steps forth to claim excess credit. You will likely find a potential L5 leader at work. Are fanatically driven to produce sustained results. They are resolved to do whatever it takes to make the company great.
Display workmen diligence, they are more like a workhorse than a show horse. Chapter 3: First Who … Then What The G2G leaders began the transformation by first getting the right people on the bus and the wrong people off the bus and then figured out where to drive it.
First who, then what — as a rigorous discipline, consistently applied. This model fails when the genius departs. The G2G leaders were rigorous, not ruthless, in people decisions.
They did not rely on restructuring and layoffs as a primary strategy for improving performance. The comparison companies used layoffs to a much greater extent. Corollary: A company should limit its growth based on its ability to attract enough of the right people. When you know you need to make a people change, act. First be sure that they are not merely in the wrong seat.
Put your best people on your biggest opportunities, not your biggest problems. If you sell off your problems, do not sell off your best people. G2G management teams consist of people who debate vigorously in search of the best answers, yet who unify behind the decision, regardless of parochial interests.
No systematic link was found between executive compensation and a transformation. It is the right people who are your best asset. Chapter 4: Confront the Brutal Facts Yet Never Lose Faith There is no worse mistake in public leadership than to hold out false hopes soon to be swept away.
Winston S. Churchill The G2GC infused the process with the brutal facts of reality, allowing for communication between the lower and upper levels of management without the threat of retribution.
The moment a leader allows himself to become the primary reality people worry about, rather than reality being the primary reality, you have a recipe for mediocrity, or worse. Charisma can be as much a liability as an asset, as the strength of your leadership personality can deter people from bringing you the brutal facts. If you have the right people on the bus you will not have to spend a lot of time motivating them.
As a leader you must create an environment where the truth is heard and brutal facts are confronted. Four ways to do this: Lead with questions not answers. Only use questions as a means to obtain information Do not use questions to coax or manipulate Engage in dialogue and debate, not coercion. Conduct autopsies without blame.
None of them jumped on the. All of them took a cautious approach as to how technology can already help them do what they do well even better.
He is merely reporting data. The suggestion is if you could model these critical factors, your company could also reach the level of greatness. The 5th Level Leader — 5th Level Leaders have a combination of strong will and personal humility. The 5th Level Leader demonstrates an unwavering resolve and sets the standard for building great companies. They are moving at a speed that allows them to feel themselves, as well as those around them. Leadership greatness is about being a conduit of energy, not a single generator of it.
Collins asked a critical question: Can 5th Level Leadership be taught? Well, yes and no. To the extent someone is gifted with these innate capabilities, they certainly have a head start. For any leader it is a matter of degree. It is about growing into the role of a 5th Level Leadership leader. It is interesting to note that most 5th Level Leaders do not live extravagant lifestyles.
They have strong family and community relationships. They have healthy and long-term marriages. Most of them are highly spiritual people who attribute much of their success to good- luck and God, rather than personal greatness. These men and women are servant leaders, not self-serving ones.
First Who…Then What Once you have the right people on the bus, the problem of how to motivate and manage people largely goes away. Great vision without great people is irrelevant. Until recently, business has been largely dominated by how we can do things. How well we can implement the latest technology. But now things have changed. We are seeing a fundamental shift. It is becoming less about what we can do than who we can become. Less about rugged individualism and more about connectedness.
Notice the fundamental shift from things to people. The reality is, we can no longer compete based on faster, better, cheaper. In large part, it is because few of them are convinced they can. They are still stuck with the notion that their life is being controlled by external circumstances. These workers are not self-disciplined.
They want handholding. This is also why top talent commands the best opportunities. There will be a handful of companies where the need to externally motivate is not all that necessary. However, for the majority of companies, self-motivated individuals will continue to be a key to productivity. How people are compensated makes little difference when it comes to productivity. Again, this makes common sense. For those people who are motivated primarily by compensation, send them to the competition.
Their energy is not that of a Level 5 person. They may cause a short burst in productivity, which is guaranteed to be followed by lots of drama and the eventual crash.
These unnecessary dramas you can best do without. And they get them. And they prosper for it.
