You are on page 1of 10

ASSIGNMENT

OF
MANAGEMENT FOR
ORGANIZATION

Submitted to :- Submitted by :-
Vineeta aggarwal Arjun SinghBajwa
Section B
GOOD TO GREAT

What is given in the book

Good is enemy of great” – and judged from this angle of vision- the book is not good, it
is great! The Book is a breakthrough in the contemporary discussion on leadership,
excellence and corporate management. Rightly observed by Jim Collin, himself, to
say this book is“ by Jim Collin” overstates the case. It is, in fact, a research study,
representing about 15000 hours of works by a dedicated team of 21 scholars,
consuming 10.5 people years of efforts, studying nearly 6000 articles, and generating
more than 2000 interview transcripts. The study, starting with the 1435 companies
(selected from the Fortune 500 companies, during the years 1965 to 1995).And then
126 companies were finally selected for detailed data pattern analysis. Ultimately 11
companies were found, which turned out really “good to great” set of companies.
This great deal of concrete work, with a clearly defined process of theorizing and
evaluating, developing ideas, testing ideas against the data, and building a
framework, gives it a great deal of authenticity to its finding and inferences. Some of
the inferences and theories, can safely be termed as findings, tears apart and dispels
many myths about the factors of leadership and corporate excellence. For example,
the book finds , celebrity leaders from the outside are negatively correlated with the
great companies, strategy or long term strategic planning has little to do with the
great companies, the good to great companies did not focus on what to do but
focused more on what not to do, the good to great companies paid scant attention on
managing change, managing people, or creating alignment. The author has taken the
sample of 11 companies which had fifteen year cumulative stock return at or below
the general stock market, punctuated by a transition point, and reached a cumulative
return at least three times the market average, over the fifteen years. It included
companies ranging from Circuit City to Kimberlay clark , achieving the cumulative
return being 18.50 times and 3.42 times market average, respectively. The study
analyses “what did the “good to great companies” shared in common, that
distinguished them from the “comparison companies” and also from “un sustained
comparisons” It is an eye opening exercise corroborated by carefully gathered data.
The framework considers the transformation as a process of “build up” (comprised
of “level 5 leadership”, “first who then what” and “confront the brutal facts”)
followed by “breakthrough” (comprised of “hedgehog concept”, “culture of
discipline” and “technology accelerators”). It is all mounted on a fly wheel of regular
efforts giving it a momentum to accelerate and sustain the process, to turn the
company from good to great. “Level 5 leadership” very appropriately dealt with the
leadership qualities, in the context of corporate management, starting from first
“Highly capable individual”, second “a contributing team member”, third “a
competent manager”, four “an effective leader” and finally to a “level 5 executive”
who is a paradoxical blend of “humility” and “professional will”. Collins very aptly
cited the example “Abraham Lincoln”! “First who than what” concept emphasizes on
getting the right people in the bus (and the wrong people off the bus) before figuring
out where to drive it. The point has very lucidly explained quoting the David
Maxwell (CEO of Fennie Mae) and Dick Cooley (CEO of Wells Fargo), who said “I
don’t know where we should take this company, but I do know that if we start with
the right people, ask them the right questions and engage them in vigorous debate,
we will find the way to make this company great”. “Confront brutal facts” It deals
with the need for openness and realization. For a charismatic leadership, the chapter
curiously observes, “the charisma can be a liability” because the strength of
personality can sow the seeds of problem when the people filter the brutal facts from
the leader. Leadership is about vision. But the leadership is equally about creating a
climate where the truth is heard and brutal facts confronted. It emphasizes on this
paradox of keeping faith in the end and at the same time, bear with the stark reality.
(“Stockdale paradox”) “The Hedgehog concept” Cork Walgreen (CEO Walgreens)
worked out a clear and concise strategy to have “the best most convenient drugstore
with high profit per customer visit” and then every effort and resources was simply
vested to one strategy, “a frame of reference for every decision” and it worked,
Walgreen achieved a cumulative stock return of $562 per $1 invested as against $309
for a company like Intel and $37 for the stock market in general. Such strategy
should be founded on deep understanding of three key dimensions i.e. “what you can
be the best in the world at”, “what drives your economic engine” and “what you are
passionate about”. A good to great company translate that strategy into a simple
crystalline concept that guided all their efforts. “Culture of discipline” is another
element of breakthrough. The chapter referred the “concept of responsibility
Accounting”( developed by Bernard H. Semler, an Accounts Officer with Abbott)
wherein every item of cost, income and investment will be clearly identified with
each individual responsible for the item. Every manager in every type of job was
responsible for his or her return on investment. Beauty of this Abbott system lay not
just in the rigor but in how it used rigor and discipline to enable creativity and
entrepreneurship. The concept is comprised of: 1. Build a culture around the idea of
freedom and responsibility, within a framework. 2. Fill the culture with self-
disciplined people who are willing to go to extreme length. 3. Don’t confuse a
culture of discipline with tyrannical disciplinarian. 4. Adhere with great consistency
with Hedgehog concept, exercising a religious focus on the intersection of the three
circles (“best at”, “economic engine” and “passionate about”). Equally important,
create a “stop doing” list and systematically unplug anything extraneous.
“Technology accelerators” – Walgreen is a case in study, who suffered a loss of
market value of $15 billion when ‘drugstore.com, the first Internet Pharmaceutical
company floated its share in market. Walgreen played a “crawl, walk and run” style
of response. It started with a crawl, experimenting with website cautiously, being
careful that it is consistent with their hedgehog concept of “convenience concept”.
Next, it walked, began to find ways to tie internet directly to its sophisticated
inventory-and-distribution model and ultimately to its “convenience concept”.
Finally, it ran in full swing, launching an internet site, as sophisticated and well
designed, as most pure dotcoms. Walgreen did not adopt the technology just for the
sake of technology or in a fearful reaction of falling behind; it used technology as a
tool to accelerate momentum after hitting breakthrough and tied technology directly
to its Hedgehog concept of “convenient drugstores increasing profit per customer
visit. Primary variable in winning a car race is not the car, but the driver! “The fly
wheel”- Try to turn a flywheel of 5000 kgs, push it one inch, then a few inches, then
few feet, then one rotation, then few rotations a minute, same effort continued for a
longer period and it may lead to a hundred, a thousand rotation per minute. It just a
matter of continued effort and time! At times, when it acquires a momentum, it may
pull you along, if you don’t push it further! It holds true for the “good to great
companies” which continued their exercising “build up” and “transformation”, un
relented, gradually and continuously. The flywheel effect has been depicted as a
cycle of events- “Step forward” (consistent with hedgehog effect), “accumulation of
visible results” , “People line up” (Energized with results), “Flywheel builds
momentum” and again a “step forward”, and so on. In sum total, it is marvelous
work to build the theory by interpolating data. The book is worth reading for the
corporate managers, entrepreneurs and management students as well. It is no less
important for the HR people looking for some concrete basis for effectiveness of
behavior and an insight into the phenomenon of leadership.

