Good to Great
Good to Great
In the book “Good to Great”, the author researches by comparing and contrasting selected businesses to establish if a good company can become great. The research establishes key findings that form the basis of the discussion of the book. According the author, highly celebrated leaders do not have the capacity to transform their companies from good to great. On the second hand, Good-to-Great companies focus majorly on events that lead to greatness. Companies that use technology only accelerated the transition process but technology itself dos not ignite transformation of the business. Besides mergers between corporations has no link to the transformation from good to great. In brief, the transformation process is long and requires patience such that no company can assign a name or plan when to move from good to great.
On the other hand, transformation of a company from good to great requires level five leadership. According to the writer, such leaders exhibit a paradoxical mixture of personal humility and professional will to achieve goals of a company. In their leadership style, these leaders start by getting the right people to the company, and then later make decisions concerning what happens next. Furthermore, to transform a company level five leaders create an environment where all people confront the brutal facts while having faith that they will succeed. Remarkably, competence is not a focus in the Good-to-Great companies; instead, there is strict adherence to the hedgehog concept, which guides companies to do what ignites passion while developing a culture of discipline. Besides, the timeless physics principle of Good-to-Great compels level five leadership to keep on searching for new ideas while remaining true and relevant no matter the emerging changes. Unusually, the leadership embraces change and use it to turn the company into production of sustainable results. This paper presents a summary of the key points in chapter 2,3,4,6 and 8 of the book “Good to Great by Jim Collins. In the last section, the paper presents recommendations for the application of the concepts from the book in the social and public sectors.
Chapter 2- level 5 leadership
A level five leader is a person who combines extreme personal humility with a passionate professional will. Such leaders direct their individuality away from oneself into the bigger goal of building a great business.
Level five hierarchy
The hierarchy comprises of five levels that describe different kinds of leaders. At the lowest level, there is the Highly Capable Individual. This leader makes creative contributions through talent, information, expertise, and good work practices. Secondly, is the level of the Contributing Team Member, this leader contributes to the team according to personal capabilities while working well with other members to achieve the goals of the company. Thirdly, the competent manager who has the ability to organise individuals and other resources with a focus on the resourceful pursuit of set goals. Fourthly, the effective leader, this is an individual who hastens commitment to a robust quest for a clear and compelling dream, while inspiring greater performance standards. Lastly, executive, at this level a leader builds enduring greatness through an inexplicable combination of humility and professional will. Fully established level five leaders exhibit all the five layers of the pyramid and this applies to the case of Darwin Smith while working as a CEO at Kimberly-Clark. Notably, all Good-to-Great companies have level five leadership during the period of transition of performance (P.22).
A level five leader
These leaders are a study in duality; that is modest and willful, humble and
fearless. In addition, they possess other traits as summarised below.
Ambition for the company
Level five leaders have an ambition for the company and wish to see the success of the company in the next generation. At the same time, they are comfortable that success does not trace back to them. This implies that these leaders have a professional will to create outstanding results, from a clear driver at the time of transitioning from Good-to-Great. In addition, they demonstrate a personal humility in the sense that they prepare their assistants for success and continuity after they exit the company (p.26).
A compelling modesty.
Good-to-great or level leaders do not talk about themselves or desire to be flamboyant. They possess the professional will of talking about the contributions of other executives and do not wish to take much credit (p.27). Moreover, they have a belief there are other people who are better than they are in the same company. Thus, they are modest, quiet shy, kind and reachable by anybody. For this reason, they possess a personal humility of avoiding public praise and they do not boast of the company success.
Unwavering resolve. In addition to humility and modesty, level five leaders demonstrate a professional will to have an enduring determination to accomplish duties for the greatness of the company (p.30). In this case, fanaticism in the need to produce results drives a leader. The author points out that these leaders make big decisions like laying off their close relatives or even selling the mills if need be for the great of the company. On the other hand, they demonstrate a personal humility where they make decisions gently with a composed determination while relying on inspired ethics to motivate others.
The window and the mirror. Window and mirror in this chapter denote luck and other factors that most level five leaders refer to while answering the question on company performance. In this case, level five leaders in the good-to-great companies have the professional will to look in the mirror and not out the window to apportion responsibility for failure and not blame others. On the other hand, the leaders have the personal humility to look out the window and allocate company success to other people, external factors and good luck. Correspondingly, people outside leadership attribute the company success to the level five leader. On the contrary, leaders in the comparison companies look out the window for someone to blame in the case of poor results, while they look in the mirror and credit themselves for company success.