Just goes to show- you get what you focus on! Here are a few of the steps I recommend to get the right people on the bus: 1. Know precisely what you are after in terms of both skills and character. Test for skills. I recommend looking at www. Check their background. I recommend www. Assess their character. I believe in the assessment tools at www.
Given that Level 5 leadership cuts against the grain of con- ventional wisdom, especially the belief that we need larger-than-life sav- iors with big personalities to transform companies, it is important to note that Level 5 is an empirical finding, not an ideological one. To quickly grasp this concept, think of United States President Abraham Lincoln one of the few Level 5 presidents in United States his- tory , who never let his ego get in the way of his primary ambition for the larger cause of an enduring great nation.
Yet those who mistook Mr. Lin- coln's personal modesty, shy nature, and awkward manner as signs of weakness found themselves terribly mistaken, to the scale of , Con- federate and , Union lives, including Lincoln's own. During Mock- 7 ler s tenure, Gillette faced three attacks that threatened to destroy the company's opportunity for greatness. Two attacks came as hostile takeover bids from Revlon, led by Ronald Perelman, a cigar-chomping raider with a reputation for breaking apart companies to pay down junk bonds and finance more hostile raids.
A quiet and reserved man, always courteous, Mockler had the reputation of a gracious, almost patrician gen- tleman. Yet those who mistook Mockler's reserved nature for weakness found themselves beaten in the end. In the proxy fight, senior Gillette executives reached out to thousands of individual investors-person by person, phone call by phone call-and won the battle.
Now, you might be thinking, "But that just sounds like self-serving entrenched management fighting for their interests at the expense of shareholder interests.
First, Mockler and his team staked the company's future on huge invest- ments in radically new and technologically advanced systems later known as Sensor and Mach3. Had the takeover been successful, these projects would almost certainly have been curtailed or eliminated, and none of us would be shaving with Sensor, Sensor for Women, or the Mach3-leaving hundreds of millions of people to a more painful daily battle with stubble.
I9 Second, at the time of the takeover battle, Sensor promised significant future profits that were not reflected in the stock price because it was in secret development. To sell out would have made short-term shareflippers happy but would have been utterly irresponsible to long-term shareholders.
In the end, Mockler and the board were proved right, stunningly so. If a shareflipper had accepted the 44 percent price premium offered by Ronald Perelman on October 31, , and then invested the full amount in the general market for ten years, through the end of , he would have come out three times worse off than a shareholder who had stayed with Mockler and Gillette. Sadly, Mockler was never able to enjoy the full fruits of his effort. O n January 25, , the Gillette team received an advance copy of the cover of Forbes magazine, which featured an artist's rendition of Mockler stand- ing atop a mountain holding a giant razor above his head in a triumphal pose, while the vanquished languish on the hillsides below.
Walk- ing back to his office, minutes after seeing this public acknowledgment of his sixteen years of struggle, Mockler crumpled to the floor, struck dead by a massive heart attack. His placid persona hid an inner intensity, a dedication to making an y thing he touched the best it could possibly be-not just because of what he would get, but because he simply couldn't imagine doing it any other way.
It wouldn't have been an option within Colman Mockler's value system to take the easy path and turn the company over to those who would milk it like a cow, destroying its potential to become great, any more than it would have been an option for Lincoln to sue for peace and lose forever the chance of an enduring great nation.
Good to great: why some companies make the leap--and others don't
Ambition for the Company: Maxwell retired while still at the top of his game, feeling that the company would be ill served if he stayed on too long, and turned the company over to an equally capable suc- cessor, Jim Johnson. Maxwell responded by writing a let- ter to his successor, in which he expressed concern that the controversy would trigger an adverse reaction in Washington that could jeopardize the future of the company.
Level 5 leaders want to see the company even more successful in the next generation, comfortable with the idea that most people won't even know that the roots of that success trace back to their efforts. As one Level 5 leader said, "I want to look out from my porch at one of the great compa- nies in the world someday and be able to say, 'I used to work there.
After all, what better testament to your own personal greatness than that the place falls apart after you leave? In over three quarters of the comparison companies, we found execu- tives who set their successors up for failure or chose weak succes- sors, or both.
