Good to Great Why Some Companies Make the Leap... and Others Don´t
GOOD IS THE ENEMY OF GREAT ”That´s what makes death so hard – unsatisfied curiosity.” Beryl Markham
GOOD IS THE ENEMY OF GREAT * Can a good company become a great company, and if so, how? ... almost any organization can substantially improve its stature and performance, perhaps even become great, if it conscientiously applies the framework of ideas that have been uncovered in this study.
GREAT RESULTS What´s inside the BLACK BOX? GOOD RESULTS GOOD TO GREAT
Good to Great Concepts Sustained Great Results Built to Last Concepts Enduring Great Company The Dynamics of Greatness
DISCIPLINED PEOPLE Level 5 Leadership First Who then What DISCIPLINED THOUGHT Confront the Brutal Facts Hedgehog Concept DISCIPLINED ACTION Culture of Discipline Technology Accelerators BUILDUP... BREAKTHROUGH! FLYWHEEL Level 5 Leadership
Level 5 Leadership ”You can accomplish anything in life, provided that you do not mind who gets the credit.” Harry S. Truman
LEVEL 5 EXECUTIVE Level 5 EFFECTIVE LEADER Level 4 COMPETENT MANAGER Level 3 CONTRIBUTING TEAM MEMBER Level 2 HIGHLY CAPABLE INDIVIDUAL Level 1 Level 5 Hierarchy
Level 5 Hierarchy Level 5 Executive – Builds enduring greatness through a paradoxical blend of personal humility and professional will.
Level 5 Hierarchy Effective Leader – Catalyzes commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards.
Level 5 Hierarchy Competent Manager – Organizes people and resources toward the effective and efficient pursuit of predetermined objectives.
Level 5 Hierarchy Contributing Team Member – Contributes individual capabilities to the achievement of group objectives and works effectively with others in a group setting.
Level 5 Hierarchy Highly Capable Individual – Makes productive contributions through talent, knowledge, skills, and good working habits.
Level 5 Leadership Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It´s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly amtitious – but their ambition is first and foremost for the institution, not themselves.
Level 5 Leadership HUMILITY + WILL
Level 5 Leadership Personal Humility: * Demonstrates a compelling modesty, shunning public adulation; newer boastful. * Acts with quiet, calm determination; relies principally on inspired standards, not inspiring charisma, to motivate.
Level 5 Leadership Personal Humility: * Channels ambition into the company, not the self; sets up successors for even greater success in the next generation. * Looks out the window, not in the mirror, to apportion credit for the success of the company – to other people, external factors, and good luck.
Level 5 Leadership Professional Will: * Creates superb results, a clear catalyst in the transition from good to great. * Demonstrates an unwavering resolve to do whatever must be done to produce the best longterm results, no matter how difficult.
Level 5 Leadership Professional Will: * Sets the standard of building and enduring great company; will settle for nothing less. * Looks in the mirror, not out the window, to apportion responsibility for poor results, newer blaming other people, external factors, or bad luck.
Level 5 Leadership The great irony is that the animus and personal ambition that often drive people to positions of power stand at odds with the humility required for Level 5 leadership. When you combine that irony with the fact that boards of directors frequently operate under the false belief 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.
Level 5 Leadership KEY POINTS: * Every good-to-great company had Level 5 leadership during the pivotal transition years. * Level 5 leaders embody a paradoxical mix of personal humility and professional will. * Level 5 leaders are ambitious – for the company!
Level 5 Leadership KEY POINTS: * Level 5 leaders set up their successors for even greater success in the next generation, whereas egocentric Level 4 leaders often set up their successors for failure.
Level 5 Leadership KEY POINTS: * Level 5 leaders display a compelling modesty, are self-effacing and understated. In contrast, two thirds of the comparison companies had leaders with gargantuan personal egos that contributed to the demise or continued mediocrity of the company.
Level 5 Leadership KEY POINTS: * Level 5 leaders are fanatically driven, infected with an incurable need to produce sustainded results. They are resolved to do whatever it takes to make the company great, no matter how big or hard the decisions.
Level 5 Leadership KEY POINTS: * Level 5 leaders display a workmanlike diligence – more plow horse than show horse. * Potential Level 5 leaders exist all around us, if we just know what to look for, and that many people have the potential to evolve into Level 5.
Level 5 Leadership UNEXPECTED FINDINGS: * Celebrity leaders correlate negatively with going from good to great. * Level 5 leaders attribute much of their success to good luck, rather than personal greatness. * Level 5 leadership is empirical, not ideological, finding.
DISCIPLINED PEOPLE Level 5 Leadership First Who then What DISCIPLINED THOUGHT Confront the Brutal Facts Hedgehog Concept DISCIPLINED ACTION Culture of Discipline Technology Accelerators BUILDUP... BREAKTHROUGH! FLYWHEEL First Who then What
First Who then What Two possibilities: 1. Level 5 + Management Team 2. A ”Genius with a Thousand Helpers”
LEVEL 5 + MANAGEMENT TEAM A ”GENIUS WITH 1000 HELPERS LEVEL 5 LEADER LEVEL 4 LEADER FIRST WHO Get the right people on the bus. Build a superior executive team. FIRST WHAT Set a vision for where to drive the bus. Develop a road map for driving the bus. THEN WHO Enlist a crew of highly capable ”helpers” to make the happen. THEN WHAT Once you have the right people in place, figure out the best path to greatness. First Who then What
First Who then What KEY POINTS: * The good-to-great leaders were rigorous, not ruthless, in people decisions. They did not rely on layoffs and restructuring as a primary strategy for improving performance.