Chapter 3- First Who, Then What
The good-to-great leaders understand that getting the right people to their company is important. The first truth is ”who rather than what”, the author notes that Great-to-Good leaders assert that before the the transformation of a company, one needs to get the right people before formulating policies. Secondly, motivation and management are easy once you get the right people. This is because the right people have the internal motivation to produce outstanding results and be part of forming a great company (p.42). Thirdly, making great visions with the wrong people is irrelevant since they will not produce results that will transform a company from good-to-great. In sum to take a company from good to great, a leader needs to assemble the right team then later make decisions on what happens next(p.44).
A genius with a thousand helpers
Comparison companies follow the model of “A genius with a thousand helpers”. In this model, a company depends on the aptitudes of a gifted individual with the company success as the fundamental driving force. The genius cannot from teams because he or she possess the knowledge required for to run the company (p.46). However, the company has a group of people to implement the great ideas of the expert. Notably, in the absence of the genius, the implementers are unable to reproduce the knowledge of the expert. For example, Eckerd Corporation suffered when their leader would figure out “what” but was unable to select the right “who” to be part of the team. The model dubbed the genius with a thousand helpers is common in comparison companies and it fails when the expert (genius) leaves the company.
Figure 1. Comparison of level 5 and A Genius with a Thousand Helpers (p.47)
Executive compensation. There is no regular pattern connecting executive compensation to the process of transitioning from Good-to-Great. Thus, the structure of executive compensation is not a key lever to moving a company from Good-to-Great. However, executive compensation can move a company from Good-to-Great if the right people are in place. This is a manifestation of the “first who” ideology. It is not about how to compensate the managers, but it is about which manager to recompense. If you have the right executives in place, their moral code allows them to work for success and build a great company irrespective of compensation. Good-to-Great companies work with the truth that right people do the right thing to deliver results regardless of the remuneration system. Thus in the Good-to-Great companies, the purpose of executive compensation is to get the right people in place and keep them there. For example, Nucor paid its steel workers more than other steel companies did with a bonus mechanism tied to productivity. For Nucor, the right people are the most important asset.
Rigorous, not ruthless. The systems in the Good-to-Great companies are rigorous and not ruthless. In these companies, workers do not worry about job security. This is because the management applies demanding standards at all times throughout all levels to improve performance (p.52). Builders of great companies have the capability to get and retain the right people in a company. Good-to-Great leaders understand that when in doubt you do not hire, to make people change act and use the best people for the biggest opportunities and not in problems (p.54-58). Moreover, Level five leaders have the ability to argue strongly while seeking for answers but support a decision fully regardless of their personal interests.
Great company, great life. Members of the Good-to-Great company teams remain life friends and keep close contact with one another long after leaving a company. They anticipate meetings and enjoy each other’s presence while discussing peak moments of and how they achieved results. Importantly, devotion to the notion of “first who” is the closest link between a great company and good life. There is Good life when people spend most of their time with individuals they love and respect.
Chapter 4- Confronting brutal facts
Facts are better than dreams
Good results arise from a series of good decisions, meticulously implemented and amassed one after the other (p.69). Leaders of the Good-to-Great companies initiate making more good decisions than bad ones. Furthermore, they make more decisions than the comparison companies do. On the other hand, Good-to-Great companies find a path to greatness by confronting brutal facts of the present reality. Additionally, they have a simple yet an intuitive structure of reference for all decisions they make (p.70). Contrariwise, less charismatic leaders are more likely to produce results compared to charismatic leaders. This is because the strength of a charismatic leader can bar people from faking the leader through with brutal facts (p.73). In sum, Good-to-Great leadership is about letting people confront brutal facts and acting on the repercussions.
A climate where the truth is heard
Good-to-great leaders create an environment to confront the brutal facts. In this case, the leaders ensure that there is a culture where people have a chance to talk while at the same time allowing a display of truth and not false hopes. To create such an environment, a Good-to-Great leader ought to
i) Lead with questions and not answers; this is a humble way showing that a leader does not know everything. He/she needs information to create the best intuitions.
ii) Engage in debate and dialogue, not compulsion; leaders of good-to-great
companies use dialogue and discussions a way of letting people have a say so that they agree with predetermined decisions of the management.
iii) Conduct autopsies without blame; this approach allows Good-to-Great leaders to create a climate of truth and confrontation of brutal facts. With the right people in the company, good-to-great leaders do not apportion blame but seek comprehension and learning.
iv) Build “red flag” mechanisms to attend to all information; this creates a system of synthesizing information for the better of the company.
Unwavering faith amid the brutal facts. In confronting brutal facts, Good-to-Great companies remain strong and spirited. This is because facing the truth helps a company to develop a sense of “never give up” until attainment of success.