Key Points
• “Level 5 Leaders” - leaders who have both “personal humility” and “professional
will”. These are not rock-star leaders whose companies go into decline when they
move on. They are diligent and hard working - more bite than bark. Celebrity
leaders often work for a time, but appear to be damaging in the long run, because
they don’t create sustained results.
• Get the right people on the bus - that has to happen before the “what” decisions
are taken. That can change if you have the right people, but the wrong people will
certainly make the enterprise fail.
• You must always be willing to “confront the brutal facts”. Don’t ignore reality in
favor of what your hopes reflect it to become. Only by having accurate
information can you achieve success.
• The “Hedgehog concept” means having a simple, extremely clear concept of what
their business is. That business is something they can
1. Make money at
2. Be passionate about, and
3. Be the best in the world at These are also known as “The Three Circles”
• A culture of self-discipline is critical, because it creates an environment where
people work within a defined system, and yet, because the confines of the system
are known, gives them more freedom to act within that system.
• Technology is an accelerator, not an agent of change. Good companies use it to
execute better, but it won’t save a mediocre company.
• “The Flywheel” refers to the idea of momentum - keep pushing in one direction
and you’ll build up a lot of it that will help you to overcome obstacles.
Momentum is built a little bit at a time - it’s not a dramatic, revolutionary change,
but constant, diligent work.

Summary
The idea that sparked this book was to answer questions about how good companies
might become great companies, and how they went about doing so.

These six concepts are the heart of Good To Great and he devotes a chapter to explaining
each of them.

• Level 5 Leadership
• First Who... Then What
• Confront the Brutal Facts
• The Hedgehog Concept
• A Culture of Discipline
• Technology Accelerators

Methodology
The study looks at companies from 1965 to 1995, looking for those that, for 15 years,
either tracked or underperformed the stock market, followed by a transition, and
subsequently returning at least 3 times the stock market for at least 15 years. The goal
was to eliminate “flash in the pan” success from the results. Further filtering was
performed in order to ensure that companies also outperformed their industries, so as not
to include spurious results showing entire industries that grew by leaps and bounds in a
given period. Eleven companies were located that matched these criteria, and were
studied in depth, and compared to competitors in their fields
The companies studied were:

