Anna Rendon Ashley Hoptay Olivia Erwin Paige Stone Brandon Laviage Chase Mueller Tanner Gilreath. Good To Great Chapter 3 First Who…Then What . “There are going to be times when we can’t wait for somebody. Now, you’re either on the bus or off the bus.” - Ken Kesey.
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The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there.
What did they do then?
They FIRST got the right people on the bus and the wrong people off of the bus, and THEN they figured out where to drive it.
“Look, I don’t really know where we should take this bus. But I know this much: If we get the right people on the bus, the right people in the right seats, and the wrong people off the bus, then we’ll figure out how to take it someplace great.”
Begin with the “Who” rather than the “What”. Helps you adapt to a changing world.
If you have the right people on the bus, the problem of how to motivate and manage people largely goes away. The right people are self-motivated to produce the best results.
Going in the right direction with the wrong people will never produce a great company. Great vision without great people is irrelevant.
CEO Dick Cooley foresaw that the banking industry would eventually undergo change.
Instead of focusing on change, he focused on finding the right people.
Focused on “injecting an endless stream of talent” directly into the veins of the company.
Hired outstanding people whenever and wherever they found them, often without any specific job in mind.
“That’s how you build the future,” Cooley said. “If I’m not smart enough to see the changes that are coming, they will. And they’ll be flexible enough to deal with them.”
By getting the right people on the bus, Wells Fargo outperformed the market by over three times.
This occurred at a time when its sector of the banking industry fell 59% behind the general stock market
Bank of America took a different approach: “Weak generals, strong lieutenants”
If you pick strong generals for key positions, their competitors will leave. But if you pick weak generals – placeholders, rather than highly capable executives – then the strong lieutenants are more likely to stick around.
Weak generals would wait for direction from above.
Sam Armacost, who inherited the weak generals model, said, “I came away quite distressed from my first couple of management meetings. Not only couldn’t I get conflict, I couldn’t even get comment. They were all waiting to see which way the wind blew.”
Lost $1 billion
Ended up recruiting a gang of strong generals to turn the bank around.
In 1998, the cumulative value of $1 invested:
Wells Fargo = $74.47
General Market = $19.86
Bank of America = $15.60
Get the right people on the bus and the wrong people off the bus before you figure out where to drive it.
The degree of sheer rigor needed in people decisions in order to take a company from good to great.
CEO of Fannie Mae during its darkest days
Held off on developing a strategy until he got the right people in place, while the company was losing $1 million every single business day with $56 billion of loans underwater.
Focused on getting the right people on the Fannie Mae management team.
Maxwell made it absolutely clear that there would only be seats for A players who were going to put forth A+ effort, and if you weren’t up for it, you better get off the bus, and get off now!
Example: think of our teams – we want only A players who will put forth an A+ effort. The alternative is getting fired.
14 of the 26 executives left the company
“Who” questions come before “what” questions – before vision, before strategy, before tactics, before organizational structure and before technology.
Exemplified a Level 5 style
“I don’t know where we should take this company, but I do know that if I start with the right people, ask them the right questions, and engage them in vigorous debate, we will find a way to make this company great.”
In this model, the company is a platform for the talents of an extraordinary individual.
In these cases, the towering genius, the primary driving force in the company’s success, is a GREAT asset….. AS LONG AS THE GENIUS STICKS AROUND!
Company’s who take this approach are usually successful UNTIL the “genius” of the company leaves.
Ex.: Steve Jobs
A “Genius With A Thousand Helpers”
(Good To Great Companies)
Level 5 Leader
Level 4 Leader
Set a vision for where to drive the bus. Develop a road map for driving the bus.
Get the right people on the bus. Build a superior executive team.
Enlist a crew of highly capable “helpers” to make the vision happen.
Once you have the right people in place, figure out the path to greatness.
Eckerd Corporation, led by Jack Eckerd expanded the Eckerd Empire with over 1000 stores across the southeastern U.S. In the late 1970’s, Eckerd’s revenues equaled Walgreens. But when Jack Eckerd left to pursue his passion for politics, Eckerd Corp. took a toll for the worse as the company began a long decline and eventually taken over by J.C. Penny.
