Book Review: Good to Great

Book Review: Good to Great

This review is not about the companies who, according to Jim Collins, achieved the move from good to great but whether the reasons behind their greatness are legitimate. The companies identified were good companies in their own right and became great through concepts including level 5 leadership, first who...then what, confrontation of the brutal facts, the Hedgehog Concept, a culture of discipline, technology accelerators, the flywheel and doom loop, and finally, a core ideology.

Jim Collins has researched and written about how companies are able to maintain success over time in Built to Last, however, he found himself wondering how companies make it to a level of greatness and longevity. Collins and his team set out to discover what it takes for a company to go from below average, or average, to great. Criteria established to meet the "great" label included "fifteen years cumulative stock returns at or below the general market, punctuated by a transition point, then cumulative returns at least three times the market over the next fifteen years" (6); eleven companies were identified. Seventeen other companies of similar standing were named as a comparison group with one direct comparison company for each of the eleven and six unsustained comparisons.

The level 5 leader is at the top of the hierarchy of identified leadership skills. This individual must have a strong will, desire for the company to succeed, focus on the company goals and not individual desires, and a sense of humility. These skills were deemed necessary to build a successful company but also successful employees. The leader was the anchor for the next steps in building a lasting company. Great leaders focused on hiring the 'right' people for the job; any doubt meant the person was not right, not hired and the search continued. When the need for change in personnel was identified, these leaders and companies took the necessary actions to fit the right person in the right position. The companies were found to maintain great employees for long periods of time and release the wrong employees quickly. These leaders also made sure their best employees had the best opportunities. If the top employees were utilized and valued, they were more likely to maintain the same type of focus and goal-driven behavior as the level 5 leaders. From this process of employment, a cohesiveness in personnel resulted.

The great companies were able to deal with the hard and brutal facts of their current standing and status, what needed to be accomplished, and what hard steps were required to achieve their goals. They allowed for a culture of honesty, openness and trust that each member would be heard. Leaders asked questions, participated in conversations, analyzed without fault, and did not overlook the warning signs. These eleven companies based their mission on the Hedgehog Concept: a combination of what they were deeply passionate about, what drove them economically, and what they could be the absolute best at in their respective industry. When a company focused on these three integrated aspects, they excelled.

A culture of discipline centered around "disciplined people, disciplined thought and disciplined action" (126). Disciplined people meant having the right people on the team who were completely devoted to the company's objectives. Disciplined thought involved team members recognizing where the company was at that time and the belief that it was possible for the company to achieve its goals. And finally, disciplined action was the "fanatical" work needed to support the Hedgehog Concept created by the company. "Disciplined action without disciplined understanding of the three circles cannot produce sustained great results" (133). These three steps needed to be adhered in order for a company to reach its goals. Even though some form of discipline can be found in most organizations, the difference between 'good' and 'great' company discipline is simply leadership. Level 4 leaders provide discipline through "sheer force" while level 5 leaders provide an "enduring culture of discipline" (130).

Most would assume that technology played a major role in a company's move from good to great. From the research, technology was more of a facilitator, increasing the momentum of the movement versus the cause of the movement. Companies needed to view technology as it related to their Hedgehog Concept. Not every new technology is effective for a company's success and the disciplined people within the company needed to understand which technologies were supportive of the company objectives and which became irrelevant.

The flywheel effect and the doom loop were the positive and negative outcomes of transition, respectively. The flywheel effect was based on decisions and actions that supported the company's Hedgehog Concept. This began the momentum of the flywheel and continuous repetition of support to this concept through disciplined people, thought and action continued the flywheel towards breakthrough and ultimately, greatness. The opposite, the doom loop, occurred when decisions did not support the Hedgehog Concept such as too much expansion into other areas and excessive changes in leadership. Eventually, financial results began to decline and the result, a failed company.

Companies who had ideas of greatness needed a core ideology consisting of core values and purpose. Core values were the tenets of the company defining who the company is and what it stood for. Core values never changed regardless of adjustments in processes and strategies. A company's purpose was a reason for being in existence other than generating profit. Without this purpose, a company simply could not make the move to greatness. The next step was progression, and this was achieved by maintaining the core values and purpose while having the flexibility to adjust strategies and processes to keep up with an ever-changing environment. And finally, establishing "big, hairy, audacious goals (BHAGs)" through "understanding" instead of "bravado," and ensuring these goals fell into the Hedgehog Concept, allowed great companies to endure (203).