How Did They Do It?
The author and his team of researchers established the good-to-great benchmark as follows:
● The companies had to have experienced 15-year cumulative stock returns that were at or below the general stock market, punctuated by a transition point, then cumulative returns at least three times the market over the next fifteen years.
● Each company had to demonstrate the good-to great pattern independent of its industry.
● Each company had to demonstrate a pattern of
results.
● Each company was compared to other similar companies that either never made the good-to-great leap (or made it but did not sustain it), in order to determine what distinguished the good-to-great company from all others.
When the dust cleared and the good-to-great companies were identified, the author and his researchers found distinct patterns of behavior in those who led each company and the people who followed them — patterns that concerned disciplined people, thought and action. ■
DISCIPLINED PEOPLE
Level 5 Leadership
One of the most surprising results of the research of good-to-great companies was in the discovery of the type of leadership required to turn a good company into a great one. One might think that such companies are led by high-profile leaders with big personalities, those
who make headlines and become celebrities. Yet, those leaders who seek and thrive in the spotlight do not exude what can be termed “Level 5 Leadership” behaviors (the term Level 5 refers to the highest level in a hierarchy of executive capabilities as shown in the chart on the following page). Leaders of this type — those who combine extreme personal humility with
intense professional will — shun the attention of celebrity, channeling their ambition toward the goal of building a great company. Those leaders might run different companies in different markets, but they exemplify the same basic set of qualities:
Level 5 Leadership
● They set up successors for success. Many leaders fail to set their companies up for success when they depart, or pick a weak leader to replace them at the helm — after all, what better testament to your own personal greatness than that the place falls apart after you leave?
Level 5 leaders like Fannie Mae’s former CEO, David Maxwell, make sure those who follow them are poised to continue a successful path, or to exceed the expectations that arise as a result of that success. Maxwell came under fire from Congress for the perceived excessiveness of his $20 million retirement package (Fannie Mae operates under a government charter). Instead of serving his own self-interest and taking the money, he instructed his successor to withhold the remaining balance of $5.5 million, saving the company from a potentially bad (not to mention threatening) relationship with Washington.
● They are compellingly modest. In contrast to the very I-centric style of some other leaders, Level 5 leaders do not typically talk about themselves, preferring to direct attention to other individuals, or to the results of the company as a whole. They don’t aspire to be larger-than-life heroes, or to be placed on a pedestal. They are seemingly ordinary people quietly producing extraordinary results.
● They have unwavering resolve. Level 5 leaders do not simply exude modesty or humility; they also have a ferocious resolve, an almost stoic determination to do whatever needs to be done to make the company great.
First Who … Then What
One of the things most people assume they will find when studying good-to-great companies is a compelling, new vision, strategy, or direction, around which management will gain people’s commitment. The truth is quite the opposite. Executives who ignited transformations from good to great did not first figure out where to drive the bus, then get the people to take it there. Instead, they first got the right people on the bus (and the wrong people off) and then figured out where to drive it. “Who” questions must come before “what” decisions — before vision, before strategy, before organization structure, before tactics.
Simple Truths
Good-to-great leaders understand three simple truths:
● If you begin with the “who,” rather than the “what,” you can more easily 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.
● 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.
Good-to-great companies tend to have rigorous cultures — cultures in which leadership consistently applies exacting standards at all times and at all levels, especially upper management. To be rigorous means that the best people need not worry about their positions,
leaving them to concentrate fully on doing their best work. It can also mean being up front about the need to let people go, if that is warranted.
To be rigorous in people decisions means first becoming rigorous about top management people decisions,
and to following three practical disciplines:
● 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 cannot build a great company.
● 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. Don’t delay, try different alternatives, give third or fourth chances, or build systems to compensate for shortcomings. Letting the wrong people hang around is unfair to all the right people, who often find themselves compensating for the wrong people’s inadequacies. Get the wrong people off the bus.
● Put your best people on your biggest opportunities, not your biggest problems. Many companies think that putting their best people in bad situations will help turn the bad situation around. While this sometimes works to everyone’s advantage, managers who do so fail to grasp the fact that managing your problems can only make you good. Building opportunities is the only way to become great.
