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A review by jwsg
Good to Great: Why Some Companies Make the Leap...and Others Don't by Jim Collins
4.0
In Good to Great, Jim Collins lays out the principles and practices that make distinguish the merely good companies from the great ones.
#1: Level 5 Leadership. Contrary to popular belief, good-to-great leaders are not high profile personalities but tend to be "self-effacing, quiet, reserved, even shy" albeit with "intense professional will" to do whatever needed to be done to make the company great. (By contrast, egocentric Level 4 leaders, while personally very successful, can set their successors up for failure.) Collins and his team deliberately found a new phrase - Level 5 Leadership - to describe this sort of leader, rather than relying on existing terms like "servant leader" because these terms gave the impression of meekness or only emphasised the humility aspect and not the force of will. Collins says this of George Cain, the CEO of Abbott:
"Cain didn't have an inspiring personality to galvanise the company, but he had something much more powerful: inspired standards. He could not stand mediocrity in any form and was utterly intolerant of anyone who would accept the idea that good is good enough."
Collins does caveat though that while his team's research indicated that "Level 5 leadership was 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". However, this should not stop leaders from putting to practice what Level 5 leaders do within their companies.
#2: First Who….then What. Good-to-great leaders focus on "getting the right people on the bus, the wrong people off the bus, and the right people in the right seats", before they actually figure out where to drive the bus. The idea here is that if you find the right people who are self-motivated to produce the best results and be part of creating something great, you don't need to manage them tightly or fire them up. By contrast, if you have the wrong people, no matter how great your strategy is, you're not going to become a great company because "great vision without great people is irrelevant". (And by the "right people", Collins notes this has more to do with character traits and innate capabilities than with specific knowledge, background or skills.)
Collins warns that while "first who" is a simple idea to grasp, it is very difficult to do and many do not do it well. I can definitely relate to that, having hired people who were not the greatest fit because the team was struggling from being understaffed and surely we could train the person up to where we needed them to be? (It turned out badly.) Leaders of good-to-great companies argue that if you start with the right people, ask them the right questions and engage them in vigorous debate, you can find a way to make the company great. And while the right people need to be paid a decent, fair amount, compensation isn't the main issue. Collins states:
"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 company, 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 not more likely to change that with a compensation package than you're likely to affect whether they breath…The right people will do the right things and deliver the best results they're capable of, regardless of the incentive system."
These rigorous people standards need to be applied consistently across the entire organisation and at all levels, especially at the senior management level. Collins argues that if an individual isn't up to scratch, it is far better to move them out, rather than let them "languish in uncertainty for months or years, stealing precious time in their lives that they could use to move on to something else, when in the end they aren't going to make it anyway". Moreover, having the wrong person on the bus is not only unkind to them, it is unfair for all the right people on the bus who have to compensate for the inadequacies of the wrong people. As Brene Brown says, clear is kind, unclear is unkind. Or as a senior person once told me, keeping the wrong people on is a form of "petty compassion". Collins advises: "the moment you feel the need to tightly manage someone, you've made a hiring mistake. The best people don't need to be managed. Guided, taught, led - yes. But not tightly managed."
Collins adds that sometimes it might be the case that we need to put people in the right seats; "instead of firing honest and able people who are not performing well, it is important to try to move them once or even two or three times to other positions where they might blossom." And on a related note, Collins notes that in good-to-great companies, the best people were put on the biggest opportunities, not the biggest problems.
At the end of the day, if leaders can assemble the right team around them, it means that they don't have to spend as much time or energies to manage the company. Collins observes that former Gillette CEO Colman Mockler (a level 5 leader) did not significantly reduce the time he spent with his family, rarely working evenings or weekends. He continued to spend time on church activities, serving on the governing board of Harvard College.
#3: Confront the brutal facts (yet never lose faith). Here, Collins argues that good-to-great companies created a culture for people to be heard and for the truth to be heard. This involved leading with questions, engaging in dialogue and debate rather than coercion, conducting autopsies without blame and building red flag mechanisms that turned information into information that could not be ignored. Once the truth was put out there, companies would confront the facts of their current reality and deal with it. And while they had faith that they would prevail in the end, this faith was grounded in reality and not (blind) optimism. This was something Victor Frankl had written about in Man's Search for Meaning.
#4: The Hedgehog Concept. This basically says that good-to-great companies are more like hedgehogs that know "one big thing" and stick to it, rather than being like foxes that dart around and do many things but lack consistency. Good-to-great companies set their goals based on those things that they could be best in the world at, were deeply passionate about AND that drove their economic engine.