The Stockdale paradox. Good-to-Great companies face challenges on the way to greatness. However, their management responds with an influential psychological duality (Stockdale Paradox) while patiently accepting brutal facts (p.83). Application of Stockdale Paradox leaves the Good-to-Great companies more resilient. This is because the management increases the series of making good decisions eventually realizing a simple yet shrewd concept for making big choices (p.87). Practically, Good-to-Great leaders operate from both sides of the Paradox thus focussing on matters that have the greatest impact. Subsequently, they transform the company from Good-to-Great in a sustainable way.
Figure 2. Stockdale Paradox (p.86)
Chapter 5- The hedgehog concept
Isaiah Berlin classifies people as either foxes or hedgehogs. Under foxes, the people chase many ends simultaneously and view the world as complex. Because of the many ends, these people are dispersed and do not integrate their thinking into one vision. Conversely, the hedgehogs integrate their minds into a simple single idea that unifies and directs everything (p.91). Good-to-Great leaders fall into the category of hedgehogs because they are able to simplify ideas to generate innovation leading to the greatness of a company. On the contrary, leaders in the comparison companies signify the foxes group where ideas remain complex and are never simplified nor unified.
The three circles
This is a hedgehog principle that level leaders use to move companies from Good-to-Great. It is a concept that flows from the profound understanding of the intersection three circles.
i) What you can do best and what you cannot be best at; possession of some competence does not necessarily imply that one is the best at it in the world. Conversely, one can be engaged in something that he/she is not the best.
ii) The driver of your economic engine. The Good-to-Great companies have a way of generating a sustainable and robust cash flow and profitability. Their economic driver is profit per a common denominator leading to greatness.
iii) What you are deeply passionate about. The Good-to-Great companies
focus on events that kindle their passion. In this case, they work with an idea of discovering what stimulates their passion.
Importantly, the hedgehog concept is not the key to be the best but rather understanding what one can do best. A company, which is not the best in the world at its central business, cannot form the basis of the hedgehog concept. The Good-to-Great companies understand that doing the best makes one good (p.100). Therefore, the only path to greatness in companies is to focus solely on what one can do better than another organization.
Figure 3. The three circles of The Hedgehog Concept (p. 96)
What are your denominator and passion?
For a company to be great, it does not require to be in a great industry. Nevertheless, it requires an economic engine for it to achieve greatness. All Good-to-Great companies have a key economic denominator that drives their activities (p.107). Besides, they have a conviction that they only do what makes them passionate. On the other hand, comparison companies do not have a key economic factor and they implement programs without a passion.
The Triumph of Understanding over Bravado. While the Good-to-Great companies experience ease with the hedgehog concept, comparison companies do not (p.111). This is because the comparison companies ask the wrong questions while setting their goals and they plan on bravado instead of profound understanding. With the adoption of the hedgehog concept, transition from Good-to-Great follows within a period of about five years. Just like a scientific intuition, the hedgehog concept makes decisions easier by simplifying the complicated world. However, comprehending the hedgehog concept is difficult and with a repetitive process. The principle of this process is to engage people in dialogue and debate while imparting them with the brutal facts guided with the questions from the circles. For the process to be smooth there is a need for a council to participate in the dialogue and debate repeatedly. The council consists of the right members of the company, they ask the right questions, engage in rigorous debate, make decisions, analyse results and learn with the guidance of the three circles.
Chapter 6-A culture of discipline
A small number of start-ups become great businesses because they react to growth and success wrongly. As a company grows the entrepreneurial innovations disappears and is replaced by little organisation, moribund systems and lack of accountability. Once other leaders join the company, they may introduce a culture of discipline that is consistent with the hedgehog concept. For greatness, the leadership must
i) Create a culture founded on the idea of freedom and responsibility
ii) Have disciplined and intrinsically motivated people.
iii) Differentiate between a culture of discipline and the tyrannical disciplinarian.
iv) Stick to the hedgehog concept with strict application of the questions in three circles.
Freedom and responsibility
Good-to-Great companies create a reliable system with strong limitations but allow freedom and accountability within the context of the system. They employ self-disciplined people who do not need management eventually leading to transition from Good-to-Great companies. This is because, with disciplined individuals, it is possible to confront brutal facts until the attainment of the hedgehog concept. On the hand, the comparison companies apply disciplined action on the employees, resulting in a slow growth. Remarkably, a disciplined action without self-disciplined individuals is unsustainable.
Fanatical adherence to the hedgehog concept.
Good-to-Great companies believe that they cannot engage in activities inconsistent with the hedgehog concept. On the other hand, lack of discipline to adhere to the three circles of the hedgehog concept leads to the collapse of the comparison companies. Importantly, the more a company develops the discipline to stick to the hedgehog concept, the more it transitions from Good-to-Great.
A culture, not a tyrant. Good-to-Great companies have level five leaders who work to build a sustainable culture of discipline. On the contrary, the comparison companies have level four leaders who apply force to discipline their workforce.
