The decisions of the leaders of great companies inspire others primarily via inspired standards—excellence, hard work, sacrifice, and integrity—not with an inspiring public persona. They are noted for the long-term greatness of the company, not “quick fixes.”
What Collins calls, “Level 5 Leadership,” creates a culture that values substance over style, integrity over personality, and results over intentions. The leadership team dialogues and debates in search of the best answer (not for the sake of looking smart or winning a point) up until the point of decision. Once a decision is made, members of the team unify behind the decision to ensure success— even those who disagreed with the decision.
The great company cultivates leaders who have all levels in the Level 5 hierarchy; highly capable individuals, strong contributing team members, competent managers, effective leaders, and Level 5 executives.
Part 1: First Who, Then What
Collins uses a metaphor of a bus to make his point. He accentuates five ideas.First, it is imperative to get the right people on the bus. Second, the great company gets the right people in the right seats. Third, it is equally important to get the wrong people off the bus. Fourth, developing people to take sit in bigger seats. Last, plan to pass the seats on to the right people, when vacated.
When confronted with any problem or opportunity, great companies have a natural habit of translating the decision from a “what” question (“what should we do?”) into a “who” decision (“who would be the right person to take responsibility for this?”). A significant portion of their time is spent in one form or another with people decisions: getting the right people on the bus, getting the right people in the right seats, getting the wrong people off the bus, developing people into bigger seats, planning for succession, etc.
These companies have a disciplined, systematic process for improving their success at getting the right people on the bus. With each passing year, the percentage of people decisions that turn out good versus bad continues to rise.
Part 2: Confront the Brutal Facts
Great companies create a climate where the truth is heard. When things go wrong, they conduct autopsies without “blame.” They seek to understand underlying root causes, rather than pin the blame on an individual. Their leaders ask a lot of questions, rather than just making statements, thereby creating a climate of vibrant dialogue and debate about the brutal facts. Their leaders do not allow their charisma or force of personality to inhibit people from bringing forth the brutal facts—even if those brutal facts run contrary to the views held by those leaders. People in the culture of great companies are never penalized for bringing forth the brutal facts.
Great companies acquire important data and make excellent use of data, metrics, and hard tangible evidence to assess external threats and internal weakness. They make particularly good use of trend lines (to see where we are declining) and comparative statistics (to see where we are falling behind others) to discover and highlight brutal facts. When people advance a point of view or make an argument, they expect them to marshal evidence, facts, and rigorous thinking to back up their argument. “It is my opinion” does not qualify as an acceptable argument in the great companies. When someone has a gut instinct that “something is just wrong, “ they pay attention; instincts can be good early warning systems. But they don’t just stop there: they then conduct a disciplined, fact-based assessment of the situation.
Great companies embrace the “Stockdale Paradox.” When facing difficult times, they never hold out false hopes soon to be swept away by events. They are not unrealistic optimists who die of a broken heart when their belief that “it will be better tomorrow” gets continually shattered on the rocks of reality. Despite whatever brutal facts they face, great companies have an unwavering faith that they can and will prevail in the end. They believe that greatness is not primarily a function of circumstance; it is first and foremost a function of conscious choice—and discipline.
Part 3: The Hedgehog Concept
Another prominent metaphor used by Collins is “The Hedgehog Concept.” First, if forced to choose between describing them as foxes (crafty creatures that know many things) or hedgehogs (simpler creatures that know one big thing), great companies weigh in with the hedgehogs.
They keep it simple. They have a simple, coherent strategic concept that they pursue with relentless consistency. If they have multiple options for how to accomplish an objective, they almost always pick the simplest option that will work. In other words, at each fork of the road, they tend toward the path of simplicity, rather than complexity.
Great companies have a deep understanding of what Collins called the three circles. 1) what we can be passionate about, 2) what we can be the best in world at, and 3) what best drives our economic or resource engine.
Great companies understand that nothing great can be accomplished without passion, and they limit their primary arenas of activity to those for which they have great passion. They also know what they can be the best in the world at. This encapsulates what a company (school) can do better than any other institution on the planet.