First Who then What KEY POINTS: * Good-to-great management teams consist of people who debate vigorously in search for the best answers, yet who unify behind decisions, regardless of parochial interests.
First Who then What Rigorousness in people decisions: • When in doubt, don´t hire – keep looking. • When you know you have to make a people change, act. • Put your best people on your biggest opportunities, not your biggest problems.
First Who then What UNEXPECTED FINDINGS: * No systematic pattern linking executive compensation to the shift from good to great. * People are not your most important assett. The RIGHT people are. * Whether someone is the ”right” person has more to do with character traits and innate capabilities than with specific knowledge, background, or skills.
DISCIPLINED PEOPLE Level 5 Leadership First Who then What DISCIPLINED THOUGHT Confront the Brutal Facts Hedgehog Concept DISCIPLINED ACTION Culture of Discipline Technology Accelerators BUILDUP... BREAKTHROUGH! FLYWHEEL Confront the Brutal Facts
CONFRONT THE BRUTAL FACTS(Yet Never Lose Faith) • Facts are better than dreams. • A climate where the truth is heard. • Unwavering faith amid the brutal facts. • The Stockdale paradox
* All good-to-great companies began the journey to greatness by confronting the brutal facts of their current reality. * When you start with an honest and diligent effort to determine the truth of your situation, the right decisions often become self-evident. Facts are better than dreams
* A primary task in taking a company from good to great is to create a culture wherein people have a tremendous opportunity to be heard and, ultimately, for the truth to be heard. Four basic practises: Lead with questions, not answers. Engage in dialogue and debate, not coercion. Conduct autopsies, without blame. Build red flag mechanisms. A climate where the truth is heard
Unwavering faith amid the brutal facts The good-to-great companies faced just as much adversity as the comparison companies, but responded to that adversity differently. They hit the realities of their situation head-on. As a result, they emerged from adversity even stronger.
The Stockdale paradox Retain absolute faith that you can and 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 might be.
CONFRONT THE BRUTAL FACTS(Yet Never Lose Faith UNEXPECTED FINDINGS: * Charisma can be as much a liability as an asset * Leadership does not begin just with a vision * Spending time and trying to motivate people is a waste of effort
DISCIPLINED PEOPLE Level 5 Leadership First Who then What DISCIPLINED THOUGHT Confront the Brutal Facts Hedgehog Concept DISCIPLINED ACTION Culture of Discipline Technology Accelerators BUILDUP... BREAKTHROUGH! FLYWHEEL Hedgehog Concept
WHAT YOU ARE DEEPLY PASSIONATE ABOUT WHAT YOU CAN BE THE BEST IN THE WORLD AT WHAT DRIVES YOUR ECONOMIC ENGINE Hedgehog Concept
Hedgehog Concept * Understanding what you can (and cannot) be the best at * Insight into your economic engine – what is your denominator? * Understanding your passion * The triumph of understanding over bravado
ASK QUESTIONS, GUIDED BY THE THREE CIRCLES AUTOPSIES AND ANALYSIS, GUIDED BY THE THREE CIRCLES THE COUNCIL DIALOGUE AND DEBATE, GUIDED BY THE THREE CIRCLES EXECUTIVE DECISIONS, GUIDED BY THE THREE CIRCLES Getting the Hedgehog ConceptAn Iterative Process
Hedgehog Concept KEY POINTS: * If you cannot be the best in the world in your core business, then your core business cannot form the basis of your Hedgehog Concept. * The ”best in the world” understanding is a much more severe standard than a core competence.
Hedgehog Concept KEY POINTS: * Search for the one denominator that has the single greatest impact. * Good-to-great companies set their goals and strategies based on understanding; comparison companies set their goals and strategies based on bravado.
Hedgehog Concept UNEXPECTED FINDINGS: * The good-to-great companies are more like hedgehogs – simple, dowdy creatures that know ”one big thing” and stick to it. The comparison companies are more like foxes – crafty, cunning creatures that know many things yet lack consistency.
Hedgehog Concept UNEXPECTED FINDINGS: * It took four years on average for the good-to-great companies to get a Hedgehog Concept. * Strategy per se did not separate the good-to-great companies from the comparison companies.
Hedgehog Concept UNEXPECTED FINDINGS: * You absolutely do not need to be in a great industry to produce sustained great results. No matter how bad the industry, every good-to-great company figured out how to produce truly superior economic returns.
DISCIPLINED PEOPLE Level 5 Leadership First Who then What DISCIPLINED THOUGHT Confront the Brutal Facts Hedgehog Concept DISCIPLINED ACTION Culture of Discipline Technology Accelerators BUILDUP... BREAKTHROUGH! FLYWHEEL Culture of Discipline