#5: A Culture of Discipline. Collins defines a culture of discipline as "getting disciplined people who engage in disciplined thought and who then take disciplined action". He argues that "the purpose of bureaucracy is to compensate for incompetence and lack of discipline" arising from having the wrong people on the bus. But if you have the right people, you don't need a bureaucracy. For instance, employees at Abbott Laboratories would set their objectives for the year in stone. While they had flexibility to change their plans, they could not change what they were measuring themselves against. This held people accountable for what they said they were going to achieve. In a good-to-great company, it is the system that needs managing and tending to, rather than the (self-disciplined and self-motivated) people.
Part of having a culture of discipline, Collins argues, is also having a "stop list" of the things that are extraneous or detract from the company's core mission, and such stop doing lists are more important than the "to do" lists.
#6: Technology Accelerators. Good-to-great companies don't use technology as the primary means of creating momentum but as an accelerator of it. They don't start their transformations with pioneering technology but eventually become pioneers in application of technology once they figure out how it fits within their three circles.
#7: The Flywheel and the Doom Loop. Becoming a great company isn't about that single killer innovation, lucky break or single defining action. Rather, it is the result of a steady accumulation of moves in one direction, that slowly build momentum for the company. By contrast, companies that try to skip the buildup and jump straight to breakthrough invariably set themselves on the path for a doom loop as they lack consistency and coherence. With the Flywheel, good-to-great leaders don't spend energy "creat[ing] alignment" or motivating staff. Alignment follows from the results and momentum, rather than the reverse.
I read Good to Great over a decade ago and I recall finding it an enjoyable read. 10 years on working in various organisations, Collins' writing resonates on a whole new level. And he encouragingly ends off by saying that "it is no harder to build something great than to build something good. It might be statistically more rare to reach greatness, but it does not require more suffering than perpetuating mediocrity. Indeed….it involves less suffering, and perhaps even less work. The beauty and power of the research findings is that they can radically simplify our lives while increasing our effectiveness. There is great solace in the simple fact of clarity - about what is vital and what is not...the point of this entire book is not that we should 'add' these findings to what we are already doing and make ourselves even more overworked…the point is to realise that much of what we're doing is at best a waste of energy" (Shades of Greg McKeown's Essentialism).
Inspiring and thought-provoking.
#1: Level 5 Leadership. Contrary to popular belief, good-to-great leaders are not high profile personalities but tend to be "self-effacing, quiet, reserved, even shy" albeit with "intense professional will" to do whatever needed to be done to make the company great. (By contrast, egocentric Level 4 leaders, while personally very successful, can set their successors up for failure.) Collins and his team deliberately found a new phrase - Level 5 Leadership - to describe this sort of leader, rather than relying on existing terms like "servant leader" because these terms gave the impression of meekness or only emphasised the humility aspect and not the force of will. Collins says this of George Cain, the CEO of Abbott:
"Cain didn't have an inspiring personality to galvanise the company, but he had something much more powerful: inspired standards. He could not stand mediocrity in any form and was utterly intolerant of anyone who would accept the idea that good is good enough."
Collins does caveat though that while his team's research indicated that "Level 5 leadership was 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". However, this should not stop leaders from putting to practice what Level 5 leaders do within their companies.
#2: First Who….then What. Good-to-great leaders focus on "getting the right people on the bus, the wrong people off the bus, and the right people in the right seats", before they actually figure out where to drive the bus. The idea here is that if you find the right people who are self-motivated to produce the best results and be part of creating something great, you don't need to manage them tightly or fire them up. By contrast, if you have the wrong people, no matter how great your strategy is, you're not going to become a great company because "great vision without great people is irrelevant". (And by the "right people", Collins notes this has more to do with character traits and innate capabilities than with specific knowledge, background or skills.)
Collins warns that while "first who" is a simple idea to grasp, it is very difficult to do and many do not do it well. I can definitely relate to that, having hired people who were not the greatest fit because the team was struggling from being understaffed and surely we could train the person up to where we needed them to be? (It turned out badly.) Leaders of good-to-great companies argue that if you start with the right people, ask them the right questions and engage them in vigorous debate, you can find a way to make the company great. And while the right people need to be paid a decent, fair amount, compensation isn't the main issue. Collins states:
"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 company, 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 not more likely to change that with a compensation package than you're likely to affect whether they breath…The right people will do the right things and deliver the best results they're capable of, regardless of the incentive system."
