Hector Gonzalez Robles

Mat A00940806
Liderazgo y Dirección de Personas
en las Organizaciones

Critical Analyis – Good to Great

Good to great presents a well structured deep analysis regarding the critical factors that allow a
company to go from being just a good corporation to becoming a great one and doing so in a
sustainable way. Jim Collins is well known for different titles related to leadership like “Built to
Last” and “Great by Choice”. In this take, the author walks us through a stupendous team effort
to achieve a methodical formula that some companies have followed to leave behind the shadow
of being good and achieving greatness. Mr. Collins reflects on the fact that good is many times
the biggest enemy of growth, not only for companies but for every organization and even people
themselves. Accomplishing good things might blind the road to greatness by creating a certain
comfort zone. The book explains how some companies have shied away from goodness and
hand in hand with great leadership have accomplished moving to the next level.

The study is built around historic and public information from 28 companies, 11 that have gone
from good to great, 11 companies that were great at some point and might still be but never
achieved greatness and compare one on one in the same industries as the first companies, and
6 more companies that at some point went from good to great but failed to be sustainable. The
analysis considers a 15-year period to be the threshold to determine if there was sustainability in
the process. The author and his team systematically compared all the companies and the
decisions made by their leaders, specially during the “breaking point” from having good to great
results. Finally, good to great companies were selected because they were over achievers versus
the market and the other players in the market, not only in their own industry.

Right out of the box, the author hooks the reader by explaining that pre-conceived ideas like
compensation, how famous the top management was, or technology were determinant factors to
determine if a company took the step or not. In contrast, the end results of the analysis turn out
to be as simple as these pre-conceived ideas but much more astonishing. Being this a book by
an author that specializes on leadership, the study focuses constantly on the actions and
decisions made by those who leaded the companies, not only those who took them to greatness
but also their predecessors and those who took the realms of the ones leaving.

Finally, during the introductory lines of the study, Collins explains how the results achieved have
timeless application and justifies this by explaining that the companies that achieved greatness
(11 out of more than 1,000 companies) had been in business for a long time and have endured
many changes similar if not more complex than the ones coming into effect now, especially when
considering industry specific alterations. That being the case, the author does not anticipate the
results being affected by time and consider them as applicable for the foreseeable future.

The framework constructed by the author and his team considers factors that were critical in all
the good to great companies but were significant for less than 30% of the comparison companies.
Collins goes into detail for each of these concepts and in a very simple but consistent way related
each of them to scenarios of the analyzed companies. The following paragraphs intend to
communicate my personal understanding of their framework.

After many though, Collins and his team arrived at the name “Level 5 Leadership” to categorize
the status required to take a company from good to great. They go on to explain that based on
the information gathered this level is something that can be considered rare but in fact can be
trained and accomplished by many people and is not something that we either are born with or
not. They conclude that these leaders are not those who everybody might imagine at first,
celebrities, larger than life, high profile leaders that have taken top 5 companies to where they
are. Instead, many if not all the analyzed leaders appear rather quiet, reserved and even
sometimes shy. The one thing they do all shared was an enormous drive to accomplish their
companies’ goals.

None of the leaders that took companies from good to great top headlines of famous business
magazines or newspapers, the accomplished what they did in a quiet and methodical manner.
They are characterized by having that down to earth attitude that might mislead some to think of
it as a weakness but were key to making difficult, ground breaking, and sometimes un popular
decisions, that helped their companies make the leap. They all had a pristine work ethics and
worked towards making the company great, and not their own recognition, fame or legacy. They
all had a superb drive, a need to accomplish unconceivable results and by doing so beating all
odds.
As part of these leaders’ humbleness and understanding of the end goal for their companies they
were human and smart enough to recognize that the only way a company can maintain a certain
level of greatness is to go beyond on individual achievements and time frames and build a
management team that can continue implementing the same ideas. The companies that could
not be kept in the great category commonly suffered after change of management and most of
the times this was because the leader that left was too egocentric to create a culture where
someone could undertake what was being done and do it in a right way. On the contrary, they
thrived in being the heroes and know-it-alls of their organization, almost messianic. The author
calls this the “biggest dog” syndrome where they don’t care if there are other dogs in the kennel
if they are always the largest.

Level 5 leaders commonly conduct themselves with great and honest modesty, they understand
that their accomplishments are also their teams’ accomplishments because they are responsible
for building and training those teams and creating the culture that surrounds them and enabled
them to get where they are. Many of them minimized their role when asked about it. If we think
about it, many or all the real work done to take a company from good to great is done by the
people on the ground and the actual role of the leader is to bring those necessary pieces together
and put them in the right place at the right time. Great leadership can only be achieved when
there is a group of people that will follow. In all cases these leaders are as selfless as can be and
the author describes this with a mirror and a window analogy: a great leader will look at the mirror
when trying to understand what needs to be changed or what is going wrong and looks out the
window when he must recognize success. Other leaders, even very goof leaders, will look at the
mirror when recognizing success and out the window when trying to understand what is not going
well to blame external factors.

The second concept for greatness is the first who and then the what. If I had to chose one that
mostly resonated in me I would go with this one. Coming back to the importance of the team effort,
the book relates how all these leaders did not start their tenure by establishing changes,
strategies, models or anything related. Instead, the first understood who they had under their wing
and what was their potential and drive. The direction the company is heading is only important
when whoever we have at the wheel are the right people. He mentions a common saying: “A
company’s biggest asset is his people” and clarifies that the saying is flawed, the biggest asset
for a company are the right people. In hindsight, task #1 for these leaders was to make sure that
whoever was up to the task and was willing and thrilled by the simple fact of being a part of
something big would be the ones that should stay, anyone else will just be losing their and the
company’s time and thus should leave. Great leadership understands the people in he ship and
not only listens to them but actively pushes them to question and debate. There’s nothing worse
than an authoritarian leader who everybody fears and is afraid of confronting with a different
opinion. This situation hinders the ability for growth in a company and creates a bad habitat for
everybody. The book also goes on to destroy the idea that compensation is critical to have good
people on board. Those who are motivated and have the drive needed will to whatever has to be
done regardless of this factor. That does not mean that they should or could be underpaid, but
money will not be the motivation they’ll need to contribute at their very best. What is more
important, when you have the right people on board it is easier to achieve good compensation
levels, a highly productive team allows for a smaller head-count with even better results. In a
nutshell, motivation comes first, compensation is secondary.

Obviously having the best people in the team is not always easy, even though the author explains
how many of these leaders halted any hires when in doubt it is common to misinterpret talent and
have underachievers in the group. When that’s the case, the decision must be made immediately
out of respect for the other team members that are clearly aware of the short comings, out of
respect for the company and out of respect for that person that is basically losing time while
staying put. For those recognized overachievers, those talents and potentials that have
demonstrated a higher than average capacity we tend to give them projects that have given us
headaches in the understanding that because of that potential they will be able to resolve. The
book explains how these leaders viewed this in a different way by putting these high potentials in
their biggest opportunity to be successful and create value for the company.

One might think that achieving level 5 leadership might require more time that there is in a day
and the need to neglect everything else in our life. Surprisingly enough, these leaders achieved
a good work-life balance by going for the who first, instead of the what. Having the key pieces in
the right places allows them to be involved but not at a level where they would have to be present
always. A great leader strategizes and gives importance to what matters, including personal life.
In my opinion this last factor sounds a bit simplistic but understand how great management may
allow this.

The third concept described in the book involves embracing circumstances and maintaining faith
regardless of how difficult times might seem. One of the most obvious traits these leaders have
in common is that they had to take the reins of a company that was either doing below average
or just good. Many of them stepped in when the situation what somewhat critical and the first step
in the right direction is to confront those odds head on. Not accepting them or trying to shortcut it
will undoubtedly leave a dangerous gap between the desired goals and the effectiveness of the
strategy implemented. A great leader understands what needs to be done and goes for it and is
particularly good at identifying those required actions when the times are hard.

Clearly, we must come back to the fact that the leaders do not stand alone, a clear communication
is critical to overcoming obstacles and making the most out of them. Maintaining a false calm just
makes the issue at hand even more complex and discourages the team members. Once the
whole team understand what the situation is they can all be in the same page and take
responsibility on the own actions, it might be better to lose someone if they are not really invested
in the challenge and keep those who will leave their lives on the line to get where the company
needs to be.

Being up front with facts and maintaining the team informed might sound like a nightmare for
many leaders because that means having to maintain a level of motivation within the team in spite
of the harsh situation. The book explains how the need for motivation evidences a bigger problem
and one that we have talked about before. The right people will embrace the challenge and will
be self-motivated because of it. People that are not all-in will simply fade away and leave a whole
in the organization, therefore hiring the right people is crucial. Once the team is right, the
ambiance should be one of truth and communication where debate is not only an option but
encouraged and where accountability is more of a learning process that a finger pointing. When
a company and a leader can understand, self-evidence its mistakes, talk about them and learn
from the we might say that a level of maturity has been achieved. There is nothing bad about
being wrong if there is something new to learn from those mistakes. That level of communication
will allow the team to be alert for those red flags and open their mouths when something needs
to be changed.

Faith is something that cannot be lost, taking on the challenges is what makes a company and its
team stronger at the end. It is important to point out that even though these great leaders faced
great challenge, that level of complexity is common among business and that the comparison
companies went through the same, the way they handled it is what sets them apart.
The author follows with the hedgehog concept, explaining how the same honesty previously
mentioned is crucial for achieving greatness. A company must be honest with itself and
understand what are is its core business, regardless if that is not the activity that it is currently
executing. As humans, companies can create self-perceptions and get carried away with the
possibility of engaging in activities that may render success without realizing that taking on too
many tasks and losing focus can ultimately bring problems.

One cannot be an expert on everything, companies can only achieve greatness when they focus
their efforts on becoming the best at what it does and staying away of those things at which it
cannot be the best. This simple concept created the bases with which a leader establishes and
permeates the company’s goals and strategies. A clear understanding of what the hedgehog
concept for the company will allow those efforts to be productive and avoid losing time and
resources on things that will ultimately not render profit. Good to great companies normally focus
on simple and few things, they avoid getting distracted by the possibility of something distant.

Achieving or obtaining the hedgehog concept might sound more obvious and simple than it is.
Getting there requires multiple iterations and bumps along the road. Coming back to the
importance of communication, the book explains how a council integrated by key team members
can accelerate the process by establishing a clear channel to discuss the three circles of the
concept:

1. What can we be the best in the world at, which creates a clear scope of work for the team.
2. What drives the economic engine, what brings the most return out of your time, regardless
of it is sexy or not.
3. What is the company passionate about, the need to discover what lights it.

I consider the hedgehog concept as a critical one and easily relatable to personal life, we try so
many times to take on more than we can handle and sometimes on more than we need to.
Focusing our efforts on whatever we are good most times will prove more beneficial in every
aspect that trying to be super heroes. It is just a matter of self-management, one must know
enough about himself to identify the implicit limits and inner potential. Same thing with business,
the company does not have to be the best in many things or be in a trendy industry, it can very
well be successful at one thing in a merely quiet industry, ultimately this is not a e beauty contest,
it is about making profit.
I consider discipline to be the glue that hold all these concepts together, a company need a certain
structure to achieve greatness and then needs a lot more discipline to make it sustainable. The
on thing about structure or discipline is that it might sometimes be confused with being square or
too bureaucratic. When a company has the right people in the right place bureaucracy is simply
not needed, policies, procedures, rules and all that paperwork most of the times is created
because team members are undisciplined by themselves, when someone abuses the from the
travel expense account one might think there is no other way that to create a policy. Once again,
the right people will be self-disciplined, be aligned with the company and its goals and won’t
require of so called policies. The hedgehog concept takes on another level of importance when it
comes to discipline. Having a clear understanding of the company’s motivators, money makers
and limitations will ensure the team is the correct one and that the y know what the goal is. That
way they can responsibly take the appropriate actions themselves.

Creating an overwhelming discipline structure can in turn be converted into a tyranny, the
company must be agile enough to accomplish a duality where there is enough freedom to allow
people to make their own decisions, empower them the keep creating, imagining and contributing
but do so in a well-defined system that keep things in order. The author mentions how from the
outside this might look somewhat boring and it makes sense if we think that it might look too
machine-like but giving a second though, a well-oiled machine can be extremely fun for those
who like machines. Working at a company where everyone is motivated, has the same goals and
constantly delivers must be fun. Rules matter but having a team of people that understands them
more as a culture is way more productive, anyone can enforce a set of rules but only a great
company will grow to create an environment where people reflect those rules by nature.

When it comes to technology, great companies conceive it in a different way than mediocre ones,
especially in recent years. Great companies stick to their core activities and carefully select those
technologies that might accelerate their success but not take it out of course from what it does
best. If in turn the technology fits perfectly within the hedgehog concept then everything changes,
the company must continue being the best in the world at what it does and pioneering that
technology might be the best or at some point the only way of keep being the best.

Great companies react carefully to new technologies, they are methodical in the way the conduct
everything and this is not the exception. We might have heard of many companies which blew
the market because of technology but we must keep in mind that what this study defines as a
good to great company implies sustainability. One time wonders only serve speculative investing.
Carefulness should not be confused with arrogance. Companies cannot hope to stay present if
they are negligent to technology advances, they just need to be especially careful not to bounce
off their hedgehog while trying to implement it.

Good to great does not happen by coincidence and does not happen from one day to another. To
outsiders it might look like a breakthrough but the insiders achieving greatness is just part of a
well-organized effort that has been under process for many years. Perspective has this duality
since insiders have been pushing and working hard to gain momentum of what is going on and
that normally does not show, again, great leaders keep their mouths closed and give results, they
do not shout every single success and minimize every mistake. Once the breakthrough moment
arrives, the company, its team and its leaders naturally have been expecting as well as they have
identifying as their goal.

A big difference of how good to great and comparison companies approach growth is identified
when we consider that many comparison companies have tried to reach success by trying to hit
a homerun every time they embark in a new adventure which in many cases do not match with
their hedgehog. Good to great companies work for years to achieve that breakthrough and then
focus on acquisitions to maintain growth.

To wrap up his book, Collins turns to answer some unanswered questions from his previous book
“Built to Last”. I consider the idea both a smart way of wrapping up his work and also a great
publicity stunt to promote sales of that book, I for one can’t wait to read it to understand the results
behind that study.

The author explains how “Good to Great” became more of a prequel than a sequel to his other
book by describing many of the actions a leader and his team must take to ensure that a company
can head into greatness in comparison to being built from the bottom up. Many concepts of this
book are easily adaptable as they describe what those leaders had to do to overcome the odds
and build their companies. The hedgehog concept, for example, relates as to how these leaders
had to understand their companies’ identity to focus on that and avoid distractions and by doing
so achieving greatness. It is important to point that those leaders fit into a completely different
category as the ones analyzed in this but since they brought companies from null relevance to
what they are today, and they did so throughout a considerable period.
In all I considers the analysis a well-rounded, carefully constructed with almost scientific approach
to historical data that might pass as non-related to the by passer but that when brought together
paints a very interesting picture. Not to say that the conclusions to which the team arrived are to
be considered universal truths but as with many things in life, perfect truth might never be reached
and a good analysis like the one achieved in this book might the best approximation to it.

Basic principles and simple values that many times are taught at home are present all over the
book. The leaders’ misdemeanor and the way they conducted within their companies and with
their teams makes things look almost too easy but that are rarer to find each passing day. Many
of those attitudes or principles are not only important in business but should be considered general
rules as to how each of us should conduct its personal life and treat others, including our friends,
our family and every stranger that might cross our path.

The book destroys preconceptions related to compensation or how a leader’s fame is related to
a company achieving greatness. These ideas could be a quick exit to easily describe how the
company got where it is but did not sustain the test Collins developed for them. After many though
this makes sense, especially when we consider the importance of the team associated to those
leaders. Being able to focus primarily in the who really resonated in my head. This is something I
probably had always considered but had never been able to put into words. Putting together the
correct team of professionals and giving the right tasks to not only be successful, but also be able
to enjoy what they are doing is pivotal to achieve a breakthrough and I would say that it is critical
for anything in life. The right team of people can lead masses and change the world and it might
seem almost magical when those team come together, think of the Chicago Bulls back in the 90’s,
or the undefeated Miami Dolphins back in 1978.

Ultimately, I don’t consider this book to be the end of road for this analysis, some of the companies
considered as good to great went on to have not so goo times in recent history, for example,
Circuit City lost the battle against Best Buy in the United States and closed all of its stores,
certainly something had to go wrong after they achieved greatness. Wells Fargo on the other side
has recently reinvented themselves after losing much of its hard-earned presence. In many
senses I consider that this implies what must be a persistent effort to maintain all the concepts
mentioned in this book alive while at the same time continue reinventing the organization. Perhaps
the timeless assumption the author makes about their analysis has different shades to it and
requires of constant analysis throughout time.