How Did They Do It?
The author and his team of researchers established the good-to-great benchmark as follows:
● The companies had to have experienced 15-year cumulative stock returns that were at or below the general stock market, punctuated by a transition point, then cumulative returns at least three times the market over the next fifteen years.
● Each company had to demonstrate the good-to great pattern independent of its industry.
● Each company had to demonstrate a pattern of
results.
● Each company was compared to other similar companies that either never made the good-to-great leap (or made it but did not sustain it), in order to determine what distinguished the good-to-great company from all others.
When the dust cleared and the good-to-great companies were identified, the author and his researchers found distinct patterns of behavior in those who led each company and the people who followed them — patterns that concerned disciplined people, thought and action. ■
DISCIPLINED PEOPLE
Level 5 Leadership
One of the most surprising results of the research of good-to-great companies was in the discovery of the type of leadership required to turn a good company into a great one. One might think that such companies are led by high-profile leaders with big personalities, those
who make headlines and become celebrities. Yet, those leaders who seek and thrive in the spotlight do not exude what can be termed “Level 5 Leadership” behaviors (the term Level 5 refers to the highest level in a hierarchy of executive capabilities as shown in the chart on the following page). Leaders of this type — those who combine extreme personal humility with
intense professional will — shun the attention of celebrity, channeling their ambition toward the goal of building a great company. Those leaders might run different companies in different markets, but they exemplify the same basic set of qualities:
Level 5 Leadership
● They set up successors for success. Many leaders fail to set their companies up for success when they depart, or pick a weak leader to replace them at the helm — after all, what better testament to your own personal greatness than that the place falls apart after you leave?
Level 5 leaders like Fannie Mae’s former CEO, David Maxwell, make sure those who follow them are poised to continue a successful path, or to exceed the expectations that arise as a result of that success. Maxwell came under fire from Congress for the perceived excessiveness of his $20 million retirement package (Fannie Mae operates under a government charter). Instead of serving his own self-interest and taking the money, he instructed his successor to withhold the remaining balance of $5.5 million, saving the company from a potentially bad (not to mention threatening) relationship with Washington.
● They are compellingly modest. In contrast to the very I-centric style of some other leaders, Level 5 leaders do not typically talk about themselves, preferring to direct attention to other individuals, or to the results of the company as a whole. They don’t aspire to be larger-than-life heroes, or to be placed on a pedestal. They are seemingly ordinary people quietly producing extraordinary results.
● They have unwavering resolve. Level 5 leaders do not simply exude modesty or humility; they also have a ferocious resolve, an almost stoic determination to do whatever needs to be done to make the company great.
First Who … Then What
One of the things most people assume they will find when studying good-to-great companies is a compelling, new vision, strategy, or direction, around which management will gain people’s commitment. The truth is quite the opposite. Executives who ignited transformations from good to great did not first figure out where to drive the bus, then get the people to take it there. Instead, they first got the right people on the bus (and the wrong people off) and then figured out where to drive it. “Who” questions must come before “what” decisions — before vision, before strategy, before organization structure, before tactics.
Simple Truths
Good-to-great leaders understand three simple truths:
● If you begin with the “who,” rather than the “what,” you can more easily 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.
● 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.
Good-to-great companies tend to have rigorous cultures — cultures in which leadership consistently applies exacting standards at all times and at all levels, especially upper management. To be rigorous means that the best people need not worry about their positions,
leaving them to concentrate fully on doing their best work. It can also mean being up front about the need to let people go, if that is warranted.
To be rigorous in people decisions means first becoming rigorous about top management people decisions,
and to following three practical disciplines:
● 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 cannot build a great company.
● 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. Don’t delay, try different alternatives, give third or fourth chances, or build systems to compensate for shortcomings. Letting the wrong people hang around is unfair to all the right people, who often find themselves compensating for the wrong people’s inadequacies. Get the wrong people off the bus.
● Put your best people on your biggest opportunities, not your biggest problems. Many companies think that putting their best people in bad situations will help turn the bad situation around. While this sometimes works to everyone’s advantage, managers who do so fail to grasp the fact that managing your problems can only make you good. Building opportunities is the only way to become great.
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