Good to Great
Why Some Companies Make the Leap… and Others Don’t
by Jim Collins

Jim Collins established himself as a serious corporate researcher when he co-authored (with Jerry Porras) the book Built To Last almost ten years ago. This book conveyed the authors’ findings on companies that made significant growth compared to their competitors for a substantial period of time. Though very insightful in identifying the factors associated with the development of these companies, Built To Last gave very little insight on how a company could go from being good to great.

Driven by the question, “How does a company go from being good to great?” Collins put together a research team and spent 5 years in searching for the answers. He focused on public corporations that made a dramatic leap into greatness after being “good companies” for many years. To qualify for the study, these companies had to remain in the “great” status for at least 15 years. He used a set of criteria designed by his research group to define and quantify “good” and “great” companies. His insightful findings are contained in the book Good to Great Why Some Companies Make the Leap… and Others Don’t.

Collins’ research showed that there are similarities among companies that made the leap to greatness. He found that greatness is not so much a function of circumstance: it is clearly a matter of conscious choice and it does not happen over night. Great companies are run by what Collins calls level-five leaders (he suggests there are five levels of leadership). These individuals have a unique blend of personal humility and professional will. They “look in the mirror, not out the window” when focusing on responsibility and do just the opposite when apportioning credit for success of the company. These men and women are servant leaders, not self-serving ones.

Collins discovered that level five leaders lead by asking questions, not giving answers. They engage in dialogue and debate, not coercion. They conduct autopsies on ideas, plans and actions that did not go as anticipated, without projecting blame and then make the appropriate adjustments, moving forward with an expanded understanding. Level five leaders instilled in their followers a “red flag” mentality. A red flag is a mechanism that provides early warning when things are not going as planned.

Another similarity of great companies is the amount of effort they spend in hiring the best people and placing them in the “right” position (the book goes into detail as to what makes up “best” people). Best people don’t need to be tightly managed or fired up; they will be self-motivated and self-disciplined by the inner drive to produce the best results and to be part of creating something great. Once you have the right people, the problem of how to motivate and manage people largely goes away. Collins found “if you have the wrong people, it doesn’t matter whether you find the right direction; you still won’t have a great company. Great vision without great people is irrelevant.” Great companies realize that people are not their most important asset rather the right people are their most important asset.

Great companies minimize bureaucracy and hierarchy. Their management teams are made up of people who vigorously challenge, question and debate each other, in search of the best answers. Yet, they unify behind decisions, regardless of parochial interest. Great companies create a culture of discipline with a strong value of entrepreneurship. They build their culture around the idea of freedom and responsibility. Great companies understand there is no linkage between executive compensation and the process of going from good to great. The motivation to go from good to great is a personal attitude and cannot be purchased.

Good to great companies made it a priority to understand their financial situation and closely managed it. They took the time and patience to identify every item of cost, income and investment of the company. They then developed the best single measure of profitability. Great companies designated a single person to be responsible for tracking and reporting on these indices to every level of the company.

Changes in great companies tended to be the result of repetition of good things, not a huge strategic change. Technology had nothing to do with the transformation from good to great. It may have supported and helped accelerate it but it was not the cause. Mergers and acquisitions were not the cause. Good to great companies approach mergers and acquisitions cautiously. They use them as accelerators not creators of momentum.

Collins observed that good to great companies did not say, “let’s get passionate about what we do,” they went the other way “we should only do those things that we can be passionate about.” They did not create a goal to be the best; rather they developed an understanding of what they could do best, then they developed a strategy to perform and improve what they do best.

Last but not least, good to great companies maintain unwavering faith that they can and will prevail in the end, regardless of the difficulties, and at the same time have the confidence and discipline to confront the most brutal facts of their current reality – whatever that might be. Great companies found that it is more important to develop a "stop doing the wrong things" list than creating a "to do" list. They concentrate on one simple, unifying concept - everything else is irrelevant.

If you want to go from good to great Collins suggests that you: 1) Hire only the “best” people, well-disciplined people and empower them to find out what your company can be great at. 2) Choose a simple unifying concept that the company can be passionate about. Passion isn't dictated, it's discovered, 3) Identify your best single measure of profitability. Ask yourself: if you could maximize profitability per x, what x would have the biggest long-term impact on your company's success? Then, stay focused on improving that one key ratio. 4) Stop making 'to do' lists. Start making "stop doing" lists. Stop doing anything that doesn't fit within your simple unifying concept. 5) Have faith in your company's destiny, but realize it might take many years that are disappointing to get there. 6) Confront the brutal facts of your company's reality. 7) Make sure that the new effort is the agenda of all your employees. If it isn’t, make room for others who will enthusiastically adopt the new direction.

The preceding is but a small indicator of the contents of the book Good To Great. Collins does an excellent job of conveying his discoveries and observations in a language that illuminates their practicality and impact on the organization. If you are interested in taking your organization to the next level reading this book is well worth your time.

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