You know that book Good To Great? It’s the most popular business management book out there.
The author, Jim Collins, analyzed 1,435 companies. He named 11 as “good to great.”
Many in K-12 world like it. We use his ideas for how a school might go from good to great. Or mediocre to good. Or crappy to mediocre.
Many of his ideas boil down to No Shortcuts. For example, Collins writes:
In each of these dramatic, remarkable, good-to-great corporate transformations, we found the same thing: There was no miracle moment. Instead, a down-to-earth, pragmatic, committed-to-excellence process—a framework—kept each company, its leaders, and its people on track for the long haul. In each case, it was the triumph of the Flywheel Effect over the Doom Loop, the victory of steadfast discipline over the quick fix.
What’s the Doom Loop?
Companies that fall into the Doom Loop genuinely want to effect change—but they lack the quiet discipline that produces the Flywheel Effect. Instead, they launch change programs with huge fanfare, hoping to “enlist the troops.” They start down one path, only to change direction. After years of lurching back and forth, these companies discover that they’ve failed to build any sustained momentum. Instead of turning the flywheel, they’ve fallen into a Doom Loop: Disappointing results lead to reaction without understanding, which leads to a new direction—a new leader, a new program—which leads to no momentum, which leads to disappointing results. It’s a steady, downward spiral. Those who have experienced a Doom Loop know how it drains the spirit right out of a company.
Many teachers in large, traditional, urban high schools have many tales of experiencing the Doom Loop. They stay. They persist. But their spirit drains.
For example, down the street from our middle school is English High.
The long road back: The fate of a school and its headmaster’s career rest on restoring what was once a Boston educational icon
Almost a year after the state Board of Education (BOE) approved Boston English High School’s proposal to become a Commonwealth Pilot school—preempting a potential state takeover—the troubled city school is on the right track, many say.
Hired as a savior, the young, new principal upended everything at English High but this: the pattern of failure
Well Jim Collins found many companies behave in a similar way. Til they die.
Consider the Warner-Lambert Co.—the company that we compared directly with Gillette—in the early 1980s. In 1979, Warner-Lambert told Business Week that it aimed to be a leading consumer-products company. One year later, it did an abrupt about-face and turned its sights on healthcare. In 1981, the company reversed course again and returned to diversification and consumer goods. Then in 1987, Warner-Lambert made another U-turn, away from consumer goods, and announced that it wanted to compete with Merck. Then in the early 1990s, the company responded to government announcements of pending healthcare reform and reembraced diversification and consumer brands.
Doom Loop is why my teacher friends in some traditional large urban schools have indigestion when they hear about any sort of “reform.”
In their direct experience, all they’ve seen is Doom Loop. More precisely, Doom Loop masquerading with claims that this time it would be Flywheel. This time. Righto.
So anyway. Back to Collins.
I wondered: What has happened to those 11 companies since Collins published in 2001? Are they still Great? Or did they go from Great to Good?
I looked up stock prices.
1. Two of the 11 Greats have continued to be Great since 2001: Nucor or Philip Morris. Making tons of dough for investors.
2. Five have been medicore: fairly close to how other companies in the S&P performed over that time.
A few a bit worse (Abbott Labs, Walgreens), a few a bit better (Kimberly-Clark, Kroger, Walgreens).
3. Three “Great” companies have gotten killed.
Pitney Bowes is half its market cap of 2001.
Circuit City is defunct.
Fannie Mae (securities fraud, delisted by NYSE, contributed to gigantic financial meltdown)a
(One of Jim Collins’ 11 companies is hard to tell: Gillette was bought by Proctor and Gamble in 2005, so hard to gauge its profitability).
* * *
So what happened? Did these companies stop doing the things that Collins says worked? Or is Collins wrong about what makes a company great?
Collins’ beliefs include:
Disciplined people: “Who” before “what”
You are a bus driver. The bus, your company, is at a standstill, and it’s your job to get it going. You have to decide where you’re going, how you’re going to get there, and who’s going with you.
Most people assume that great bus drivers (read: business leaders) immediately start the journey by announcing to the people on the bus where they’re going—by setting a new direction or by articulating a fresh corporate vision.
In fact, leaders of companies that go from good to great start not with “where” but with “who.” They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats. And they stick with that discipline—first the people, then the direction—no matter how dire the circumstances. Take David Maxwell’s bus ride. When he became CEO of Fannie Mae in 1981, the company was losing $1 million every business day, with $56 billion worth of mortgage loans underwater. The board desperately wanted to know what Maxwell was going to do to rescue the company.
Maxwell responded to the “what” question the same way that all good-to-great leaders do: He told them, That’s the wrong first question. To decide where to drive the bus before you have the right people on the bus, and the wrong people off the bus, is absolutely the wrong approach.
Maxwell told his management team that there would only be seats on the bus for A-level people who were willing to put out A-plus effort. He interviewed every member of the team. He told them all the same thing: It was going to be a tough ride, a very demanding trip. If they didn’t want to go, fine; just say so. Now’s the time to get off the bus, he said. No questions asked, no recriminations. In all, 14 of 26 executives got off the bus. They were replaced by some of the best, smartest, and hardest-working executives in the world of finance.
So was Collins wrong on this point? I don’t think so.
I wonder if, with the company’s new high profile, it was hard to retain the A-level people. Collins writes:
Sidebar: Great answers to good questions
Fast Company: The CEOs who took their companies from good to great were largely anonymous. Is that an accident?
Jim Collins: There is a direct relationship between the absence of celebrity and the presence of good-to-great results. Why? First, when you have a celebrity, the company turns into “the one genius with 1,000 helpers.” It creates a sense that the whole thing is really about the CEO. At a deeper level, we found that for leaders to make something great, their ambition has to be for the greatness of the work and the company, rather than for themselves.
That doesn’t mean that they don’t have an ego. It means that at each decision point—at each of the critical junctures when Choice A would favor their ego and Choice B would favor the company and the work—time and again the good-to-great leaders pick Choice B. Celebrity CEOs, at those same decision points, are more likely to favor self and ego over company and work.
FC: Like the anonymous CEOs, most of the good-to-great companies are unheralded. What does that tell us?
JC: The truth is, few people are working on the most glamorous things in the world. Most of them are doing real work—which means that most of the time they’re doing a heck of a lot of drudgery with only a few moments of excitement.
I wonder if the massive success of Collins’ book made these anonymous CEOs and other folks….famous.
And therefore they were offered other gigs.
And perhaps there was a talent drain.
I wonder. That’s just one small facet, I’m guessing, of the larger puzzle.
What do you make of the fact that the Good-to-Great companies are not, on average, great any more?