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

by Jim Collins

Exactly! Gault was indeed a tremendous Level 4 leader, perhaps one of the best in the last fifty years.

But he was not a Level 5 leader, and that is one key reason why Rubbermaid went from good to great for a brief shining moment and then, just as quickly, went from great to irrelevant.

During interviews with the good-to-great leaders, they’d talk about the company and the contributions of other executives as long as we’d like but would deflect discussion about their own contributions.

It wasn’t just false modesty.

Those who worked with or wrote about the good-to-great leaders continually used words like quiet, humble, modest, reserved, shy, gracious, mild-mannered, self-effacing, understated, did not believe his own clippings; and so forth.

The good-to-great leaders never wanted to become larger-than-life heroes. They never aspired to be put on a pedestal or become unreachable icons.

They were seemingly ordinary people quietly producing extraordinary results.

According to Business Week, Dunlap personally accrued $100 million for 603 days of work at Scott Paper (that’s $165,000 per day), largely by slashing the workforce, cutting the R&D budget in half, and putting the company on growth steroids in preparation for sale.

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.

“Those labels don’t ring true,” said Anthony Chirikos. “It makes them sound weak or meek, but that’s not at all the way I think of Darwin Smith or Colman Mockler. They would do almost anything to make the company great.”

Level 5 leaders are fanatically driven, infected with an incurable need to produce results.

Cain didn’t have an inspiring personality to galvanize the company, but he had something much more powerful: inspired standards. He could not stand mediocrity in any form and was utterly intolerant of anyone who would accept the idea that good is good enough.

Unlike George Cain, Upjohn’s CEO never showed the same resolve to break the mediocrity of nepotism.

As an interesting aside, Darwin Smith, Colman Mockler, and George Cain came from inside the company. Stanley Gault, Al Dunlap, and Lee Iacocca rode in as saviors from the outside, trumpets blaring.

The evidence does not support the idea that you need an outside leader to come in and shake up the place to go from good to great.

In fact, going for a high-profile outside change agent is negatively correlated with a sustained transformation from ...

Well, that next day, things really clicked into gear to winding down our restaurant business. He never wavered. He never doubted; he never second-guessed.

Joseph F. Cullman 3d, the Level 5 transition CEO of Philip Morris, flat-out refused to take credit for his company’s success, attributing his good fortune to having great colleagues, successors, and predecessors.

Then we began to notice a contrasting pattern in the comparison executives: They credited substantial blame to bad luck, frequently bemoaning the difficulties of the environment they faced.

Ken Iverson and his crew at Nucor considered the same challenge from imports a blessing, a stroke of good fortune (“Aren’t we lucky; steel is heavy, and they have to ship it all the way across the ocean, giving us a huge advantage!”). Iverson saw the first, second, and third problems facing the American steel industry not to be imports, but management.

Level 5 leaders look out the window to apportion credit to factors outside themselves when things go well (and if they cannot find a specific person or event to give credit to, they credit good luck). At the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly.

Everyone outside the window points inside, directly at the Level 5 leader, saying, “He was the key; without his guidance and leadership, we would not have become a great company.” And the Level 5 leader points right back out the window and says, “Look at all the great people and good fortune that made this possible; I’m a lucky guy.” They’re both right, of course. But the Level 5s would never admit that fact.

“Can you learn to become Level 5?”

My hypothesis is that there are two categories of people: those who do not have the seed of Level 5 and those who do. The first category consists of people who could never in a million years bring themselves to subjugate their egoistic needs to the greater ambition of building something larger and more lasting than themselves. For these people, work will always be first and foremost about what they get—fame, fortune, adulation, power, whatever—not what they build, create, and contribute.

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.

The second category of people—and I suspect the larger group—consists of those who have the potential to evolve to Level 5;

I believe—although I cannot prove—that potential Level 5 leaders are highly prevalent in our society.

Our research exposed Level 5 as a key component inside the black box of what it takes to shift a company from good to great. Yet inside that black box is yet another black box—namely, the inner development of a person to Level

This chapter is about what Level 5s are; the rest of the book describes what they do.

Level 5 leaders embody a paradoxical mix of personal humility and professional will. They are ambitious, to be sure, but ambitious first and foremost for the company, not themselves.

Level 5 leaders set up their successors for even greater success in the next generation,

Level 5 leaders display a compelling modesty, are self-effacing and understated.

Level 5 leaders are fanatically driven, infected with an incurable need to produce sustained results. They are resolved to do whatever it takes to make the company great, no matter how big or hard the decisions.

Level 5 leaders look out the window to attribute success to factors other than themselves.

Ten of eleven good-to-great CEOs came from inside the company, whereas the comparison companies tried outside CEOs six times more often.

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.

The good-to-great leaders understood three simple truths. First, if you begin with “who,” rather than “what,” you can more easily adapt to a changing world.

Second, if you have the right people on the bus, the problem of how to motivate and manage people largely goes away. The right people don’t need to be tightly managed or fired up; they will be self-motivated by the inner drive to produce the best results and to be part of creating something great. Third, if you have the wrong people, it doesn’t matter whether you discover the right direction; you still won’t have a great company.

Great vision without great people is irrelevant.

They hired outstanding people whenever and wherever they found them, often without any specific job in mind.

You get the best people, you build them into the best managers in the industry, and you accept the fact that some of them will be recruited to become CEOs of other companies.

“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.”9

“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.”

The contrast between Jack Eckerd and Cork Walgreen is striking. Whereas Jack Eckerd had a genius for picking the right stores to buy, Cork Walgreen had a genius for picking the right people to hire.

We found no systematic pattern linking executive compensation to the process of going from good to great. The evidence simply does not support the idea that the specific structure of executive compensation acts as a key lever in taking a company from good to great.

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.

“We have the hardest working steel workers in the world,” said one Nucor executive. “We hire five, work them like ten, and pay them like eight.”

When it came to management, the Wells Fargo standards were ferocious and consistent. Like a professional sports team, only the best made the annual cut, regardless of position or tenure. Summed up one Wells Fargo executive: “The only way to deliver to the people who are achieving is to not burden them with the people who are not achieving.”

We were not going to subject our culture to a death by a thousand cuts.’”