Good to Great
by Jim Collins
"Good is the enemy of great."
Collins and a team of researchers studied companies that outperformed similar companies over a sustained time period in an effort to determine what factors contributed to making them great. From this study, which began with more than 1400 companies, Collins' team found 11 companies that made the transition from good to great. Among these companies, Collins developed a framework to explain how businesses and other organizations can make this transformation.
1. Level 5 Leadership - It is commonly held today that charismatic, "bigger-than-life" leadership is needed for an organization to excel. Collins' team found, however, that this type of leader can actually hinder the growth of a business in the long-term as their personality and will can force change that proves to be unsustainable after that person leaves the entity or becomes distracted. According to the author, there are five levels in a hierarchy of leadership. The highest level, Level 5, is a leader who builds enduring greatness through a blend of humility and professional will. According to Collins, "Level 5 leaders channel their ego needs away from themselves…their ambition is first and foremost of the institution, not themselves." He continues by writing that "it is equally about ferocious resolve, an almost stoic determination to do whatever needs to be done to make the company great." A Level 5 leader is both humble and strongly determined for the success of the institution. These leaders attribute success to factors other than themselves and blame themselves for failures.
2. First Who…Then What - Leaders of great organizations make sure they have the right people in the right positions and do not have the wrong people "on the bus" even before they determine the direction to be taken. The right people have the determination, integrity, and motivation to do what it takes to be successful when the vision is cast. When the right people are involved, motivation is not an issue. Instead, leaders are more concerned about not de-motivating them. "In a good-to-great transformation, people are not your most important asset. The right people are." In personnel decisions, Collins notes that it is important to be rigorous rather than ruthlessly cutting at random. By rigorous, he means that organizations must consistently apply high standards to all personnel, especially upper management or, in our case, administration. The author proposes three principles of rigor: 1) When in doubt, don't hire - keep looking. It is more important to have the right person than it is to have a person. 2) When you know you need to make a people change, act. "The moment you feel the need to tightly manage someone, you've made a hiring mistake." It is a de-motivator for the right people and unfair to the future and potential success of the wrong people to keep someone who cannot do the job. We should do all we can to guide and help someone find the right spot for them, but if you cannot, act. Collins includes two questions to help determine when it is time to act: If there were a vacancy, would I hire this person again? If this person were to tell me they were leaving, would I be disappointed or secretly relieved? 3) Put your best people on your biggest opportunities, not your biggest problems. According to Collins, "managing your problems can only make you good, whereas building your opportunities is the only way to become great." Management teams at good-to-great businesses are composed of people who have vigorous debate while searching for best answers but unify behind decisions regardless of their own interests.
3. Confront the Brutal Facts (Yet Never Lose Faith) - Great organizations "start with an honest and diligent effort to determine the truth which allows their decisions about what actions to take to become much clearer. They use this external reality, which is continually updated, to guide their decisions. Leaders must be careful to not impose an unrealistic and unfactual reality on the organization by the will of their personality. In this situation, charisma can actually become a liability as team members shade their opinions or the information shared from fear of "crossing the boss". While vision is important, leaders must create a climate where the brutal truth is heard and confronted without fear of reprisal. Collins lists four practices to help establish this culture: 1) Lead with questions, not answers. A leader must have the humility to understand that she does not have all the answers and then to ask questions that will lead to solutions. 2) Engage in dialogue and debate, not coercion. People must feel that they have input for the sake of solving problems rather than to simply promote "buy in" to a solution that has already been predetermined. 3) Conduct autopsies, without blame. When you have the right people, don't worry about assigning blame but about finding solutions. 4) Build "red flag" mechanisms. Organizations should develop methods by which important information cannot be ignored or explained away. While confronting the truth, good-to-great organizations also maintained an unwavering faith that they would overcome and prevail in spite of adversities and challenges. Collins describes the story of Admiral Jim Stockdale who was a prisoner of war in Hanoi for eight years during the Vietnam War. Despite torture and depravity, Stockdale survived and described this experience as the "defining event of my life, which, in retrospect, I would not trade." When asked why he survived, Stockdale explained that he never gave up faith that he would prevail. The hero also explained that the optimists were those most likely to perish because of their unrealistic expectations of their soon-to-be-had freedom. Collins used the admiral's lessons to develop the "Stockdale Paradox" which asserts that good-to-great companies, and individuals, must "retain faith that you will prevail in the end, regardless of the difficulties, and at the same time confront the most brutal facts of your current reality, whatever they may be."