Great companies understand what best drives their economic or resource engine.If they are a for-profit business, they have identified their one economic denominator—profit per X—that has the most significant impact on their economics. If they are a social sector organization, they know how best to improve their total resource engine, so that they can spend less time worrying about money and more time fulfilling their mission.
Finally, he says that the great company acts with understanding, not bravado. They believe that great results come about by a series of good decisions—actions taken with understanding, not bravado—accumulated one on top of another, in line with their Hedgehog Concept. They confront the brutal facts of what they can—and equally cannot—become the best in the world at, and they do not allow bravado to obscure the truth.
Part 4: A Culture of Discipline
Great companies have the discipline to say “No thank you” to big opportunities that do not fit within their Hedgehog Concept. A “once-in-a-lifetime opportunity” is irrelevant if it is the wrong opportunity. They never lurch after growth for growth’s sake; they grow consistently within their Hedgehog, period. They are willing to jettison their core competencies and largest lines of business if they cannot be the best in the world at them. They make excellent use of “Stop Doing” lists.
A cornerstone of the great companies’ culture is the idea of freedom and responsibility within a framework: so long as people stay within the wide bounds of the framework, they have an immense amount of freedom to innovate, achieve and contribute. People in this system understand that they do not have “jobs”— they have responsibilities—and they grasp the distinction between just doing assigned tasks and taking full responsibility for the results of their efforts. We can answer the question for each significant activity, “Who is the one person responsible?” Their culture is a productive blend of dualities, such as: freedom and responsibility, discipline and entrepreneurship, rigor and creativity, financial control and innovative spirit, focused Hedgehog and adaptable.
Great companies manage the system, not the people. They do not spend a lot of time motivating their people; they recruit self-motivated people, and provide an
environment that does not de-motivate them. They do not spend a lot of time disciplining their people; they recruit self-disciplined people, and then manage the system, not the people.
Great companies avoid bureaucracy that imposes unnecessary rules on self-motivated and self-disciplined people. If they have the right people, they don’t need a lot of rules.
Great companies practice extreme commitment. In their culture, people go to extremes to fulfill their commitments and deliver results, bordering at times on fanaticism. They are equally disciplined in good times as in bad times. They never allow prosperity to make them complacent.
Part 5: The Flywheel not the Doom Loop
The next metaphor used by Collins is that of the Flywheel and Doom Loop. For Collins, each great company builds cumulative momentum. They understand that building greatness never happens in one fell swoop—that there is no single defining action, no one killer innovation, no seminal acquisition, no breakthrough technology, no savior on a white horse, no wrenching revolution that can by itself bring about sustained greatness. Instead, they build greatness by a cumulative process—step by step, action by action, day by day, week by week,
year by year—turn by turn of the flywheel.
They are relentlessly consistent over time. When examining their behavior, one word that comes to mind is consistency—consistency of purpose, consistency of values, consistency of purpose, consistency of high standards, consistency of people, and so forth. Their success derives from a whole bunch of interlocking pieces that reinforce one another, consistently applied over a long period of time. They have immense flexibility and adapt well to change—but always within the context of a coherent Hedgehog Concept.
Great companies create alignment by results, not hoopla. They tend to undersell themselves, and then delightfully surprise by blowing people away with their actual results.
They never pump up our reputation with a sales job (“buy into our future”) to compensate for lack of results. They do not “sell visions” to fire people up or take a programmatic or hoopla-laden approach to alignment. They understand that when people begin to feel the magic of momentum—when they feel the flywheel increase speed—is when most people line up to throw their shoulders against the wheel and push.
Great companies avoid the Doom Loop. They do not succumb to the lazy, undisciplined search for a single silver bullet solution—be it a new program, a motivational event, a sexy technology, a big acquisition, or a savior CEO. They do not build from 0 to 100 rotations in the flywheel, then stop, lurch in a new direction, lose their momentum and start anew. They have the discipline to turn the flywheel from 0 to 100, 100 to a thousand, a thousand to a million, a million to a billion turns—and to not go 0 to 100, 0 to 100, 0 to 100, lurching from new program to new program. If a new technology advances their product, they become a pioneer in its application; if a new technology does not fit, they don’t worry too much about it—and certainly don’t lurch about in fearful frantic reaction.
