A study of companies that went from good to great.

Chapter 2

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 ambitions – but their ambition is first and foremost for the institution, not themselves.

  • Level 5  Executive – Builds enduring greatness through a paradoxical blend of personal humility and professional will.
  • Level 4 Leader – Catalyzes commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards.
  • Level 3 Competent Manager – Organizes people and resources toward the effective and efficient pursuit of pre-determined objectives.
  • Level 2 Contributing Team Member – Contributes individual capabilities to the achievement of group objectives  and works effectively with others in a group setting.
  • Level 1 Highly Capable Individual – Makes productive contributions through talent, knowledge, skills, and good work habits.

Level 5 Executive

Humility + Will = Level 5
Level 5 leaders are a study in duality: modest and willful, humble and fearless.
“A dedication to making anything he touched the best it could possibly be – not because of what he would get in return, but because he simply couldn’t imagine doing it any other way.” – Mockler -Gillette

Ambition for the Company: Setting Up Successors for Success

Maxwell – CEO of Fanny Mae : Gave up his 5.5 million due him due to Congress controversy. Donated it to the Fanny Mae foundation for low-income housing; level 5 leadership; ambition first and foremost for the company and concern for its success rather for his own riches.

Level 5 leaders want to see the success of the company even after they are gone; for the next generation.

They are comfortable with no one knowing that they were responsible for the company’s success.

Good to Great L5 executives rarely talk about themselves.

Those who worked with good to great leaders continually used words like quiet, humble, modest, reserved, shy, gracious, mild-mannered, self-effacing, understated, did not believe his own clippings, etc.

L5 leaders are humble and simple minded.

L5 leadership is not only about humility and modesty, it is also about ferocious resolve, an almost stoic determination to do whatever needs to be done to make the company great. They CANNOT stand mediocrity in any form and was utterly intolerant of anyone who would accept the idea that good is good enough.

You do not need an outsider to come in and shake up the organization, it can come from within, as long as the L5 leader will do ANYTHING to  further the progress of the company. 10 out of 11 leaders came from within the organization, not from the outside.

L5 leadership – extraordinary results exist but there is no individual steps taken to claim excess credit.

Chapter 3

Companies that went from good to great FIRST got the right people on board and the wrong people off board, then figured out where to go.

The right people do not need to be tightly managed or motivated, they will be self-motivated by the inner drive to produce the best results and to be part of creating something great.

If you find the right direction, but the wrong people, you still will not have a great company. Great vision without great people is irrelevant.

No systematic pattern existed linking executive compensation to the process of going from good to great. The evidence simply does not support the idea that the specific structure of executive compensation acts as a key driver in taking a company from good to great.

Once you have structured something that makes sense, executive compensation falls away as a distinguishing variable in moving an organization from good to great.

Good executives do not work for money alone, they work for the reason that they will do everything within their power to build a great company, not for what they will get for it, but because they simply cannot imagine settling for anything less.

The right people will do the right things and deliver the best results they’re capable of, regardless of the incentive system in place.

Ruthless – hacking and cutting, especially in difficult times, or wantonly firing people without any thoughtful consideration.

Rigorous – constantly applying exacting standards at all times and at all levels, especially in upper management.

To be rigorous, but not ruthless, means that the best people need not to worry about their positions and can concentrate on their work fully. It might seem ruthless to let people go, but to keep them around when in the end you are getting rid of them would be more ruthless.

Layoffs were used more frequently at the lesser companies. Just letting people go to save money is never the way to get great.

How to be rigorous:

  1. When in doubt, don’t hire — keep looking.
  2. When you know you need to make a people change, act. Letting the wrong people hang around is a disservice to the right people.
  3. Put your best people at your biggest opportunities, not your biggest problems.

If you have the right people in place, it relives you to be there constantly, and maintain a balance of life.

Members of a good to great team retained a relationship long after retirement. They simply enjoyed the presence of their team.