4. The Hedgehog Concept (Simplicity Within the Three Circles) - Just as a hedgehog survives the attack of the fox by knowing the single defense of curling into a spiny ball, good-to-great companies are able to focus on the essential, basic principles or concepts in the midst of a complex world. The "Hedgehog Concept" flows from a deep understanding of the intersection of three circles: What you can be the best in the world at. What drives your economic engine. What you are deeply passionate about. Good-to-great companies are able to maintain an intense and dedicated focus on those things that intersect all three of these categories. This focus drives the decisions and efforts of the organization.
5. A Culture of Discipline - This principle does not mean an environment of acquiescence from fear of being "hacked". Instead, it refers to a culture of unity in purpose resulting from a focus on the intersection of the three circles. Collins points out that such a disciplined effort eliminates the need for bureaucratic rules which are usually designed to manage the few "wrong people" and end up driving off those people you want to keep. Instead, freedom and responsibility within a framework of guiding principles produces a culture of discipline where people, thoughts, and actions are all directed toward the "Hedgehog Concept". This discipline applies not only to those things you do but also to those that you stop doing. To be successful, organizations must be able to determine what does not fit in their "Hedgehog Concept" and be able to turn down such opportunities, no matter how appealing.
6. Technology Accelerators - Mistakenly, companies often view technology as a cure-all or a savior as it offers the latest bells and whistles. This is incorrect. Instead, technology can be an accelerator of momentum in the transition from good to great when aligned with the purposes of the organization. Technology, however, is never an effective creator of momentum.
The transition from good to great is a process rather than an event. Much like turning a large flywheel, the transition from good to great gains momentum step by step and decision by decision. As Collins points out, "Tremendous power exists in the fact of continued improvement and the delivery of results. Point to tangible accomplishments - however incremental at first - and show how these steps fit into the context of an overall concept that will work. When you do this in such a way that people see and feel the buildup of momentum, they will line up with enthusiasm." Thus, the "flywheel effect". The breakthrough momentum necessary to move from good to great comes as the result of having the discipline to make good decisions consistent with the Hedgehog Concept.
Other companies often fall into the "doom loop". Rather than building long-term momentum, they try to go directly to a breakthrough by jumping from program to program or fad to fad as they react to disappointing results without an understanding of what caused them. As a result, no momentum builds up and the cycle continues as the company searches for a "quick fix" to the problem. The ultimate end is either mediocrity, at best, or failure.
Collins first book was Built to Last in which he described what it takes to build an enduring great company from the ground up. In the final chapter of Good to Great, he makes connections between the two concepts stating that good-to-great principles are actually necessary before a company can be built to last. He specifically outlines four principles from Built to Last that connect and support the good-to-great research. Those principles are: 1) Clock building, not time telling. To last, you have to build an organization that can endure and adapt through changes and generations rather than being focused on a single idea or great leader. 2) Genius of AND. Rather than choosing A OR B, figure out a way to do both A AND B such as freedom AND responsibility or continuity AND change. 3) Core Ideology. To last, an organization must maintain core values and core purpose (other than making money or providing jobs) as principles to guide decisions and inspire people. 4) Preserve the Core/Stimulate Progress. An organization must be able to maintain its core ideology as an anchor while stimulating change, improvement, innovation, and renewal in other areas. Practices and strategies change while values and purpose remain. Set and achieve BHAGs consistent with the core ideology. What is a BHAG? A BHAG is a Big Hairy Audacious Goal. It is clear, easily understood, motivating, and challenging. A good BHAG is based on understanding rather than bravado and should be at the center of the three circles of the Hedgehog Concept.
Some may ask "why greatness?" Why should we try to achieve something difficult that may not be possible when we can do something easier that we are confident we can accomplish? Collins believes there are two answers. First, building something great is no harder than building something good. In fact, "it does not require more suffering than perpetuating mediocrity." Second, building something great helps satisfy the search for meaning or meaningful work. Collins states, 'Indeed, the real question is not, "Why greatness?" but "What work makes you feel compelled to try to create greatness?" If you have to ask the question, "Why should we try to make it great? Isn't success enough?" then you're probably engaged in the wrong line of work.'