Start a “Stop Doing” List. In the Good-to-Great companies, there is the discipline of creating lists of things that do not require funding. In the transitioning period, budgeting is a discipline to choose what to fund and not. Good-to-Great companies use the budget, to establish the activities that are consistent with the hedgehog concept and then fund them.
Chapter 8- The Flywheel and the Doom Loop
The movement of the flywheel depends on the effort that one makes. Each push cumulatively leads to final movement of the wheel.
Build-up and breakthrough
The effect on the flywheel represents the process through which the Good-to-Great companies use during transition. The transition is a result of a cumulative process that leads to sustained outcomes (p. 165). Conversely, no Good-to-Great company has a name for the transition period because the process is cumulative until breakthrough.
Not Just a Luxury of Circumstance
The fly model is not a luxury but a process. The Good-to-Great companies experience pressure but have the patience and self-discipline to follow the flywheel model until the realization of a breakthrough. However, the comparison companies view the process as long and unsustainable.
The “Flywheel Effect. The good-to-great companies understand the truth that there is tremendous power in sustained improvement and better outcomes. With the right approach and use of the concepts that work, the result is noticeable to the public. This is because when people see and feel the increase in momentum of a process, they remark. Companies that use the flywheel consistent with the hedgehog concept, gain momentum and the right people notice and would like to be part of the team and share the great outcome.
The Doom Loop. The comparison companies launch new programs frequently without proper deliberations. The aim is to motivate the workforce however they always fail. With the doom loop concept, these companies come up a major program hoping to make a breakthrough; they push the wheel in one direction, reverse many times until they lose direction (p. 178). This way there is no sustainable momentum and therefore, the flywheel stops and the companies fail in their goals. Additionally, some new leaders join these companies and introduce new programs that stop the momentum of the flywheel resulting in failure of the company.
The Misguided Use of Acquisitions. The success Good-to-Great companies is a result of big acquisitions that happens after the adoption of the hedgehog concept and the gain of the momentum of the flywheel. The acquisitions help accelerate the flywheel but they do not create it. In contrast, the comparison companies move directly to a breakthrough by mergers that do not work. Consequently, they make bigger acquisitions for growth and diversify their problems while covering-up for the CEO (p.180). However, they do not solve the problem that leads to their failure.
Application of the concepts to the public and social sectors.
The social sector refers to the activities undertaken by non-profit making organizations with the aim of benefiting the society. They include government entities, international organizations such as the Red Cross, churches, and community hospitals. The concepts in the book good to great by Collins form a basis on which to transform the social sector from good to great. To achieve this, it is important that the leadership in social sector define what is great for them. This is a reminder to the leadership about goals they must achieve for the greatness of the company. To supplement this, the social sector must apply the following factors.
The right leader (level five)
From the book “Good to Great”, the writer posits that level five leaders exhibit a paradoxical blend of personal humility and professional will. For this reason, they have an ambition for the company while leading their successors to attain success. Since leadership in the social sector may at times pose challenges due to the nature of the work, getting the right leaders in the sector can help in transformation. Thus, the social sector should seek leaders who are modest, have a determination to accomplish duties, and apportion success to other people while taking credit for failure. This implies that the sector should infuse in its structure a level five leadership by using the power of inclusion, discourse, and discussions for installing decisions.
Who first ideology
The principle having the right people first as articulated by Jim Collins is important for any business. Accordingly, choosing of appropriate people for a given job in the social sector is key to attaining greatness. This is because the right people will do the correct thing for the success of the company. Thus to achieve this, the social sector ought to streamline their appointment process to select people based on self-motivation and passion for the company goals rather than self-improvement or individual gain. As result, the organization of the social sector will be an appeal to the public leading to satisfaction and achievement of set goals.
The hedgehog concept. Leaders who apply the hedgehog concept are capable of viewing circumstances from a positive side and are able to simplify complex situations. In this perspective, the management in the social sector should be clear on the kind of activities that they are involved in and set clear targets to achieve greatness. Furthermore, for transition from good to great, the social sector must use the hedgehog concept at all times with a strict adherence to the three circles. In addition, they should have a council that helps in implementation of the process of three circles. This ensures the company leadership asks the right questions that lead dialogue and discourse for the greatness of the company.
Turning the flywheel concept. This concept implies that every successful action or a breakthrough comes after a long and difficult process that is cumulative. One action adds on another one until the realization of a breakthrough. Thus, patience is key for growth in the social sector, such that one needs to assume the responsibility of creating systems that encourage teamwork for the attainment of the company goals. By turning the wheel and building momentum, the social sector is able to build their brand and reach many right people who will be willing to join the sector for its great purpose.
Collins, J. C. (2001). Good to great: Why some companies make the leap– and others don’t. London: Random House Business.