Good to Great: Why Some Companies Make the Leap...And Others Don't

by Jim Collins

People are not your most important asset. The right people are.

When you have disciplined people, you don’t need hierarchy. When you have disciplined thought, you don’t need bureaucracy. When you have disciplined action, you don’t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.

You can accomplish anything in life, provided that you do not mind who gets the credit. —HARRY S. TRUMAN1

“I never stopped trying to become qualified for the job.”

Level 5 leaders are a study in duality: modest and willful, humble and fearless.

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, from The Electric Kool-Aid Acid Test by Tom Wolfe1 When we began the research project, we expected to find that the first step in taking a company from good to great would be to set a new direction, a new vision and strategy for the company, and then to get people committed and aligned behind that new direction. We found something quite the opposite. 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. No, they first got the right people on the bus (and the wrong people off the bus) and then figured out where to drive it.

Great vision without great people is irrelevant.

They hired outstanding people whenever and wherever they found them, often without any specific job in mind. “That’s how you build the future,” he said. “If I’m not smart enough to see the changes that are coming, they will.

It’s Who You Pay, Not How You Pay Them

If you have the right executives on the bus, they will do everything within their power to build a great company, not because of what they will “get” for it, but because they simply cannot imagine settling for anything less.

The right people will do the right things and deliver the best results they’re capable of, regardless of the incentive system.

Nucor rejected the old adage that people are your most important asset. In a good-to-great transformation, people are not your most important asset. The right people are.

When in doubt, don’t hire—keep looking.

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. If your growth rate in revenues consistently outpaces your growth rate in people, you simply will not—indeed cannot—build a great company.

the ultimate throttle on growth for any great company is not markets, or technology, or competition, or products. It is one thing above all others: the ability to get and keep enough of the right people.

When you know you need to make a people change, act.

The moment you feel the need to tightly manage someone, you’ve made a hiring mistake. The best people don’t need to be managed. Guided, taught, led—yes. But not tightly managed.

Letting the wrong people hang around is unfair to all the right people, as they inevitably find themselves compensating for the inadequacies of the wrong people. Worse, it can drive away the best people. Strong performers are intrinsically motivated by performance, and when they see their efforts impeded by carrying extra weight, they eventually become frustrated.

The purpose of compensation is not to “motivate” the right behaviors from the wrong people, but to get and keep the right people in the first place.

The old adage “People are your most important asset” is wrong. People are not your most important asset. The right people are.

Yes, leadership is about vision. But leadership is equally about creating a climate where the truth is heard and the brutal facts confronted.

Leading from good to great does not mean coming up with the answers and then motivating everyone to follow your messianic vision. It means having the humility to grasp the fact that you do not yet understand enough to have the answers and then to ask the questions that will lead to the best possible insights.

“I will take responsibility for this bad decision. But we will all take responsibility for extracting the maximum learning from the tuition we’ve paid.”

Life is unfair—sometimes to our advantage, sometimes to our disadvantage. We will all experience disappointments and crushing events somewhere along the way, setbacks for which there is no “reason,” no one to blame. It might be disease; it might be injury; it might be an accident; it might be losing a loved one; it might be getting swept away in a political shake-up; it might be getting shot down over Vietnam and thrown into a POW camp for eight years. What separates people, Stockdale taught me, is not the presence or absence of difficulty, but how they deal with the inevitable difficulties of life.

Entrepreneurial success is fueled by creativity, imagination, bold moves into uncharted waters, and visionary zeal.

Most companies build their bureaucratic rules to manage the small percentage of wrong people on the bus, which in turn drives away the right people on the bus, which then increases the percentage of wrong people on the bus, which increases the need for more bureaucracy to compensate for incompetence and lack of discipline, which then further drives the right people away, and so forth.

Everyone would like to be the best, but most organizations lack the discipline to figure out with egoless clarity what they can be the best at and the will to do whatever it takes to turn that potential into reality. They lack the discipline to rinse their cottage cheese.

Most men would rather die, than think. Many do. —BERTRAND RUSSELL1

Mediocrity results first and foremost from management failure, not technological failure.

those who turn good into great are motivated by a deep creative urge and an inner compulsion for sheer unadulterated excellence for its own sake. Those who build and perpetuate mediocrity, in contrast, are motivated more by the fear of being left behind.