Good to Great Summary
Some had the "biggest dog" syndrome- they didn't mind other dogs in the kennel, as long as they remained the biggest one. T h e architect of this remarkable story, a charismatic and brilliant leader named Stanley Gault, became synonymous in the late s with the success of the company.
In 3 12 articles collected on Rubbermaid, Gault comes through as a hard-driving, egocentric executive. In one article, he responds to the accusation of being a tyrant with the state- ment, "Yes, but I'm a sincere tyrant. Rubbermaid generated forty consecutive quarters of earnings growth under his leadership-an impressive performance, and one that deserves respect.
But-and this is the key point- Gault did not leave behind a company that would be great without him. Gault was indeed a tremendous Level 4 leader, perhaps one of the best in the last fifty years. But he was not a Level 5 leader, and that is one key reason why Rubbermaid went from good to great for a brief shining moment and then, just as quickly, went from great to irrelevant.
A Compelling Modesty In contrast to the very I-centric style of the comparison leaders, we were struck by how the good-to-great leaders didn't talk about themselves. Dur- ing interviews with the good-to-great leaders, they'd talk about the com- pany and the contributions of other executives as long as we'd like but would deflect discussion about their own contributions.
When pressed to talk about themselves, they'd say things like, "I hope I'm not sounding like a big shot. Oh, that sounds so self-serving. I don't think I can take much credit. We were blessed with marvelous people. Those who worked with or wrote about the good-to-great leaders continually used words like quiet, humble, modest, reserved, shy, gracious, mild-mannered, self-effacing, understated, did not believe his own clippings; and so forth.
Board member Jim Hlavacek described Ken Iverson, the CEO who oversaw Nucor's transformation from near bankruptcy to one of the most successful steel companies in the world: Ken is a very modest and humble man.
I've never known a person as suc- cessful in doing what he's done that's as modest. And, I work for a lot of CEOs of large companies. And that's true in his private life as well.
The simplicity of him. I mean little things like he always gets his dogs at the local pound. He has a simple house that's he's lived in for ages. Yet, despite their remarkable results, almost no one ever remarked about them!
The good-to-great leaders never wanted to become larger-than-life heroes. They never aspired to be put on a pedestal or become unreach- able icons. They were seemingly ordinary people quietly producing extra- ordinary results. Some of the comparison leaders provide a striking contrast.
Dun- lap loudly beat on his own chest, telling anyone who would listen and many who would prefer not to about what he had accomplished. Rambo goes into situations against all odds, expecting to get his brains blown out.
But he doesn't. At the end of the day he succeeds, he gets rid of the bad guys. He creates peace out of war. That's what I do, too. Lee Iacocca, for example, saved Chrysler from the brink of catastrophe, per- forming one of the most celebrated and deservedly so turnarounds in American business history.
Chrysler rose to a height of 2. Then, however, he diverted his attention to making himself one of the most celebrated CEOs in American business history. Investor's Business Daily and the Wall Street Journal chronicled how Iacocca appeared regularly on talk shows like the Today show and Larry King Live, personally starred in over eighty com- mercials, entertained the idea of running for president of the United States quoted at one point, "Running Chrysler has been a bigger job than running the country.
I could handle the national economy in six months" , and widely promoted his autobiography. T h e book, lacocca, sold seven million copies and elevated him to rock star status, leading him to be mobbed by thousands of cheering fans upon his arrival in Japan. Sadly, Iacocca had trouble leaving center stage and letting go of the perks of executive kingship.
Unwavering Resolve. It is equall y about ferocious resolve, an almost stoic determination to do whatever needs to be done to make the com- pany great. Indeed, we debated for a long time on the research team about how to describe the good-to-great leaders. Initially, we penciled in terms like 7 "selfless executive ' and "servant leader.
They would do almost an y thing to make the com- pany great. If we put a label like 'selfless' or 'servant' on them, people will get entirely the wrong idea. We need to get people to engage with the whole concept, to see both sides of the coin. If you only get the humility side, you miss the whole idea. They will sell the mills or fire their brother, if that's what it takes to make the company great.
Cain didn't have an inspiring personality to galvanize the company, but he had something much more powerful: He could not stand mediocrity in any form and was utterly intolerant of anyone who would accept the idea that good is good enough. Cain then set out to destroy one of the key causes of Abbott's mediocrity: Systematically rebuilding both the board and the executive team with the best people he could find, Cain made it clear that neither family ties nor length of tenure would have any- thing to do with whether you held a key position in the company.