Part 6: Preserve the Core/ Stimulate Progress
Collins contends that great companies articulate a core guiding philosophy—core values and a reason for being that goes beyond just making money.According to him, they have a passionately-held set of core values that they adhere to, no matter how much the world
changes around them. They are honest about what their core values actually are. They don’t worry about what outsiders think of their values; they are for internal guidance, not marketing. If these core values were to become a competitive disadvantage at some point in the future, they would still hold them. They have an enduring purpose or mission—a reason for being—that that goes beyond just
Great companies change and improve everything except your core values.They practice the “Genius of the And”—continuity and change, values and results, cohesion and autonomy, endurance and urgency, and so forth. They are clear on the difference between their core values (which should never change) as distinct from their operating practices, cultural norms, goals, strategies, and tactics (which should remain open for change). While they hold their core values constant, they stimulate progress—change, improvement, innovation, and renewal—in the operating practices, cultural norms, goals, strategies and tactics that surround the core values.
Great companies understand that if their list of core values is too long, they are very likely confusing core values with practices and aspirations; theyhave no more than six values that they consider to be truly core.
Great companies have built a culture that so consistently reinforces their core values that those who do not share the values are ejected like a virus, or they become so uncomfortable that they self-eject. They promote leaders who live the core values; those who repeatedly breach their values never make it far or last long in their culture. They are so consistent with their values that if every conversation, every decision, every action were videotaped, people watching the tape would be astounded by their consistency and passion for living to their values.
No matter how much they achieve, they never feel comfortable or feel that they’ve arrived. Great companies are obsessively focused on their shortcomings—on what they could do better; the term “productively neurotic” describes their culture well.
Great companies achieve BHAGs—big hairy audacious goals. They have a remarkable success rate at achieving their BHAGs (big hairy audacious goals). They rarely fall short of the extreme standards of achievement they set for themselves. They understand the difference between a 10-to-25 year BHAG—which is like a huge mountain to climb--
and 5-year intermediate objectives, which are like base camps on the way to the top of the mountain.
They have a 10-to-25 year BHAG in place, which they have broken down into base-camp objectives. Their BHAGs are set with understanding, not bravado—in direct alignment with the three circles of the Hedgehog Concept.
Part 7: Clock Building not Time Telling
Another metaphor used by Collins is that of clock-building. For him, great companies build a system that can be great beyond any single leader or great idea. Their chief leader is a clock-builder, not just a time teller—he or she is building a system that can prosper beyond his or her presence. Their chief leader is building a great team of strong individuals, rather than acting as a “genius with 1000 helpers” on whom everything depends.
If any individual leader were to disappear tomorrow, their discipline would remain as strong as ever. They have built a culture of discipline, as distinct from having a larger-than-life disciplinarian at the helm. They hold their leaders accountable for the success of their successors.
Great companies create catalytic mechanisms. They have red flag mechanisms that bring brutal facts to their attention, and force them to confront those facts, no matter how uncomfortable. They set in place powerful mechanisms that stimulate progress—mechanisms designed to force them to continually improve. Their mechanisms are designed so that people who hold power—and who might want to ignore the brutal facts—cannot easily subvert the mechanisms.
Great companies manage for the quarter century. No matter what short-term pressures they face—Wall Street, financial distress, No Child Left Behind, pressure for a winning season—they build for long-term greatness; they manage not for the quarter, but for the quarter century. Their leaders measure their own success as much by how their organization performs in the hands of a successor as by how it fares during their own personal reign.
Resources for the construction of the summary provided by Good to Great by Jim Collins (New York: HarperBusiness, 2001. 320 pages, 9 chapters.), and the Diagnostic Tool at the Jim Collins website at http://www.jimcollins.com/pdf/Diagnostic%20Tool.pdf.