• Abbot Laboratories
• Circuit City (bankrupt in 2009)
• Fannie Mae
• Gillette
• Kimberly-Clark
• Kroger
• Nucor
• Philip Morris
• Pitney Bowes
• Walgreens
• Wells Fargo

Level 5 Leaders
All the companies studied had what Collins describes as “Level 5 Leaders”. Despite
sounding like something from a space-alien worshiping cult, what the term refers to is an
individual who is very humble on a personal level, but who possesses a great deal of
drive and desire to succeed, where “success” is not personal, but defined by creating
something great that will outlast their time at the helm. These are people with an
unwavering will and commitment to do what is necessary to drive their organization to
the top. Most of the good to great executives discussed luck as an important factor in
their success [and perhaps cynical readers of The Black Swan will agree with that
assessment more than the factors Collins cites - davidw]. Level 5 leaders, are, in any
case, the kind of people who do not point to themselves as the cause for an organization’s
success. The chapter closes with a discussion of whether Level 5 Leaders are born, or
made, with the conclusion that many people probably have the kernel of abilities and
attitude necessary to attain that status.

First Who … Then What


During the transformation from good to great, rather than concern themselves first with
the “what” - products, direction, strategy - the companies studied ensured they had the
right people “on the bus” before anything else. By having a strong team, these companies
avoided the pitfall of the “lone genius” CEO. For example, think what would happen to
Apple’s share price were something to happen to Steve Jobs. “Great” companies are
those that have a very solid foundation, and don’t depend on the brilliance of any one
person.

The research indicated that compensation did not correlate at all with the “good to great”
process. No particular compensation scheme appeared to be advantageous.
Also important was that, while the companies were “tough” places to work, they were
because of the general high quality and hard-working mindset, not because of ruthless
management. Some practical tips for how to be rigorous:

• Don’t hire someone unless you’re %100 sure that they’re the right person. It’s
better to wait and get someone that you know is a good fit.
• Once you realize you need to fire someone, don’t put it off. Do it quickly and
fairly, but do it and be done with it, rather than put it off.
• Give good people good opportunities, rather than the biggest problems. Fixing
problems makes you good, but taking advantage of the right opportunities can
make you great.

Good to great teams were mostly composed of people who had a good sense of balance
with the rest of their lives - family, church, and so on. Of course, they had a deep
commitment to their companies, but not one that blinded them to the other important
things in their lives.

Confront the Brutal Facts


One of the key factors in the success of the great companies was a series of good
decisions. The good decisions flowed from the fact that they all made a consistent and
thorough effort to confront reality, internalizing the facts relevant to their market. Having
lofty goals can be good, but you can never lose sight of what the reality is on the ground,
no matter how much you will it to be different.

In a large organization, where it’s impossible to personally poke your nose in all corners
of the company every day, it is crucial to create a climate where honesty is valued and
honored. If people aren’t telling it like it is, those at the top may not realize the truth until
too late. Some tips to create this kind of climate:

• It’s often better to ask questions rather than dispense “answers”.


• Encourage healthy debate. It has to be real debate, not a show put on to make
people feel included. It should also not just be argument for the sake of argument
- reach a conclusion and move on.
• When things go wrong, investigate to avoid repeating the mistake, instead of
assigning blame. If people are too worried about protecting themselves, it
becomes difficult to honestly analyze and learn from failures.
• Create mechanisms, “red flags” that allow people to communicate problems
instantly and without repercussions, and in a way that cannot be ignored.

Amidst these “brutal facts” that must be faced, you must also have faith in your final
goal. By maintaining this vision, and keeping your ear to the ground, it won’t be
necessary to motivate people - if you’ve got the right people, they’ll be motivated of their
own accord.
The Hedgehog Concept
The “hedgehog concept” refers to a parable of a hedgehog and a fox, where the fox
knows many things, but the hedgehog knows one big thing. The good to great companies
were by and large built by “hedgehogs” - this doesn’t mean stupid - au contraire - it just
means that they were able to focus on one big important thing that made their companies
great. Sometimes it takes real genius to see through all the clutter and grab the one,
simple, unique thing that gives you the advantage.

The “three circles” is an idea regarding how to find your “hedgehog concept”: think of
three interlocking circles, representing 1) what you are passionate about, 2) what you can
make money at, and 3) what can you be the best at. At the intersection of these three
things lies the winning target. If you can bring all three things to bear, you have found a
way to excel. Learn to realize, as well, what you will never be the best at - those are
things you must avoid, if possible. The economics of various industries varied widely, but
the good great companies were winners, even within industries that weren’t rising stars.
One consistent rule of thumb is to identify a ratio, profit per X, (where X could be
customer, web site user, per unit sold, per employee etc…) and focus on that. Sometimes
it may not be obvious.

