31 Temmuz 2021 Cumartesi

A Book Summary; “Good to Great”

Dear friends, today I will be posting the summary of a very famous book. “Good to Great” from Jim Collins. At the front of the cover it says that, “why some companies make the leap and others don’t.” The book is mainly about this. 

At the beginning of the book, Jim Collins prepared a section in which he says “good is the enemy of great”. He claims that we don’t have great schools because we have good schools. We don’t have a great government, principally because we have a good government. Few people attain great lives, in large part because it is just too easy to settle for a good life. It is also valid for the business life. Because they think that their situation is sufficient for them and they don’t need to force themselves to be great. 

In this book Jim Collins has conducted the study among the companies whereby he tried to specify what the distinguishing factors between the great companies and the normal companies (he defined them as comparison companies since they were used for comparison in the study) are. There are some quick findings; celebrity leaders from outside are negatively correlated with taking a company from good to great. Ten out of eleven good to great CEOs came from inside the company, whereas the comparison companies tried outside CEOs six times more often.

There is pattern, linking specific forms of executive compensation to the process of going from good to great. Plus, the 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.

They believe that technology can accelerate transformation, but technology cannot cause a transformation.

Mergers and acquisition play virtually no role in igniting a transformation from good to great, two big mediocrities join together never make one great company.

After a quick brief about the findings, let’s go into the distinguishing factors of good companies and the great companies

Level 5 Leadership: 

Level 5 Leaders are not ego centric. They are seen as humble and modest. They are incredibly ambitious but their ambition is first and foremost for their institution not for themselves. They build enduring greatness through a paradoxical blend of personal humility and professional will. All the good to great companies had Level 5 leadership at the time of the transition. These leaders are the mix of modest and willful, humble and fearless. In over three quarters of the comparison companies, the study discovered that executives who set their successors up for failure or chose weak successors. 

The good to great leaders never wanted to become heroes. They never aspired to be unreachable icons. They were acting as ordinary people creating extraordinary results. They are intolerant of anyone, stating being good is enough. 

When a failure happens they see themselves as responsible but when a success happens they give credit to the others and the organisation itself. 

First Who and Then What:

The Level 5 leaders appoint right people to the right places before they state their vision for the company. If we make a bus analogy, at the first place they don’t know where to go. They know that if they get the right people on the bus, and wrong people off the bus; then they can figure out where to go. However, the comparison companies’ leaders first set their vision where to go, after that they recruit good helpers for that. 

The good leaders understood a simple truth. The right people will do the right things and deliver the best results they are capable of regardless of the incentive system.

In determining the right people, the good to great companies put much weight on the character attributes than on specific educational background or work experience. It doesn’t mean that these are unimportant but they view these traits are more teachable whereby the character, work ethic, basic intelligence and dedication to work are more ingrained. 

No company can grow revenues consistently faster than its ability to get enough right people to implement that growth. If your growth rate in revenues consistently outpaces your growth rate in people you simply will not be a great company. 

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

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

If you are not sure about one person you can ask these questions yourself; if it were a hiring decision would you hire this person again? Or if this person comes and says he is leaving would you try to convince him to stay?

The good to great companies put their right people on their best opportunities not to their biggest problems. Comparison companies do the opposite. 

Confront the Brutal Facts (Never Lose Faith):

The good to great company leaders create an environment where the truth is heard and brutal facts confronted. However, in the comparison company culture, the people fear their leaders, they talk regarding what the leader think, feel and act. 

In great companies the leaders lead a Socratic debate where they ask series of questions to reach a productive answer. They hold sessions with their colleagues to find the right answers. They conduct autopsies without blaming. 

Great companies retain their faith that they prevail at the end regardless of the difficulties. And the same time, they confront the most brutal facts of the current reality. This requires right people since they are self-motivated. The only thing you should do is not to demotivate them. 

The Hedgehog Concept: 

Based on an Ancient Greek parable; “the fox knows many things but a hedgehog knows one big thing.” But at the end hedgehog beats the fox depending on this one big capability. We know many people acted like hedgehogs in the history. Freud and the unconscious, Darwin and the natural selection, Max and the class struggle… Like these people, the great companies have used a simple, crystalline concept that guided all their efforts. This is known as the Hedgehog concept. 

This concept is the intersection of the three circles which are; What can you be the best in the world? What drives your economic engine? What are you deeply passionate about? 

To answer these questions is not easy task they are evolved over the time. You can not sit down and state your findings to these questions. It takes about four years to develop their hedgehog concept as it is an iterative process. 

A Culture of Discipline:

In great companies they are giving freedom to their employees within a framework. They build a culture around the idea of freedom and responsibility. They fill that culture with self-disciplined people. This discipline is not a tyrannical discipline. If you recruit disciplined people, you will have disciplined thought and at last you can expect disciplined actions. 

As seen from the above matrix, as the culture of discipline gets more mature and the organization learns to act like entrepreneur, the great organization requirements are fulfilled. The good to great companies have one mantra saying that; if something doesn’t not fit with their Hedgehog concept, they do not do it. It comes with the discipline to say no to big opportunities which are not aligned with the Hedgehog concept. 

As they have a to do list, they also have stop doing lists. 

Technology Accelerators:

When used right, technology becomes an accelerator of momentum, not a creator of it. The good to great companies never began their transitions with pioneering technology, for simple reason that you can not make good use of technology until you know which technologies are relevant. The technologies which aligned with the Hedgehog Concept are the best ones to be used in the future. 

The technology cannot turn a good enterprise to a great one. 

The Flywheel and Doom Loop:

From outside, the transition from good to great is looked dramatic and revolutionary. But from inside, they feel completely different, more like an organic development. The good to great companies had no name for their transformations. There is no launch event, no tag line, no programmatic feel whatsoever. Some executives from these organization did not even feel the transformation. 

Sustainable transformations follow a predictable pattern of build up and breakthrough. Like pushing a giant flywheel, it takes a lot of effort to get the thing moving at all, but with persistent pushing in a constant direction over a long period of time. 

The frequently observed doom loop pattern from the comparison companies is when the new leaders step in they cancel the running program or stopping the already spinning flywheel. Therefore, in the comparison companies they frequently announce new programs with fancy ceremonies to motivate the employees in the organization. 

Here is the very brief summary of this great book. Amazon founder Jeff Bezos says that this book is among the most important books that have affected his business life. Please find and read it as it will be more helpful for better learning.