Nerd Guru

Because technical people need good soft skills to get ahead.

Monday, December 10, 2007

Book Report: Good to Great

What's the secret to running a great company?

To find out, former Stanford Graduate School of Business faculty member Jim Collins turned his impressive researchers loose on mountains of public data. They examined the 1,435 companies that appeared in the Fortune 500 from 1965 to 1995 looking for a pattern: more than 15 years of sustained growth.

While that sounds simple, that 15 year period was selected on purpose so that the growth was related to the management excellence at a particular company as opposed to their specific industry getting hot or the market in general. From that huge list of companies, only 11 made the cut. Collins' team then studied those top companies closely, interviewing as many of their top executives as would talk to them and did the same for one of their competitors to find out what it was that made one company good, but the other great. That's the premise of Good to Great: Why Some Companies Make the Leap... and Others Don't.

The conclusions that Collins' team reached are separated into three main sections for what each company did in preparation for their leap, steps taken to spark their leap, and how they sustained the leap. The entire book is a worthy read, but the first section on laying the groundwork was the most interesting me and I think the most applicable to anybody at any part of an organization.

This section, entitled "Disciplined People" is covered in two chapters and deals with the issues of effective leadership and hiring.

Level 5 Leadership

The most striking aspect of the CEO's of the 11 Good to Great companies was that I had never heard of any of them. In fact, I had to reread the chapter to come up with their names again: George Cain, Alan Wurtzel, David Maxwell, Colman Mockler, Darwin Smith, Jim Herring, Lyle Everingham, Joe Cullman, Fred Allen, Cork Walgreen, Carl Reichardt. Upon viewing the list yourself, I bet you can only identify the company associated with one of these people who led their companies to an average growth almost 7 times the general market over a 15 year period.

It turns out, that's not a mistake or a coincidence.

What Collins team found is that these leaders had an unusual combination of an unwavering will to succeed but combined with a fundamental humility. They took the blame for problems and pointed out the contributions of others for successes. As the book states, "more plow horse than show horse." Collins goes into what he calls the different levels of leadership, with this kind of leader at the top of the 5 bands.

Contrast that to the "rock star" CEO who has a huge personality and is a certified genius. The study found plenty of those companies and it was not unusual for them to be wildly successful. But, the pattern that repeated itself over and over again is that when these highly intelligent, highly charismatic people left their companies, results dipped substantially in the wake of no capable successors. When the genius gets bored, he or she leaves and the drive goes with him or her. This type of leader tends to have helpers around, but not people who challenge their massive intelligence, so when they do leave there's nobody to take their place.

First Who . . . Then What

Once these modest leaders were in place, it's not surprising that they put a premium on finding top talent instead of "yes" men in strategy level positions. What was surprising, the study found, was that often it was more useful to find the right people first before figuring out what direction to take the company. Typically we think about making the plans first and then hiring the people to execute those plans, but for these companies that achieved this long term growth, the opposite was true.

Essentially, these humble but driven leaders got as many smart people as they could find and locked them in a room together until they came up with the plan to move forward with. The concept went as far as it being better to hire nobody than to hire the wrong person. That part has stuck with me, as I've often been forced to put someone in a position of influence that I knew wasn't as capable as they could be but did so for the sake of timing. Never has that worked out and I now see how the flip side of that mistake manifests itself much better.

Conclusions

While later sections of the book are more useful to someone who has strategic decision making ability within a company, it really struck me how much these two chapters could influence just about anybody. Even if you aren't in a leadership position yet, the behaviors outlined above can help your immediate work group function more effectively. Be humble. Pass around credit. Conduct that extra interview to find just the right person. Enforcing these types of things can aid in your own career ladder climb.

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