Henry Singleton, owner of Teldyne had proclaimed a small enterprise to number 293 in the Fortune 500 list in only 6 YEARS! The company dominated the marketplace from exotic metals to insurance. Once Singleton stepped away, soon the company crumbled.
Each of these cases failed utterly at the task of building a great company.
Top Executives, Managers and Employees
Huge Incentives (Jets, Vacations, company cars, etc)
Examples: Big 3 Auto Makers, Lehman Brothers, Merrill Lynch
Do these things really increase performance and create great results?
Collected weeks of data from proxy statements
Preformed 112 separate analyses looking at patterns and correlations
Qualifications: Cash vs. Stock, LT vs. ST Incentives, Salary vs. Bonus, etc..
Outcome: No significant patterns related to executive compensation, and no systematic differences on compensation packages
Good to Great
Received slightly less total cash compensation 10 years after the transition than others in mediocre companies
Not that these people will work for free
But do better work with less incentives because they want what's best for the company
The right people will do the right things and deliver the best results they are capable of regardless of the incentive system
Built on the idea that you can teach farmers to make steel but you cant teach a farmer work ethic, to people who don’t have it in the first place
Plants: Crawfordsville, Indiana; Norfolk, Nebraska; Plymouth, Utah
They generated as high as 50% turnover in the first year, followed by very low turnover as the right people settled in
Teams of 20 to 40 people
Team Bonus mechanism with over 50% tied directly to the productivity of the team
Highest paid steel workers in the world
Arrived to work 30 minutes early and ready to go when the shift bell rang
The system did not aim to turn lazy people into hard workers, but to create an environment where hardworking people to thrive and lazy ones to fail
Good to great companies are not ruthless cultures they are rigorous
Ruthless – Hacking and Cutting or Wantonly firing people without any thoughtful consideration
Rigorous – Consistently applying exacting standards at all times and all levels
The best people need not to worry about their positions and can concentrate fully on their work
Acquired Crocker Bank in 1986
Removed 1600 managers and top executives
However some Crocker managers took positions in Wells Fargo because they were better qualified then the ones originally in that spot
“The only way to deliver to the people who are achieving is not to burden them with the people who are not achieving.”
To let the workers stay employed and waste precious time when other job opportunities might arise
To deal with it up front and let people move on with their lives
3 Practical disciplines for being rigorous rather than ruthless
When in doubt, don’t hire…keep looking.
When you know you need to make a people change, act.
Put your best people on your biggest opportunities, not your biggest problems.
For growth, companies should not focus on:
Instead, they should concentrate on finding and keeping enough of the right people.
“No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a great company.”
Focused one getting the right people from top to bottom.
Alan Wurtzel’s (CEO) goal was to build the best, most professional management team in the industry.
Delivery drivers wore uniforms, were clean shaving, and had to be professional.
When you know you need to make a people change, act.
The best people don’t need to be managed, but instead guided and taught
When you let the wrong people stay around, the right people always need to be compensating for the inadequacies of the wrong people
They are constantly on your mind and are a constant drain on your energy
Mainly cause it can be an inconvenience to get rid of them, they constantly come up with excuses on why they should wait
But meanwhile it constantly affects the right people
Turnover within a period of time
The good-to-great did not churn more, they just churned better, meaning that people either stayed for a long period of time or they left quickly
The good-to-great companies didn’t have the theory of “try a lot of people and see who works”. They took their time and would find the perfect person for the position
When Colman Mockler became CEO of Gillette, he spent 55% of his time in his first 2 years changing or moving 38 of the top 50 people of his management team
2 key questions can help:
1.) If you are trying to place someone somewhere, ask your self, “Would you hire them again?”
2.) If the person came to you and told you that he/she was leaving would, “Would you feel disappointed or relieved?”
Find the right people for the job
Focus on who is running the company, not what is running it
Find level 5 leaders
Tie compensation into performance
When in doubt, don’t hire…..keep looking
When you know you need to make a people change
Put your best people on your biggest opportunities, not your biggest problems