Good To Great by Jim Collins

I recently finished reading “Good To Great”, which is a bestseller on how good companies are different from great companies in terms of their management structure.

First, a quick review – after reading this book, I can’t help but get the sense that someone has baked a cake and covered it with turd. This may be symptomatic of all management bestsellers – it contains a few good insights covered with a lot of made-up terminology and rhetoric. I’ll try to pull out the key ideas in the book – brushing off the frosting, as it were.

Level 5 leadership

Two types of CEOs are compared – superstars like Iacocca aren’t all that hot, as the companies couldn’t endure. The real superstars are the CEOs you don’t hear about. They have the following qualities:

  • Humble
  • Takes the blame, but externalises to luck or others for credit
  • Solid resolve. This is necessary for two reasons – getting results takes years, and you don’t want anyone to think you’re a wuss.
  • Ambitious for the institution, rather than themselves. (This is the opposite of what the military might call a “careerist”.)
  • Accepts the truth rather than self-congratulation, but has faith that you will prevail in the end.
  • Is very disciplined in getting to their goal, cutting at details to get the answers.

Having a genius up top is great, but they will be surrounded by yes men who are just executors of will. Once the genius is gone, they don’t know what to do and the company fails.

An odd contradiction is that people who are ambitious and shout the loudest are most likely the ones that will make it to the top of the heap. So we need to watch out for these “Level 5” leaders.

People

The importance of getting the right people is highlighted over and over in the book. The argument goes like this – if you have the right people, you don’t need to bother doing a whole bunch of stuff:

  • Motivating people
  • Aligning people
  • Playing with your incentive structure
  • Making people passionate
  • Enforcing discipline

All you need to do is make sure you don’t stamp over these factors, e.g. don’t demotivate motivated people.

When recruiting people, here are the rules:

  • You should look for character and work ethic, and not worry about skills and experience – ethic can’t be taught easily, but skills can.
  • Don’t hire just because you need to, just keep looking
  • Boot the wrong people
  • Give the best people the biggest opportunities to work on

In a company where this is happening, people will either stay a very short time or a very long time.

What the leadership team should do

  • Ask a bunch of questions
  • Debate (and don’t coerce anyone)
  • The leader decides what to do (the group doesn’t have to come to consensus)
  • Analyse your results and autopsy failures

Strategy

  • Find one simple concept and stick to it. (This is similar to the principle of Curly’s “one thing” from City Slickers.)
  • Cut out anything that isn’t working and / or doesn’t fit with your central concept.
  • Don’t change your strategy in response to a competitor.
  • Do change the manifestation of your strategy if necessary – i.e. you can change your product lines, but don’t change what you’re trying to deliver to the customer.
  • Technology accelerates things, but it’s not the basis for a strategy.

Use these ideas to pick your concept:

  • What can you be the best in the world at?
  • What drives your economic engine?
  • What are you passionate about?

Two quick notes – once you understand your economic engine, you can play around with your metrics. Are you looking for revenue? Returns on assets? Growth? Pick one and roll. Delivering shareholder return is not allowed, as it should be a side effect of whatever you’re doing.

Secondly, the question of what you’re passionate about depends on the people you already have, as it’s tough to get people to be passionate about whatever.

The end!

2 Replies to “Good To Great by Jim Collins”

  1. Hey Shahid. Thanks for the message. I had a wonderful time at Kellogg. What is a ‘fit’? That is a ‘fit’, a feeling of belonging. The feeling at the end of the day ‘I’d like to start 8am tomorrow, where is my locker?’ I truly hope to become part of it in fall 2009.

  2. Shahid, just thought i would extend my good wishes on the BoB nomination and a great year of blogging. Hope you are enjoying your Bschool days. Cheers.

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