Good to Great

1. Good to Great Ch. 2 Level 5 Leadership By: Jennifer Eccles, Scott Addison, Clint Chapman, Lauren Sterna, Collin Gillaspie, Craig Crowell

2. Level 5 Leadership

3. Darwin E. Smith-CEO, Kimberly-Clark • Turned Kimberly-Clark into the leading consumer based paper company in the world. • Changed their product from coated paper to consumer products like Kleenex and toilet paper. • Sold all the paper mills the company owned and put all proceeds toward consumer business. • Characterized as shy and self-efficating, but had a fierce resolve for life.

4. Level 5 Leaders and Their Ego • Tend to channel their ego away from themselves and into the larger goal of building a great company. • At the time of transition, all of these companies had level 5 leaders. • Level 5 leaders are modest and willful, yet they are also humble and fearless. • Ex. Abraham Lincoln

5. Humility + Will = Level 5 • Level 5 Leaders are a study in duality. • Modest and willful • Humble and fearful • Example: President Abraham Lincoln • Modest, shy, awkward, but didn’t let anything get in the way of his ambition of an enduring greater nation.

6. Humility + Will = Level 5 • Coleman Mocker, CEO of Gillette (1975-1991) • Overcame two hostile takeovers and a proxy battle. • Even though he would have pocketed millions he fought for the future of Gillette. • Coleman believed in their top secret advances. (Mach3 and Sensor) • Due to the advances Coleman believed the 44% premium offered by Ronald Perelman was far below the future value of the stock. • Died on January 25, 1991 of a heart attack after seeing the preview of a cover featuring himself on Forbes Magazine.

7. Ambition of the Company: Setting Up Successors for Success • David Maxwell, CEO of Fannie Mae • Within 9 years FM went from losing $1 million per day to earning $4 million per day. • Fannie Mae Stock beat the market 3.8 to 1. • Maxwell retired at the “top of his game” to turn the company over to an equally capable successor, Jim Johnson. • Declined $5.5 million of his $20 million because of a controversy in Congress involving his compensation.

8. Ambition of the Company: Setting Up Successors for Success • David Maxwell, CEO of Fannie Mae • Traits of a Level 5 Leader: • Ambition for Fannie Mae • Concerned for FM’s success rather than his riches • “I want to look out from my porch at one of the greatest companies in the world someday and be able to say, ‘I used to work there.’”

9. Ambition of the Company: Setting Up Successors for Success • Comparison Leaders: Good Leaders, but not Level 5 Leaders • “Biggest dog” syndrome • Stanley Gault, CEO of Rubbermaid • Hard driving, egocentric executive • “…sincere tyrant.” • Did not leave behind a company that would be great without him!

10. Compelling Modesty • When the Good-To-Great interviews were taking place, level 5 executives only talked about the company and the contributions made by other key employees and would deflect discussion of their own contributions • When pressed to discuss themselves they always stated things such as, “I hope I’m not sounding like a big shot.” Or, “I don’t think I can take much credit. We were blessed with marvelous people.” • EX. Ken Iverson (CEO of Nucor) • When asked about Mr. Iverson, Jim Hlavacek, stated that, “I’ve never known a person as successful in doing what he’s done that’s as modest.” • It was stated that Mr. Iverson, is a simple man in his working habits as well as his life at home. The examples of, always getting his dogs at the pound and living in a small, simple home for ever, were given to describe his humble nature.

11. Gargantuan Personal Ego • “The presence of a gargantuan personal ego has contributed to the demise or continued mediocrity of companies.” • It has been found that companies that have an initial leap in positive growth and productivity under a egocentric leader, often see a decline in later years. • EX. Lee Iacocca (Chrysler CEO)-Noted for having caused the huge turnaround for Chrysler. He was soon appearing regularly on talk shows like the Today Show and Larry King Live. He even entertained the idea of running for president stating, “Running Chrysler has been a bigger job than running the country…I could handle the national economy in six months.” • However, in the second half of his tenure at Chrysler the company’s stock fell 31%, while Mr. Iacocca’s soared. Later, he and takeover artist, Kirk Kerkorian, launched a hostile takeover bit for Chrysler.

12. Unwavering Resolve • “It is very important to grasp that Level 5 leadership is not just about humility and modesty. It is equally about ferocious resolve, an almost stoic determination to do whatever needs to be done to make the company great. • EX. George Cain (Abbott Laboratories CEO)-Set out to remove nepotism from within the company. • Neither family ties nor tenure meant anything to the determined Cain. If anyone from the family didn’t have the ability to become the best executive for the job then they weren’t going to be collecting a paycheck. • Though various members of his family were fired by him, they were pleased in the end when the share holder returns were beating the marked at 4.5 to 1, outperforming other industry leaders such as Merck and Pfizer.

13. Good From Within • “Ten Out of eleven good-to-great CEOs came from inside the company, three of them by family inheritance. The comparison companies turned to outsiders with six times greater frequency-yet they failed to produce sustained great results.” • EX. Charles R. Cork (Walgreens CEO)-after noticing that there was a problem with point of clarity in the company he drew a line in the sand. He gave the company 5 years to completely remove themselves from the food service arena (a family tradition dating back to his grandfather). • “If Walgreens had to fly in the face of long-standing family tradition in order to focus its resources here it could be the best in the world (convenient drugstores), Cork would do it. Quietly, Doggedly, simply.”

14. The Window and the Mirror • When the company produces good results, the level 5 leader looks out the “window” and pays tribute to all the employees that made it possible • Level 5 leaders look into the “mirror” when the company has poor results • When there is not a specific person or event to give credit to, they credit good luck.

15. The Two Sides of Level 5 Leadership Professional Will • Superb results • Best long-term results no matter the cost • Enduring company • Looks in the mirror Personal Humility • Modest • Quiet, calm, motivating, determined • Sets up successors for greater success • Looks out the window

16. Cultivating Level 5 Leadership • Two categories of people: • Those who do not have the Level 5 leader seed • Those who have the potential to become Level 5 leaders • Can you learn to become a Level 5 Leader? • There is no particular mold for Level 5 leaders, some lead normal lives and end up at the top • Some have had significant life experiences that might have sparked their maturation • Level 5 leaders are all around us, we just have to know what to look for.

17. Becoming a Level 5 Leader • There is no list that tells us exactly what we need to do to become a level 5 leader, we can only learn from the examples of leaders we see. • Celebrity leaders who are brought into the company have a negative correlation with good to great.

18. SUMMARY • Humility + Will = Level 5 • Level 5 leaders embody a paradoxical mix of personal humility and professional will. They are ambitious, but ambitious first and foremost for the company, not themselves. • Ambition of the Company • Level 5 leaders set up their successors for even greater success in the future. • They do whatever it takes to make the company great, no matter how big or hard the decision may be. Muhtar Kent, Coca-Cola CEO Before becoming CEO of Coca-Cola, Mr. Kent was CEO of Efes Beverage Group. During that time, he increased market capitalization by 250% & experienced triple digit revenue growth.