If you didn't have the capacity to become the best executive in the industry in your span of responsibility, then you would lose your paycheck. Holiday gatherings were probably tense for a few years in the Cain clan. Want another slice of turkey? Upjohn, the direct comparison company to Abbott, also had family leadership during the same era as George Cain.
By the time Abbott had filled all key seats with the best people, regardless of family background, Upjohn still had B level family members holding key positions. This reflects a more systematic finding from our study. The evidence does not support the idea that you need an outside leader to come in and shake up the place to go from good to great.
In fact, going for a high-profile outside change agent is negatively correlated with a sustained transformation from good to great. See Appendix 2. Walgreens' brightest future lay in convenient drugstores, not food service.
Cork said at one of our planning committee meetings, "Okay, now I am going to draw the line in the sand. We are going to be out of the restau- rant business completely in five years. You could have heard a pin drop. He said, "I want to let everybody know the clock is ticking. Cork was not a real vociferous fellow. He sort of tapped on the table and said, "Listen, you have four and a half years. I said you had five years six months ago.
Now you've got four and a half years. He never wavered. He never doubted; he never second-guessed. Not that food service was the largest part of the business although it did add substantial profits to the bottom line. The real problem was more emotional.
Walgreens had, after all, invented the malted milkshake and food service was a long-standing family tradition dating back to his grandfather. Some food-service outlets were even named after the C E O himself-a restaurant chain named Corky's. Quietly, doggedly, simply.
Alan Wurtzel, a second-generation family member who took over his family's small company and turned it into Circuit City, perfectly cap- tured the gestalt of this trait. When asked about differences between himself and his counterpart C E O at Circuit City's comparison company, Wurtzel summed up: First, he holds a doctor of jurisprudence degree from Yale-clearly, his plow horse nature had nothing to do with a lack of intelligence.
Sec- ond, his plow horse approach set the stage for truly best in show results. Let me put it this way: You might expect that extraordinary results like these would lead Alan Wurtzel to discuss the brilliant decisions he made.
But when we asked him to list the top five factors in his company's transformation, ranked by importance, Wurtzel gave a surprising answer: The number one factor was luck. Fur- thermore, the comparison company Silo was in the same industry, with the same wind and probably bigger sails!
We debated the point for a few minutes, with Wurtzel continuing his preference for attributing much of his success to just being in the right place at the right time. Later, when asked to discuss the factors behind the enduring nature of the transforma- tion, he said, "The first thing that comes to mind is luck. What an odd factor to talk about. Yet the good-to-great execu- tives talked a lot about luck in our interviews. The opening para- graph reads: After all, we found no evidence that the good-to-great companies were blessed with more good luck or more bad luck, for that matter than the comparison companies.
Then we began to notice a contrasting pattern in the compar- ison executives: They credited substantial blame to bad luck, frequently bemoaning the difficulties of the environment they faced. Compare Bethlehem Steel to Nucor. Both companies operated in the steel industry and produced hard-to-differentiate products.
Both compa- nies faced the competitive challenge of cheap imported steel. Yet execu- tives at the two companies had completely different views of the same environment. Bethlehem Steel's C E O summed up the company's prob- lems in by blaming imports: Good to Great 35 The comparison leaders did just the opposite.
They'd look out the win- dow for something or someone outside themselves to blame for poor preen in front of the mirror and credit themselves when results, but would , things went well. Strangely, the window and the mirror do not reflect objective reality.
Everyone outside the window points inside, directly at the Level 5 leader, saying, "He was the key; without his guidance and leadership, we would not have become a great company.
But the Level 5s would never admit that fact. A woman who had recently become chief executive of her com- pany raised her hand and said, "I believe what you say about the good-to-great leaders. Part of the reason I got this job is because of my ego drives. Are you telling me that I can't make this a great company if I'm not Level 5? Of 1, companies that appeared on the Fortune in our initial can- didate list, only eleven made the very tough cut into our study.