These rigorous people standards need to be applied consistently across the entire organisation and at all levels, especially at the senior management level. Collins argues that if an individual isn't up to scratch, it is far better to move them out, rather than let them "languish in uncertainty for months or years, stealing precious time in their lives that they could use to move on to something else, when in the end they aren't going to make it anyway". Moreover, having the wrong person on the bus is not only unkind to them, it is unfair for all the right people on the bus who have to compensate for the inadequacies of the wrong people. As Brene Brown says, clear is kind, unclear is unkind. Or as a senior person once told me, keeping the wrong people on is a form of "petty compassion". Collins advises: "the moment you feel the need to tightly manage someone, you've made a hiring mistake. The best people don't need to be managed. Guided, taught, led - yes. But not tightly managed."
Collins adds that sometimes it might be the case that we need to put people in the right seats; "instead of firing honest and able people who are not performing well, it is important to try to move them once or even two or three times to other positions where they might blossom." And on a related note, Collins notes that in good-to-great companies, the best people were put on the biggest opportunities, not the biggest problems.
At the end of the day, if leaders can assemble the right team around them, it means that they don't have to spend as much time or energies to manage the company. Collins observes that former Gillette CEO Colman Mockler (a level 5 leader) did not significantly reduce the time he spent with his family, rarely working evenings or weekends. He continued to spend time on church activities, serving on the governing board of Harvard College.
#3: Confront the brutal facts (yet never lose faith). Here, Collins argues that good-to-great companies created a culture for people to be heard and for the truth to be heard. This involved leading with questions, engaging in dialogue and debate rather than coercion, conducting autopsies without blame and building red flag mechanisms that turned information into information that could not be ignored. Once the truth was put out there, companies would confront the facts of their current reality and deal with it. And while they had faith that they would prevail in the end, this faith was grounded in reality and not (blind) optimism. This was something Victor Frankl had written about in Man's Search for Meaning.
#4: The Hedgehog Concept. This basically says that good-to-great companies are more like hedgehogs that know "one big thing" and stick to it, rather than being like foxes that dart around and do many things but lack consistency. Good-to-great companies set their goals based on those things that they could be best in the world at, were deeply passionate about AND that drove their economic engine.
#5: A Culture of Discipline. Collins defines a culture of discipline as "getting disciplined people who engage in disciplined thought and who then take disciplined action". He argues that "the purpose of bureaucracy is to compensate for incompetence and lack of discipline" arising from having the wrong people on the bus. But if you have the right people, you don't need a bureaucracy. For instance, employees at Abbott Laboratories would set their objectives for the year in stone. While they had flexibility to change their plans, they could not change what they were measuring themselves against. This held people accountable for what they said they were going to achieve. In a good-to-great company, it is the system that needs managing and tending to, rather than the (self-disciplined and self-motivated) people.
Part of having a culture of discipline, Collins argues, is also having a "stop list" of the things that are extraneous or detract from the company's core mission, and such stop doing lists are more important than the "to do" lists.
#6: Technology Accelerators. Good-to-great companies don't use technology as the primary means of creating momentum but as an accelerator of it. They don't start their transformations with pioneering technology but eventually become pioneers in application of technology once they figure out how it fits within their three circles.
#7: The Flywheel and the Doom Loop. Becoming a great company isn't about that single killer innovation, lucky break or single defining action. Rather, it is the result of a steady accumulation of moves in one direction, that slowly build momentum for the company. By contrast, companies that try to skip the buildup and jump straight to breakthrough invariably set themselves on the path for a doom loop as they lack consistency and coherence. With the Flywheel, good-to-great leaders don't spend energy "creat[ing] alignment" or motivating staff. Alignment follows from the results and momentum, rather than the reverse.
I read Good to Great over a decade ago and I recall finding it an enjoyable read. 10 years on working in various organisations, Collins' writing resonates on a whole new level. And he encouragingly ends off by saying that "it is no harder to build something great than to build something good. It might be statistically more rare to reach greatness, but it does not require more suffering than perpetuating mediocrity. Indeed….it involves less suffering, and perhaps even less work. The beauty and power of the research findings is that they can radically simplify our lives while increasing our effectiveness. There is great solace in the simple fact of clarity - about what is vital and what is not...the point of this entire book is not that we should 'add' these findings to what we are already doing and make ourselves even more overworked…the point is to realise that much of what we're doing is at best a waste of energy" (Shades of Greg McKeown's Essentialism).
Inspiring and thought-provoking.