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

by Jim Collins

To let people languish in uncertainty for months or years, stealing precious time in their lives that they could use to move on to something else, when in the end they aren’t going to make it anyway—that would be ruthless. To deal with it right up front and let people get on with their lives— that is rigorous.

be rigorous in people decisions means first becoming rigorous about top management people decisions.

In contrast, we found layoffs used five times more frequently in the comparison companies than in the good-to-great companies. Some of the comparison companies had an almost chronic addiction to layoffs and restructurings.42

Practical Discipline #1: 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.

Those who build great companies understand that 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 asked to name the top five factors that led to the transition from mediocrity to excellence, Bruckart said, “One would be people. Two would be people. Three would be people. Four would be people. And five would be people. A huge part of our transition can be attributed to our discipline in picking the right people.”

Alan, I’m really wearing down trying to find the exact right person to fill this position or that position. At what point do I compromise?’ Without hesitation, Alan said, ‘You don’t compromise. We find another way to get through until we find the right people.’”

Practical Discipline #2: 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.

He’s doing an okay job and it would be a huge hassle to replace him, so we avoid the issue. Or we find the whole process of dealing with the issue to be stressful and distasteful. So, to save ourselves stress and discomfort, we wait. And wait. And wait. Meanwhile, all the best people are still wondering, “When are they going to do something about this? How long is this going to go on?”

The good-to-great companies showed the following bipolar pattern at the top management level: People either stayed on the bus for a long time or got off the bus in a hurry. In other words, the good-to-great companies did not churn more, they churned better.

“Every minute devoted to putting the proper person in the proper slot is worth weeks of time later.”

Practical Discipline #3: Put your best people on your biggest opportunities, not your biggest problems.

“These guys never agreed on anything and they would argue about everything, and they would kill each other and involve everyone, high and low, talented people. But when they had to make a decision, the decision would emerge. This made Philip Morris.”56 No matter how much they argued, said a Philip Morris executive, “they were always in search of the best answer. In the end, everybody stood behind the decision. All of the debates were for the common good of the company, not your own interests.”

“Oh, it really wasn’t that hard for him. He was so good at assembling the right people around him, and putting the right people in the right slots, that he just didn’t need to be there all hours of the day and night. That was Colman’s whole secret to success and balance.”

“When Colman died and we all went to the funeral, I looked around and realized how much love was in the room. This was a man who spent nearly all his waking hours with people who loved him, who loved what they were doing, and who loved one another—at work, at home, in his charitable work, wherever.”

Members of the good-to-great teams tended to become and remain friends for life.

The people we interviewed from the good-to-great companies clearly loved what they did, largely because they loved who they did it with.

The good-to-great leaders were rigorous, not ruthless, in people decisions.

You absolutely cannot make a series of good decisions without first confronting the brutal facts.

The moment a leader allows himself to become the primary reality people worry about, rather than reality being the primary reality, you have a recipe for mediocrity, or worse. This is one of the key reasons why less charismatic leaders often produce better long-term results than their more charismatic counterparts.

“I… had no need for cheering dreams,” he wrote. “Facts are better than dreams.”

One of the dominant themes that runs throughout this book is that if you successfully implement its findings, you will not need to spend time and energy “motivating” people. If you have the right people on the bus, they will be self-motivated.

How do you manage in such a way as not to de-motivate people?

“They used to call me the prosecutor, because I would home in on a question,” said Wurtzel. “You know, like a bulldog, I wouldn’t let go until I understood. Why, why, why?”

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.

Like Nucor, all the good-to-great companies had a penchant for intense dialogue. Phrases like “loud debate,” “heated discussions,” and “healthy conflict” peppered the articles and interview transcripts from all the companies. They didn’t use discussion as a sham process to let people “have their say” so that they could “buy in” to a predetermined decision. The process was more like a heated scientific debate, with people engaged in a search for the best answers.

The key, then, lies not in better information, but in turning information into information that cannot be ignored.

Scott Paper’s and Kimberly-Clark’s differing reactions to P&G bring us to a vital point. In confronting the brutal facts, the good-to-great companies left themselves stronger and more resilient, not weaker and more dispirited. There is a sense of exhilaration that comes in facing head-on the hard truths and saying,

“We will never give up. We will never capitulate. It might take a long time, but we will find a way to prevail.”

“I never lost faith in the end of the story,” he said, when I asked him. “I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”

“This is a very important lesson. You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be.”

Like much of what we found in our research, the key elements of greatness are deceptively simple and straightforward.

Those who built the good-to-great companies were, to one degree or another, hedgehogs. They used their hedgehog nature to drive toward what we came to call a Hedgehog Concept for their companies. Those who led the comparison companies tended to be foxes, never gaining the clarifying advantage of a Hedgehog Concept, being instead scattered, diffused, and inconsistent.

What was the concept? Simply this: the best, most convenient drugstores, with high profit per customer visit. That’s it.

That’s the breakthrough strategy that Walgreens used to beat Intel, GE, Coca-Cola, and Merck.

In a world overrun by management faddists, brilliant visionaries, ranting futurists, fearmongers, motivational gurus, and all the rest, it’s refreshing to see a company succeed so brilliantly by taking one simple concept and just doing it with excellence and imagination.

More precisely, a Hedgehog Concept is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles: What you can be the best in the world at (and, equally important, what you cannot be the best in the world at). This discerning standard goes far beyond core competence. Just because you possess a core competence doesn’t necessarily mean you can be the best in the world at it. Conversely, what you can be the best at might not even be something in which you are currently engaged. What drives your economic engine. All the good-to-great companies attained piercing insight into how to most effectively generate sustained and robust cash flow and profitability. In particular, they discovered the single denominator—profit per x—that had the greatest impact on their economics. (It would be cash flow per x in the social sector.) What you are deeply passionate about. The good-to-great companies focused on those activities that ignited their passion. The idea here is not to stimulate passion but to discover what makes you passionate.

If you make a lot of money doing things at which you could never be the best, you’ll only build a successful company, not a great one. If you become the best at something, you’ll never remain on top if you don’t have intrinsic passion for what you are doing.

To go from good to great requires transcending the curse of competence.

It requires the discipline to say, “Just because we are good at it—just because we’re making money and generating growth—doesn’t necessarily mean we can become the best at it.” The good-to-great companies understood that doing what you are good at will only make you good; focusing solely on what you can potentially do better than any other organization is the only path to greatness.

If you successfully apply these ideas, but then stop doing them, you will slide backward, from great to good, or worse. The only way to remain great is to keep applying the fundamental principles that made you great.

For two reasons. First, the comparison companies never asked the right questions, the questions prompted by the three circles.

Second, they set their goals and strategies more from bravado than from understanding.

You can’t just go off-site for two days, pull out a bunch of flip charts, do breakout discussions, and come up with a deep understanding. Well, you can do that, but you probably won’t get it right.

Does every organization have a Hedgehog Concept to discover? What if you wake up, look around with brutal honesty, and conclude: “We’re not the best at anything, and we never have been.” Therein lies one of the most exciting aspects of the entire study. In the majority of cases, the good-to-great companies were not the best in the world at anything and showed no prospects of becoming so.

If you cannot be the best in the world at 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.