In those eleven, all of them had Level 5 leadership in key positions, including the CEO, at the pivotal time of transition. Finally, she said, "Can you learn to become Level 5? The Two Sides of Level 5 Leadership Professional Will Personal Humility Creates superb results, a clear Demonstrates a compelling catalyst in the transition from modesty, shunning public good to great.
Demonstrates an unwavering Acts with quiet, calm resolve to do whatever must be determination; relies principally done to produce the best long- on inspired standards, not term results, no matter how inspiring charisma, to motivate.
Sets the standard of building an Channels ambition into the enduring great company; will company, not the self; sets up settle for nothing less. Looks in the mirror, not out Looks out the window, not in the the window, to apportion mirror, to apportion credit for the responsibility for poor results, success of the company-to other never blaming other people, people, external factors, and good external factors, or bad luck.
My hypothesis is that there are two categories of people: T h e first category consists of people who could never in a million years bring themselves to subju- gate their egoistic needs to the greater ambition of building something larger and more lasting than themselves. For these people, work will always be first and foremost about what they get-fame, fortune, adula- tion, power, whatever-not what they build, create, and contribute.
Good to Great 37 that they need to hire a larger-than-life, egocentric leader to make an organization great, you can quickly see why Level 5 leaders rarely appear at the top of our institutions.
The second category of people-and I suspect the larger group-con- sists of those who have the potential to evolve to Level 5; the capability resides within them, perhaps buried or ignored, but there nonetheless. And under the right circumstances-self-reflection, conscious personal development, a mentor, a great teacher, loving parents, a significant life experience, a Level 5 boss, or any number of other factors-they begin to develop.
In looking at the data, we noticed that some of the leaders in our study had significant life experiences that might have sparked or furthered their maturation. Darwin Smith fully blossomed after his experience with can- cer. Joe Cullman was profoundly affected by his World War II experi- ences, particularly the last-minute change of orders that took him off a doomed ship on which he surely would have died.
Col- man Mockler, for example, converted to evangelical Christianity while getting his MBA at Harvard, and later, according to the book Cutting Edge, became a prime mover in a group of Boston business executives who met frequently over breakfast to discuss the carryover of religious val- ues to corporate life.
I believe-although I cannot prove-that potential Level 5 leaders are highly prevalent in our society. The problem is not, in my estimation, a dearth of potential Level 5 leaders. They exist all around us, if we just know what to look for. And what is that? Look for situations where extraordinary results exist but where no individual steps forth to claim excess credit.
You will likely find a potential Level 5 leader at work. For your own development, I would love to be able to give you a list of steps for becoming Level 5, but we have no solid research data that would support a credible list. Our research exposed Level 5 as a key component inside the black box of what it takes to shift a company from good to great.
Yet inside that black box is yet another black box-namely, the inner development of a person to Level 5. So, in short, Level 5 is a very satisfying idea, a powerful idea, and, to pro- duce the best transitions from good to great, perhaps an essential idea. A "Ten-Step List to Level 5" would trivialize the concept. My best advice, based on the research, is to begin practicing the other good-to-great disciplines we discovered.
We found a symbiotic relation- ship between Level 5 and the remaining findings. O n the one hand, Level 5 traits enable you to implement the other findings; on the other hand, practicing the other findings helps you to become Level 5.
This chapter is about what Level 5s are; the rest of the book describes what they do. Leading with the other disciplines can help you move in the right direction. There is no guarantee that doing so will turn you into a full-fledged Level 5, but it gives you a tangible place to begin. We cannot say for sure what percentage of people have the seed within, or how many of those can nurture it.
Even those of us who discovered Level 5 on the research team do not know for ourselves whether we will succeed in fully evolving to Level 5. And yet, all of us who worked on the finding have been deeply affected and inspired by the idea. Darwin Smith, Colman Mockler, Alan Wurtzel, and all the other Level 5s we learned about have become models for us, something worthy to aspire toward.
Whether or not we make it all the way to Level 5, it is worth the effort. For like all basic truths about what is best in human beings, when we catch a glimpse of that truth, we know that our own lives and all that we touch will be the better for the effort. Now, you're either on the bus or off the bus. We found something quite the opposite. The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there.