Passion, on the other hand, does not come from executive rah-rah sessions with
employees, but by doing things that make people passionate on their own. Passion isn’t
something that can be forced on people, it has to come from a mission that they truly
believe in, that’s more than just a paycheck.

Another practical suggestion is to create a “Council”, of between 5 to 12 people, to


discuss and gain insights into the organization. It should meet regularly, not a one-time
group. Its members should bring to the table a deep understanding of some portion of the
firm. They need to freedom to speak their minds, and always have the respect of the other
Council members. The Council exists to help the chief executive, not reach a consensus.
It is an informal group, in the sense that it is not spelled out in official documents or org
charts.

Culture of Discipline
Great companies have both an entrepreneurial spirit and a sense of discipline. They are
both necessary - without the drive to try new things, and some degree of independence, a
company becomes a rigid, stifling hierarchy. Without some sense of discipline, things
begin to break down as the company grows. The best companies have both latitude for
individual action, as well as a culture of disciplined behavior. This begins, once again,
with the right people. It’s useless trying to create rules to force the wrong people to
behave correctly - it simply won’t work. Instead, you need to find people who have an
innate sense of self-discipline that doesn’t come from above. There is a big difference
between having a “tyrant” that enforces a culture of discipline by fear, and finding people
who naturally adhere to a disciplined approach. The former will disintegrate when the
leader moves on, the latter creates a lasting system.

One helpful approach to discipline is to have a “stop doing” list. Stop doing the things
that aren’t central to your business. Stop doing the things that are just clutter, but even
more importantly, stop doing even things that might be seen as important, if they are not
in your “three circles”.

Technology
“Great companies adapt and endure” - technology is not a differentiator in and of itself,
but rather something that enhances great companies. They use it to further increase their
leverage, in a conscious, directed way, rather than rushing to embrace it for the sake of its
newness. Technology won’t light a fire where there is none, but where there is already
good momentum, judicious use of technology can help accelerate it. Technology is an
enabler of change, not the cause of it - but the “people factors” must be in place before
application of technology will do any good. Technology as a reaction - to the latest
fashion, to the competition - was not what was found in great companies. These
companies possess a drive all their own that pushes them to be the best in their chosen
field, and picking the right technology is a natural part of that.

The “Flywheel” and “Doom Loop”


These two concepts represent positive and negative momentum. A flywheel is a heavy
wheel that takes a lot of energy to set in motion - to do so usually requires constant,
steady work, rather than a quick acceleration. Great companies’ transformations were like
this as well. There was no magic recipe or no ‘aha’ moment when everything changed.
Rather, with everything in place, lots of hard work slowly but steadily got the great
companies going faster and faster, with a lot of momentum. Once it’s in motion, all that
stored energy tends to keep it moving in the right direction.

Conversely, the “doom loop” is the vicious circle that unsuccessful companies fall into,
rushing first in one direction, then another, in the hope of creating a sudden, sharp break
with the past that will propel them to success. Some attempt to do this through
acquisitions, others through bringing in a new leader who decides to change direction
completely, in a direction incompatible with the company. The results are never good.
The difference between the two approaches is characterized by the slow, steady,
methodical preperation inherent in the flywheel, as compared to the abrupt, radical, and
often revolutionary, rather than evolutionary changes within the company.

Built to Last
The results from this book were obtained without regards to Collins’ earlier work, Built
to Last, but when all was said and done, Good to Great is what has to happen before a
company becomes Built to Last. Much of what is present in Good to Great was present
during the creation by their founders of the Built to Last firms. Companies that have
endured have a raison d’être beyond simply making money - they have distinguishing
and unique characteristics, goals and ways of operating that go beyond a simple desire to
make money. These core values are preserved, while tactics change continuously to deal
with an restless, tumultuous world that never stops.

The “Big Hairy Audacious Goal”, a concept introduced in Built to Last can be either
good (as motivation, something to pursue), or bad (if it’s impossible or a bad fit). Good
BHAGs are those formulated from a deep understanding, whereas bad ones come from
brash recklessness without regard for the actual values and capabilities of the company.

Why greatness?

Because it’s not really that much harder to be great than good, and if you’re not
motivated to greatness, perhaps you should consider doing something else where you are.

Good to Great is "one of the most influential business books of recent years." It was
"cited by several members of The Wall Street Journal's CEO Council as the best
management book they've read.

From the book I was able to learn management techniques and styles. It helped me to
adverse such features in the field of management .also learn to realize how great
companies tackle situations and difficulties by planning and applying strategies.

You might also like