Good to Great (Part 3)

This is part three of a multi-part blog, sharing my thoughts on the book Good to Great by Jim Collins.  Here are links to Part 1 and Part 2.

Chapter 4 – Confront the Brutal Facts (Yet Never Lose Faith)

The fourth chapter of Good to Great has some really good material in it, separated into a few subsections.  The main thrust of the chapter was described in the sections titled Facts Are Better Than Dreams, Unwavering Faith Amid the Brutal Facts, and The Stockdale Paradox, and then there were five other subtopics that contained related information.  I’m going to rearrange the layout a bit; hopefully this will organize the material a bit better.

 Facts Are Better Than Dreams

 I think “Facts Are Better Than Dreams” was a bad choice for the topic of this subsection of the book.  The phrase comes from a quote by Winston Churchill that’s in a different subtopic, which leads to confusion.  This section could’ve been called, “My job is to look at the squiggly things,” which comes from this quote by Fred Perdue (of Pitney Bowes):

 “When you turn over rocks and look down at the squiggly things underneath, you can either put the rock down, or you can say, ‘My job is to look at the squiggly things,’ even if what you see can scare the hell out of you.”

Another item from this section worth sharing:

 [Pitney Bowes] created a long-standing tradition of forums where people could stand up and tell senior executives what the company was doing wrong, shoving rocks with squiggly things in their faces, and saying, “Look, you’d better pay attention to this.”

This is what supports the first half of the chapter’s title, Confront the Brutal Facts (Yet Never Lose Faith).

Unwavering Faith Amid the Brutal Facts

The second half of the chapter’s title is summed up with this passage:

 Robert Aders of Kroger summed this up nicely at the end of his interview, describing the psychology of the Kroger team as it faced the daunting twenty-year task of methodically turning over the entire Kroger system.  “We had a very strong will to live, the sense that we are Kroger, Kroger was here before and will be here long after we’re gone, and, by god, we are going to win this thing.  It might take us a hundred years, but we will persist for a hundred years, if that’s what it takes.”

 Having the facts in front of your face is only half the picture because if you don’t have the faith that you’ll overcome then you can’t succeed.  To highlight this, the book gives the example of Scott Paper.  When Procter & Gamble decided to enter the paper-based consumer sector Scott Paper “simply resigned itself to second place without a fight and began looking for ways to diversify.”  You have to have a keen insight, and dedication.

 The Stockdale Paradox

 The title of this subtopic refers to Admiral James Stockdale, senior ranking American POW in Vietnam for 8 years.  Interestingly, about a year ago I read a speech Admiral Stockdale gave on Stoicism (the philosophical approach) explaining how it helped him through his captivity, so I was prepared when Mr. Collins included this material.  (For those interested, you can find his speech on Stoicism here: Part I, Part II … you’ll note some of the passages below appear to be taken verbatim from the Admiral’s speech.  I’m not sure which was published first.)

Again, I’ll let the book speak for itself:

 “I never lost faith in the end of the story, “he said, when I asked him.  “I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining moment of my life, which, in retrospect, I would not trade.”

 I asked, “Who didn’t make it out?”  “Oh, that’s easy,” he said.  “The optimists.”

 The optimists? I don’t understand, “I said, now completely confused.

 “The optimists. Oh, they were the ones who said, ‘We’re going to be out by Christmas.’ And Christmas would come, and Christmas would go.  Then they’d say, ‘We’re going to be out by Easter.’ And Easter would come, and Easter would go.  And then Thanksgiving, and it would be Christmas again.  And they died of a broken heart.”

 Then he turned to me and said, “This is a very important lesson.  You must never confuse faith that you will prevail in the end – which you can never afford to lose – with the discipline to confront the most brutal facts of your current reality, whatever they might be.”

Now, personally I don’t see this as a paradox.  They are two separate things – the future and the present – and the future may be a lot farther off than we think.  This passage also reminds me of my favorite books, Peace Is Every Step, by Thich Nhat Hanh.  Here’s a link to an excerpt from that book called Hope As An Obstacle, but the gist of it is that letting myself live in hope can stop me from doing what needs to be done today.

What have we learned so far?  You have to look at the squiggly things, but you can’t let yourself be hamstrung by either fear (like Scott Paper) or delusion (like some POWs in Admiral Stockdale’s story).  You have to have faith in the outcome, but you also have to be able to be realistic about what it is you can do to work towards your goals today.

So, that having been said, let’s look at some of the related material in this chapter…

The Rest of Chapter 4

I have to stop for a moment and explain that I think the material in this book is great, but I would have organized it differently.  There are nine chapters in the book, the first two are introductory and the last is a conclusion.  The middle six are grouped into three pairs.  I think this book could’ve been grouped into three main sections (like A, B, and C), each section containing multiple chapters.  One of those sections could’ve been titled Level 5 Leadership.  I say this because the other subtopics in Chapter 4 could’ve been rolled up into a chapter called, “Create a climate where the truth is heard” which, in my opinion, is part of Level 5 Leadership.  The material in the following sections list behaviors that underline and support building such an atmosphere.

Lead With Questions, Not Answers

Don’t use questions as a form of manipulation (“Don’t you agree with me on this?”) or as a way to blame others (“Why did you mess this up?).  If people don’t trust your motives they’ll never tell the complete truth.  If they think you’re out to assign blame or to imply others need to agree with you then they’ll filter their information based on those details. Use questions for one and only one reason: to gain understanding without blame.

Engage In Dialogue and Debate, Not Coercion

This is a really difficult topic.  Some people define “debating” and “arguing” as the same thing, some people consider them to be different things.  Personally I see them as different things, and the difference is that debating sticks to facts.  Arguing gets personal, emotional.

What makes it hard to separate them is that a lot of people say things without choosing their words carefully enough.  When you’re discussing facts but imply something personal the debate goes out the window and it turns into arguing.  What’s even more difficult is when someone does accidentally make a personal comment but then refuses to correct themselves, blaming the other party for inferring more than was implied.  Then they complain that they have to choose their words too carefully.  Well, if you want to engage in civilized debate, then yes, you do.  And you have to be willing to recant, apologize, and try gain.  If you’re not willing to do these things then you’re being a source of the conflict, not the solution.

But I digress.  Great companies don’t simply pay lip service and pretend that everyone gets to have input.  They have healthy – and sometimes loud and strenuous – debate over what the best ideas are, and they let the best idea win.  Equally important, everyone gets on board once a decision has been made.  Fight for the best idea, but don’t let personal politics get in the way of your ability to be a team player.

Conduct Autopsies Without Blame

There are two quotes in this section I like:

• “I will take responsibility for this bad decision.  But we will all take responsibility for extracting the maximum learning from the tuition we’ve paid.”

•  “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.”

Obviously if someone intentionally throws a wrench into the works you need to get that person out of the organization.  That kind of behavior is unhealthy and can be toxic.  But sometimes mistakes happen, and that’s why getting the right people on the bus was in one of the first chapters.  When you have good people on the bus you know everyone will be willing to pitch in and do their part to keep the mistake from happening again.  As we’ll get to in a future chapter, that doesn’t always mean adding layers of red tape, sometimes it’s simply accepting personal responsibility to maintain a disciplined approach to the job.

Build Red Flag Mechanisms

At the beginning of the book the author listed some of the more unusual findings of their study, things that went against the grain of either popular conception or current business school teachings.  One of the items on that list was that less charismatic leaders often produce better long-term results than more charismatic leaders.  Here’s a quote to explain:

 “The moment a leader allows himself to become the primary reality people worry about, rather than reality being the primary reality, you have a recipe for mediocrity, or worse.  This is one of the key reasons why less charismatic leaders often produce better long-term results than their more charismatic counterparts.”

Note, people can seem charismatic for a number of reasons.  Some are warm and welcoming; some are less warm but exude a different sense of personal power.  The study found people didn’t want to let down warmer leaders any more than the colder ones.  Now we get to the Churchill quote:

Churchill created a separate department outside the normal chain of command, called the Statistical Office, with the principal function of feeding him—continuously updated and completely unfiltered—the most brutal facts of reality, “I … had no need for cheering dreams,” he wrote.  “Facts are better than dreams.”

The other value of red flag mechanisms is their immediacy.  Again, I’ll quote a passage from the book, as it sums it up perfectly:

In one situation a student used her red flag to state, “Professor Collins, I think you are doing a particularly ineffective job of running class today.  You are leading too much with your questions and stifling our independent thinking.  Let us think for ourselves.”  The red flag confronted me with the brutal fact that my own questioning style stood in the way of people’s learning.  A student survey at the end of the quarter would have given me that same information, but the red flag – real time, in front of everyone in the classroom – turned information about the shortcomings of the class into information that I absolutely could not ignore.

Other Interesting Bits

Here are some other interesting things I found in this chapter:

If you have the right people on the bus, they will be self-motivated.  The real question then becomes: How do you manage in such a way as not to de-motivate people?  And one of the single most de-motivating actions you can take is to hold out false hopes, soon to be swept away by events.

I really like those first two sentences.  They can be applied to so many sections of this entire book, but they’re particularly useful in relation to the subheadings Lead With Questions, Not Answers, Engage In Dialogue and Debate, Not Coercion, and Conduct Autopsies Without Blame. The last sentence though, that applies to what the author called The Stockdale Paradox.

“You either had to be #1 or #2 in each local market or get out.”

This was from the section that talks about Kroger versus A&P but it’s equally applicable to a number of different industries, and I find it a fascinating concept.  I guess if you’re anything below #2 your profits aren’t enough to make it worth the effort (you’d be better off seeking another market where you can be #1 or #2).  But I wonder if that would also be true of a non-profit or co-op.

Good to Great (Part 2)

This is part two of a multi-part blog, sharing my thoughts on the book Good to Great by Jim Collins.  You can find the first part here.

Chapter 3 – First Who … Then What

Chapter 3 of Good to Great is titled “First who … then what.”  The author uses an analogy here of getting people together on a bus.  There are two types of trips one can take on a bus.  The first is a public transportation bus that goes from Point A to Point B, making stops every so often to pick people up and drop them off.  The other type of bus trip is when a group of people go on a trip together , like a class going to the zoo, or a company having an off-site event.

It’s all about the old adage, “Life’s a journey, not a destination.”  If you have people who focus solely on the destination and don’t care about the people they’re on the journey with it’s hard for a business to change directions.  If the group of people working together are there because they enjoy working together then it doesn’t matter as much which direction the business wants to go.

There are other benefits that come from having a group of people who simply enjoy working together.  If you have the right people together you don’t have to tightly manage them or motivate them, they will be self-motivated to be part of something great.  Conversely, if you have the wrong people on the bus it doesn’t matter if you’re headed in the right direction – the ride will still be miserable.  The right people are ones with character, work ethic, basic intelligence, dedication to fulfilling commitments, and values.  Practical skills, specialized knowledge, and work experience can be taught.

In Chapter 9 of the book Mr. Collins references Hewlett-Packard, founded by William Hewlett and Dave Packard in 1935 after they graduated with their electrical engineering degrees.  The minutes of their first meeting state that they’ve decided to form a company simply because they enjoy working together – the notes even say that the decision of what they’ll make will be made later.  You can’t get a better example than this of getting the right people on the bus first, then deciding where to go.

I feel I’m veering away from the point here, though.  The book is not saying you’re doomed if you don’t have the right people on the bus from Day 1.  All it’s saying is that it’s important to get the right people on the bus, and let the wrong people get off.  Once you’ve accomplished this, the ride gets much more pleasant.

Rigorous, Not Ruthless

There are a few subtopics in this chapter.  The first is “Rigorous, Not Ruthless.”  It covers things like hiring and laying people off.  This section makes the point that laying people off is not a primary strategy.  It might need to be done at times, and shouldn’t be shirked if it is needed, but it’s not a primary way to improve a company.  A quote from the book:

“It would be a mistake – a tragic mistake, indeed – to think that the way you ignite a transformation from good to great is by wantonly swinging the axe on vast numbers of hardworking people.  Endless restructuring and mindless hacking were never part of the good-to-great model.”

The author does say if you know that you need to lay someone off, not to hem and haw, just do it.  The moment you feel the need to tightly manage someone, you’ve made a hiring mistake.  The best people don’t need to be managed.  Guided, taught, led – yes.  But not tightly managed.  Letting the wrong people hang around is unfair to all the right people, as they inevitably find themselves compensating for all the inadequacies of the wrong people.  Worse, it can drive away the best people.  Strong performers are intrinsically motivated by performance, and when they see their efforts impeded by carrying extra weight, they eventually become frustrated.

That being said, the book goes on to point out, “First be sure you don’t simply have someone in the wrong seat.”  Here the book uses Colman Mockler (CEO of Gillette) as an example, citing that he spent fully 55% of his time during his first two years in office jiggering around with the management team, changing or moving 38 of the top 50 people.  Alan Wurtzel (CEO of Circuit City) called it, “Putting square pegs in square holes and round pegs in round holes” … Instead of firing honest and able people who are not performing well, it’s important to try and move them once (or even two or three times) to other positions where they might blossom.

The book gives two questions that might help you know when to let someone go:

“If it were a hiring decision, would you hire the person again?  If the person came to tell you that he or she would be leaving to pursue an exciting new opportunity would you feel terribly disappointed or secretly relieved?”

I’d like to add a third, which I think clarifies it a bit better: “Even knowing what you know about this person, would you hire them for some other position?”  I like this question better because I think it points directly to the idea that if the answer is yes, and you have a position in mind that they’d be a good fit for – then offer them that position.  If you’ve already got someone in that seat you might have to offer that person a different seat on the bus.  If you don’t think that person would be better suited to any other position … well, then you have to decide which of the two people would fill that seat better, and lay one of them off.

I’d like to include two other little gems of wisdom from this chapter:

• Put your best people on your biggest opportunities, not your biggest problems. (And if you sell off your problems, don’t sell off your best people.)  Managing your problems can only make you good, whereas building your opportunities is the only way to become great.
• Circuit City put tremendous emphasis on getting the right people, all up and down the line, from delivery drivers to vice presidents; [their competitor] developed a reputation for not being able to deliver the basics, like making home deliveries without damaging the products.

On Hiring

Part of the reluctance to let people go is because it’s hard to find good people.  Pointing back to Hewlett-Packard again, they reference “The Packard Law”:

No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a great company.  If your growth rate in revenues consistently outpaces your growth rate in people, you simply will not – indeed cannot – build a great company.

As difficult as hiring the right people can be, it’s much easier to wait until you find the right kind of person than it will be to hire the wrong person, then deal with getting them off the bus later.  The book included a nice little exchange that apparently took place between Walter Bruckart and Alan Wurtzel at Circuit City:

Walter Bruckart: “Alan, I’m really wearing down trying to find the exact right person to fill this position or that position.  At what point do I compromise?”

Alan Wurtzel: “You don’t compromise.  We find another way to get through until we find the right people.”

When in doubt, don’t hire, keep looking, even if it means growing slower than you could.

First Who, Great Companies, and a Great Life

It’s not impossible to work for a great company and still have a great life outside of work.  If you hire good people you don’t have to work 24/7 managing and/or compensating for them, and you can have a good work/life balance.  If the people you’ve hired are working 24/7 then they haven’t hired the right people (or they’ve got some issues).  Of course, if the people you’ve hired don’t have anyone reporting to them either they’re not right for the job or you need to hire more people to handle the work load.

And last but not least, another nice idea in this chapter refers to George Weissman and many of his executive colleagues at Phillip Morris (now called Altria).  They kept offices at the Phillip Morris headquarters, coming in on a regular basis, long after retirement.  A corridor at the Phillip Morris world headquarters is called “the hall of the wizards of was.”  These retired executives continued to come into the office, in large part because they simply enjoy spending time together.  I like this idea a lot.  It gives the retirees an office away from home to come to and work (even if it’s work unrelated to Phillip Morris).  That can be a matter of life and death for a retiree.  At the same time, it gives the current executives access to their brains and experience.  It’s a win-win situation.

That’s it for Chapter 3 – I’ll be posting my notes on Chapter 4 next weekend.  As always, it’s free to subscribe to get an email update when I post new material, all you have to do is click the button at the top of the page that says “Sign me up!” and enter your email address.  See you next week!