No, they first got the right people on the bus and the wrong people off the bus and then figured out where to drive it. They said, in essence, "Look, I don't really know where we should take this bus. But I know this much: If we get the right people on the bus, the right people in the right seats, and the wrong people off the bus, then we'll figure out how to take it someplace great.
First, if you begin with "who," rather than "what," you can more easily adapt to a changing world. If people join the bus primarily because of where it is going, what happens if you get ten miles down the road and you need to change direction? You've got a problem. But if people are on the bus because of who else is on the bus, then it's much easier to change direc- tion: The right people don't need to be tightly managed or fired up; they will be self-motivated by the inner drive to produce the best results and to be part of creating something great.
Third, if you have the wrong people, it doesn't matter whether you dis- cover the right direction; you still won't have a great company. Great vision without great people is irrelevant. Consider the case of Wells Fargo. So instead of mapping out a strategy for change, he and chairman Ernie Arbuckle focused on "injecting an endless stream of talent" directly into the veins of the company. They hired outstanding people whenever and wherever they found them, often without any specific job in mind.
And they'll be flexible enough to deal with them. No one could predict all the changes that would be wrought by banking deregulation. Yet when these changes came, no bank handled those challenges better than Wells Fargo.
At a time when its sector of the banking industry fell 59 percent behind the general stock market, Wells Fargo outperformed the market by over three times. Nearly every person had gone on to become C E O of a major company: Arjay Miller, an active Wells Fargo board member for seventeen years, told us that the Wells Fargo team reminded him of the famed "Whiz Kids" recruited to Ford Motor Company in the late s of which Miller was a member, eventually becoming president of Ford.
You get the best people, you build them into the best managers in the industry, and you accept the fact that some of them will be recruited to become CEOs of other companies. While Dick Cooley systematically recruited the best people he could get his hands on, Bank of America, according to the book Breaking the Bank, followed something 7 called the "weak generals, strong lieutenants ' model. But if you pick weak generals-placeholders, rather than highly capable executives- then the strong lieutenants are more likely to stick around.
The weak generals model produced a climate very different at Bank of America than the one at Wells Fargo. Whereas the Wells Fargo crew acted as a strong team of equal partners, ferociously debating eyeball-to-eyeball in search of the best answers, the Bank of America weak generals would wait for directions from above.
Sam Armacost, who inherited the weak generals model, described the management climate: Not only couldn't I get conflict, I couldn't even get comment. They were all wait- ing to see which way the wind blew. And where did it find those strong generals? From right across the street at Wells Fargo. In fact, Bank of America recruited so many Wells Fargo executives during its turnaround that people inside began to refer to themselves as "Wells of America.
What's new about that? But what stands out with such distinction in the good-to-great companies are two key points that made them quite different. When Maxwell became C E O of Fannie Mae during its darkest days, the board desperately wanted to know how he was going to rescue the company. Despite the immense pressure to act, to do something dramatic, to seize the wheel and start dri- ving, Maxwell focused first on getting the right people on the Fannie Mae management team.
His first act was to interview all the officers. He sat them down and said, "Look, this is going to be a very hard challenge. I want you to think about how demanding this is going to be.
If you don't think you're going to like it, that's fine. Nobody's going to hate you. I5 The same standard applied up and down the Fannie Mae ranks as managers at every level increased the caliber of their teams and put immense peer pressure upon each other, creating high turnover at first, when some people just didn't pan out. Dick Cooley and David Maxwell both exemplified a classic Level 5 style when they said, "I don't know where we should take this company, but I do know that if I start with the right people, ask them the right questions, and engage them in vigorous debate, we will find a way to make this company great.
In this model, the company is a platform for the talents of an extraordinary individual. In these cases, the towering genius, the primary driving force in the company's success, is a great asset- as long as the genius sticks around. The geniuses seldom build great man- agement teams, for the simple reason that they don't need one, and often don't want one.
If you're a genius, you don't need a Wells Fargo-caliber management team of people who could run their own shows elsewhere. No, you just need an army of good soldiers who can help implement your great ideas. However, when the genius leaves, the helpers are often lost. Or, worse, they try to mimic their predecessor with bold, visionary moves trying to act like a genius, without being a genius that prove unsuccessful. Eckerd Corporation suffered the liability of a leader who had an uncanny genius for figuring out "what" to do but little ability to assemble the right "who" on the executive team.
