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Pulse Book Club – Vol. 4 – Good To Great

Jim Collins’ Good to Great is based on research that Collins led on 11 different publicly traded companies for over 10 years. 

All of the subject companies were organizations that had been performing at or below market expectations, and somehow evolved into being great, surpassing market expectations and overcoming market conditions in ways that their competitors could not.

Collins and his team compared each of these companies to others within their sector and ones of similar size, but who failed to outperform the market the same way the good-to-great companies did.

They condensed the characteristics that these companies shared into three easily digestible concepts: the hedgehog mentality, the bus, and the level 5 leader.

Hedgehog Mentality

There is a greek parable: The fox knows many things, but the hedgehog knows one big thing.

The big thing that the hedgehog knows is what it can do. It can roll up into a ball, and protect itself. That’s it. That’s how it survives.

The fox tries a bunch of different things. It will try to attack the hedgehog in different places, from different angles, and with different tactics. But the hedgehog’s single big thing keeps it alive.

Great companies have a hedgehog mentality. They boil down their business into the most simple, pragmatic vision, mission, and strategy.

Collins presents a three-component venn diagram that exemplifies what it means to develop a hedgehog mentality.

1. How Can We Generate More Profit Per X?

A big question to simplify the process of elevating a business is “How Can We Generate More Profit Per X”

Good-to-great companies all ran through scenarios where X was different things. How can we generate more profit per branch? Per employee? Per marketing dollar spent?

Recognizing the ways in which efficiencies impact the growth of a good business can be the catalyst to moving from good to great.

2. What We Can Be The Best At vs. What We Can’t Be The Best At

The initial case study into Wells Fargo revealed the strategic brilliance behind asking that question. