There is a good reason that Jim Collins’ book Good to Great
What you may find most interesting from a leadership perspective are the revealing discoveries Collins made that can help any leader improve his craft; we’ll talk about a couple of those below; read on…
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Defining Greatness
Collins, an avid rock climber and Stanford MBA, was on a quest to answer a simple question:
“Can a good company become a great company and, if so, how?”
In answering this question, Collins and an impressive team of 21 researchers spent five years collecting data, arguing its meaning, and reaching conclusions about what makes a company great and how a good company can achieve greatness.
They began by finding what they considered to be the “Good to Great Companies.” They defined them as those who started with at least 15 years of cumulative stock returns at or below market levels (the “good” period), had a clear transition point, followed by 15 years of sustained returns that were at least three times the market – truly spectacular performance (the “great” period).
In sifting through the Fortune 500, they found that only 11 companies that made the grade.
Then the research teams made an exhaustive, detailed analysis of what happened in the transition period that caused those companies to metamorphose from merely Good, to Great.
After lengthy study and debate, some of their conclusions are quite surprising, particularly to someone interested in leadership. Here’s an example.
A Surprising Leadership Story
Early in the book, Collins chronicles the tale of a paper company that had fallen well behind the market over the previous 20 years. When the company named a new CEO, the man chosen to take his place, Darwin Smith, was the in-house lawyer. He was variously described as quiet, humble, modest, reserved, shy, and understated.
This was starting to look like the story of an unimpressive man in charge of a floundering company in a boring industry. Yawn…
Yet for the next 20 years, he led his company to spectacular performance, making the company a world leader, easily beating all its rivals, and earning cumulative stock returns 4.1 times the general market. Phenomenal!
What was it about Smith that allowed him to lead his company to greatness?
Level 5 Leaders
Actually, what was remarkable about Smith was that he was unremarkable. The person most of us might have expected to see masterminding such a turnaround would have been a dynamic, charismatic leader firmly in charge of all he surveyed.
Instead, as Collins puts it, “Compared to high profile leaders with big personalities who make headlines and become celebrities, the good-to-great leaders seem to have come from Mars.”
Smith and the people at the helms of the other Great companies turned out to be what Collins refers to as Level 5 Leaders.
Leaders in the first four levels are highly capable as individuals, team members, managers, and leaders. But at the highest level, the Level 5 leader “Builds enduring greatness through a paradoxical blend of personal humility and professional will.”
“Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious – but their ambition is first and foremost for the institution, not themselves.”
Through their intense focus on the long term success of the company, they tend to combine a quiet, workman-like diligence with an almost fanatical need to produce results, doing whatever it takes to make their company great.
Everything they did was not about them, but about the long-term benefit to their organizations.
Good leadership means never stop trying to become qualified for your job. Click To Tweet
The Opposite of Charisma
A related point that came from their research is even more surprising. The leaders of the greatest companies were modest and humble men.
But more surprisingly, larger-than-life celebrity leaders who came in from outside the company to lead a turn-around were actually negatively correlated with transforming the company from good to great.
In other words, the big personalities actually made things worse in the end.
As an example, Collins points to Chrysler Corporation in the 1980s. On the brink of failure, Chrysler brought in Lee Iacocca, former president of Ford Motor Company noted for many of its successes, including the Ford Mustang.
Once in charge, Iacocca engineered one of the most celebrated turnarounds in business history over the course of the next several years. But eventually, Iacocca lost focus, the business lapsed, and was eventually bought out by German car maker Daimler-Benz.
The celebrated leader had certainly turned the company around, but had not created a Great company that would last.
The Takeaway: Good to Great
You don’t have to be a born charismatic extrovert back slapper to be successful as a leader. While some of those traits can be helpful, what is more important is your focus as a leader.
The leaders of the Great companies were consistently and intensely focused on their companies, not on themselves.
In a memorable passage, Collins talks about how the Great leaders look out the window to give credit, but look in the mirror to dole out responsibility.
To give credit, leaders look out the window; to assign blame, they look in the mirror. - Collins Click To Tweet
If you go and do likewise, you could find yourself on the path to greatness, too!
Lead On!