Jack Eckerd, blessed with monu- mental personal energy he campaigned for governor of Florida while running his company and a genetic gift for market insight and shrewd deal making, acquired his way from two little stores in Wilmington, Delaware, to a drugstore empire of over a thousand stores spread across the southeastern United States.
By the late s, Eckerd's revenues equaled Walgreens', and it looked like Eckerd might triumph as the great company in the industry. But then Jack Eckerd left to pursue his passion for politics, running for senator and joining the Ford administration in 7 Washington.
Without his guiding genius, Eckerd s company began a long decline, eventually being acquired by J.
Whereas Jack Eckerd had a genius for picking the right stores to download, Cork Walgreen had a genius for picking the right people to hire.
Whereas Jack Eckerd failed utterly at the single most impor- tant decision facing any executive-the selection of a successor-Cork Walgreen developed multiple outstanding candidates and selected a superstar successor, who may prove to be even better than Cork him- self.
Set a vision for where to drive Build a superior executive team. Develop a road map for driving the bus. Once you have the right people Enlist a crew of highly capable in place, figure out the best path "helpers" to make the vision to greatness.
The "genius with a thousand helpers" model is particularly prevalent in the unsustained comparison companies. The most classic case comes from a man known as the Sphinx, Henry Singleton of Teledyne.
Single- ton grew up on a Texas ranch, with the childhood dream of becoming a great businessman in the model of the rugged individualist. Armed with a Ph. Through acquisitions, Singleton built the company from a small enter- prise to number on the Fortune list in six years. At one point, he said, "I define my job as having the freedom to do what seems to me to be in the best interest of the company at any time.
After all, why worry about succession when the very point of the whole thing is to serve as a platform to leverage the talents of your remarkable genius? Teledyne is not so much a system as it is the reflection of one man's singular disci- line.
Once Singleton stepped away from day-to-day management in the mids, the far-flung empire began to crumble. From the end of until its merger with Allegheny in , Teledyne's cumulative stock returns imploded, falling 66 percent behind the general stock market. Singleton achieved his childhood dream of becoming a great businessman, but he failed utterly at the task of build- ing a great company.
With all the attention paid to executive compensation- the shift to stock options and the huge packages that have become common- place-surely, we thought, the amount and structure of compensation must play a key role in going from good to great. How else do you get peo- ple to do the right things that create great results? We were dead wrong in our expectations.
We spent weeks inputting compensation data from proxy statements and performed separate analyses looking for patterns and correla- tions. We examined everything we could quantify for the top five offi- cers-cash versus stock, long-term versus short-term incentives, salary versus bonus, and so forth. Some companies used stock extensively; oth- ers didn't. Some had high salaries; others didn't. Some made significant use of bonus incentives; others didn't.
Most importantly, when we ana- lyzed executive compensation patterns relative to comparison companies, we found no systematic differences on the use of stock or not , high salaries or not , bonus incentives or not , or long-term compensation or not. The only significant difference we found was that the good-to- great executives received slightly less total cash compensation ten years after the transition than their counterparts at the still-mediocre compari- son companies!
You have to be basically rational and reasonable I doubt that Colman Mockler, David Maxwell, or Darwin Smith would have worked for free , and the good-to-great compa- nies did spend time thinking about the issue.
But once you've structured something that makes basic sense, executive compensation falls away as a distinguishing variable in moving an organization from good to great. It is simply a manifestation of the "first who" prin- ciple: It's not how you compensate your executives, it's which executives you have to compensate in the first place. If you have the right executives on the bus, they will do everything within their power to build a great com- pany, not because of what they will "get" for it, but because they simply cannot imagine settling for anything less.
Their moral code requires building excellence for its own sake, and you're no more likely to change that with a compensation package than you're likely to affect whether they breathe. The good-to-great companies understood a simple truth: The right people will do the right things and deliver the best results they're capable of, regardless of the incentive system.