Adherence to the idea of “first who” might be the closest link between a great company and a great life. For no mater what we achieve, if we don’t spend the vast majority of our time with people we love and respect, we cannot possibly have a great life. But if we spend the vast majority of our time with people we love and respect – people we really enjoy being on the buss with and who will never disappoint us – then we will almost certainly have a great life, no matter where the bus goes. The people we interviewed from the good to great companies clearly loved what they did, largely because they loved who they did it with.

Chapter 4

One of the dominate themes from our research is that breakthrough results come about by a series of good decisions, diligently executed and accumulated one on top of another. The good to great companies made many more good decisions than bad ones, and they made many more good decisions than the comparison companies.

The good to great companies faced the brutal facts in front of them and they developed a simple, yet deeply, insightful, frame of reference for all decisions.

All good companies set out for greatness. The good to great companies continually refined the path to greatness with the brutal facts of reality. They avoided the “head in the sand” mentality.

The moment a leader allows himself to become the primary reality people worry about, rather than the reality being the primary reality, you have a recipe for mediocrity, or worse. This is why less charismatic leaders often produce better long-term results than their more charismatic counterparts. Charisma  can be as much a liability than an asset.  Your strength of personality can sow the seeds of problems, when people filter brutal facts from you. You can overcome the liabilities of having charisma, but it does require your conscious attention.

** Expending energy trying to motivate people is largely a waste of time.

If you  successfully implement vision, you will not need to spend time and energy “motivating” people. If you have the right people on the bus, they will be self-motivated.

Leadership is equally about creating a climate where truth is heard and the brutal facts are confronted. There is a huge difference between the opportunity to “have your say” and the opportunity to be heard. The good to great companies understood this distinction, creating a culture wherein people had a tremendous oppoutunity to be heard and, ultimately, for the truth to be heard.

How do you create a climate where the truth is heard?

  1. Lead with questions, not answers. The good to great leaders made use of informal meetings where they would have no set agenda. Instead, they would start with questions like: “So, what’s on your mind?” “Can you tell me about that?” “Can you help me understand?” “What should we be worried about?” These non-agenda meetings became a forum where current realities tended to bubble up to the surface.
  2. Engage in dialogue and debate, not coercion. All good to great companies had a penchant for intense dialogue. “Loud debate”, “heated discussion” “heavy conflict” were often seen in articles about them. The process was more like a heated scientific debate, with people engaged in a search for the best answers.
  3. Conduct autopsies, without blame. When you conduct autopsies without blame, you go a long way toward creating a climate where the truth is heard. If you have the right people on the bus, you should almost never need to assign blame, but need only to search for understanding and learning.
  4. Build “red flag” mechanisms. The key lies not in better information, but in turning information into information that cannot be ignored. The use of red flags allow negative information to be passed up into the higher management so it simply cannot be ignored.

Good to great companies saw great competition not as a liability, but an asset. It is all about confronting the brutal facts. Good to great companies viewed great competition leaving themselves stronger and more resilient, not weaker and more dispirited. There is a sense of exhilaration that comes in facing head-on the hard truths and saying, “We will never give up. We will never capitulate. It might take a long time, but we will find a way to prevail.” The good to great companies had the goal to no merely survive their troubles, but to prevail in the end as a great company. “Six Million Dollar Man” mentality.

Every good to great company faced significant adversity along the way to greatness. On one hand they accepted the brutal facts. On the other hand, they maintained an unwavering faith in the endgame, and a commitment to prevail as a great company despite the brutal facts.

Stockdale Paradox. – Admiral Jim Stockdale; prisoner of war for 8 years. No release date and no certainty that he would ever be released and see his family again. Life is unfair at times, sometimes in your favor, sometimes not. We all experience setbacks at times in our lives for which there is no reason, no one to blame. What separates people is not the presence or absence of difficulty, but how they deal with the inevitable difficulties of life.

** You must retain faith that you will prevail in the end and you must also confront the most brutal facts about your current reality.

The good to great leaders were able to strip away so much of the noise and clutter and just focus on the few things that would have the greatest impact. They were able to do so in large part because they operated from both sides of the Stockdale Paradox, never letting one side overshadow the other.