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

by Jim Collins

That’s what makes death so hard—unsatisfied curiosity. —BERYL MARKHAM, West with the Night1

Good is the enemy of great.

Larger-than-life, celebrity leaders who ride in from the outside are negatively correlated with taking a company from good to great.

Ten of eleven good-to-great CEOs came from inside the company,

Strategy per se did not separate the good-to-great companies from the comparison companies. Both sets of companies had well-defined strategies, and there is no evidence that the good-to-great companies spent more time on long-range strategic planning than the comparison companies.

good-to-great companies did not focus principally on what to do to become great; they focused equally on what not to do and what to stop doing.

Technology and technology-driven change has virtually nothing to do with igniting a transformation from good to great. Technology can accelerate a transformation, but technology cannot cause a transformation.

good-to-great companies paid scant attention to managing change, motivating people, or creating alignment. Under the right conditions, the problems of commitment, alignment, motivation, and change largely melt away.

good-to-great companies had no name, tag line, launch event, or program to signify their transformations. Indeed, some reported being unaware of the magnitude of the transformation at the time; only later, in retrospect, did it become clear.

The good-to-great companies were not, by and large, in great industries, and some were in terrible industries. In no case do we have a company that just happened to be sitting on the nose cone of a rocket when it took off. Greatness is not a function of circumstance. Greatness, it turns out, is largely a matter of conscious choice.

We expected that good-to-great leaders would begin by setting a new vision and strategy. We found instead that they first got the right people on the bus, the wrong people off the bus, and the right people in the right seats—and then they figured out where to drive it.

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

You must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, AND at the same time have the discipline to confront the most brutal facts of your current reality, whatever they might be.

if you cannot be the best in the world at your core business, then your core business absolutely cannot form the basis of a great company.

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

Level 5 leader—an individual who blends extreme personal humility with intense professional will.

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.

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.

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

neither family ties nor length of tenure would have anything to do with whether you held a key position in the company.

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.

But no matter, if Walgreens had to fly in the face of long-standing family tradition in order to focus its resources where it could be the best in the world (convenient drugstores), Cork would do it. Quietly, doggedly, simply.

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.

A strong religious belief or conversion might also nurture development of Level 5 traits.

Sam Armacost, who inherited the weak generals model, described the management climate: “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.”

David Maxwell, who 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?

“who” questions come before “what” questions—before vision, before strategy, before tactics, before organizational structure, before technology.

To attract and keep the best workers, Nucor paid its steelworkers more than any other steel company in the world. But it built its pay system around a high-pressure team-bonus mechanism, with over 50 percent of a worker’s compensation tied directly to the productivity of his work team of twenty to forty people.

The Nucor system did not aim to turn lazy people into hard workers, but to create an environment where hardworking people would thrive and lazy workers would either jump or get thrown right off the bus.

good-to-great companies placed greater weight on character attributes than on specific educational background, practical skills, specialized knowledge, or work experience. Not that specific knowledge or skills are unimportant, but they viewed these traits as more teachable (or at least learnable), whereas they believed dimensions like character, work ethic, basic intelligence, dedication to fulfilling commitments, and values are more ingrained.

We have more people who want to do the right thing than most companies. We don’t just look at experience. We want to know: Who are they? Why are they? We find out who they are by asking them why they made decisions in their life. The answers to these questions give us insight into their core values.

One good-to-great executive said that his best hiring decisions often came from people with no industry or business experience.

To be rigorous, not ruthless, means that the best people need not worry about their positions and can concentrate fully on their work.

“The only way to deliver to the people who are achieving is to not burden them with the people who are not achieving.”

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.”

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.

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.

one of the crucial elements in taking a company from good to great is somewhat paradoxical. You need executives, on the one hand, who argue and debate—sometimes violently—in pursuit of the best answers, yet, on the other hand, who unify fully behind a decision, regardless of parochial interests.

“We have an itch that what we just accomplished, no matter how great, is never going to be good enough to sustain us,”

Pitney Bowes sales meetings were quite different from the “aren’t we great” rah-rah sales conferences typical at most companies: The entire management team would lay itself open to searing questions and challenges from salespeople who dealt directly with customers.

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.

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.

And one of the single most de-motivating actions you can take is to hold out false hopes, soon to be swept away by events.