We were not able to look as rigorously at nonexecutive compensation; such data is not available in as systematic a format as proxy statements for top officers. Nucor built its entire system on the idea that you can teach farmers how to make steel, but you can't teach a farmer work ethic to people who don't have it in the first place. So, instead of setting up mills in traditional steel towns like Pittsburgh and Gary, it located its plants in places like Crawfordsville, Indiana; Norfolk, Nebraska; and Plymouth, Utah-places full of real farmers who go to bed early, rise at dawn, and get right to work without fanfare.
In one extreme case, workers chased a lazy teammate right out of the plant with an angle iron. In a good-to-great transformation, people are not your most important asset. Nucor illustrates a key point. In determining "the right people," the good-to-great companies placed greater weight on character attributes than on specific educational background, practical skills, specialized knowledge, or work experience. Not that specific knowledge or skills are unimportant, but they viewed these traits as more teachable or at least learnable , whereas they believed dimensions like character, work ethic, basic intelligence, dedication to fulfilling commitments, and values are more ingrained.
As Dave Nassef of Pitney Bowes put it: I used to be in the Marines, and the Marines get a lot of credit for build- ing people's values.
But that's not the way it really works. The Marine Corps recruits people who share the corps' values, then provides them with the training required to accomplish the organization's mission. We look at it the same way at Pitney Bowes. We have more people who want to do the right thing than most companies. We don't just look at experi- ence.
We want to know: Who are they? Why are they? We find out who they are by asking them why they made decisions in their life. The answers to these questions give us insight into their core values. If you don't have what it takes, you probably won't last long.
But they're not ruthless cultures, they're rigorous cultures. And the dis- tinction is crucial. To be ruthless means hacking and cutting, especially in difficult times, or wantonly firing people without any thoughtful consideration.
To be rig- orous means consistently applying exacting standards at all times and at all levels, especially in upper management. To be rigorous, not ruthless, means that the best people need not worry about their positions and can concentrate fully on their work.
In , Wells Fargo acquired Crocker Bank and planned to shed gobs of excess cost in the consolidation. There's nothing unusual about that- every bank merger in the era of deregulation aimed to cut excess cost out of a bloated and protected industry. However, what was unusual about the Wells-Crocker consolidation is the way Wells integrated management or, to be more accurate, the way it didn't even try to integrate most Crocker management into the Wells culture.
The Wells Fargo team concluded right up front that the vast majority of Crocker managers would be the wrong people on the bus. Wells Fargo also sent some of its own managers packing in cases where the Crocker managers were judged as better qualified. Like a professional sports team, only the best made the annual cut, regardless of position or tenure. Summed up one Wells Fargo executive: But the evidence suggests that the average Crocker manager was just not the same caliber as the average Wells manager and would have failed in the Wells Fargo performance culture.
If they weren't going to make it on the bus in the long term, why let them suffer in the short term? One senior Wells Fargo executive told us: We decided it would be best to simply do it on day one.
We planned our efforts so that we could say, right up front, 'Sorry, we don't see a role for you,' or 'Yes, we do see a role; you have a job, so stop worrying about it.
To deal with it right up front and let people get on with their lives- that is rigorous. Not that the Crocker acquisition is easy to swallow. It's never pleasant to see thousands of people lose their jobs, but the era of bank deregulation saw hundreds of thousands of lost jobs.
Given that, it's interesting to note two points.
To be rigorous in people decisions means first becoming rigorous about top management people decisions. Indeed, I fear that people might use "first who rigor" as an excuse for mindlessly chopping out people to improve performance. And I cringe.
Good to Great Summary
For not only will a lot of hardworking, good people get hurt in the process, but the evidence suggests that such tactics are contrary to producing sustained great results. Even in the Wells Fargo case, the company used lay- offs half as much as Bank of America during the transition era.He waddles along, going about his simple day, searching for lunch and taking care of his home. When pressed to talk about themselves, they'd say things like, "I hope I'm not sounding like a big shot.
We live in an information age, when those with more and better infor- mation supposedly have an advantage. The G2G leaders were rigorous, not ruthless, in people decisions. That was the book which outlined what helped visionary companies stay visionary over decades.
It is about growing into the role of a 5th Level Leadership leader. One reason why I preach performance dialogues over performance evaluations. A 3-part examination of what it takes for companies to succeed through strategy, process, leadership and ultimately; execution.
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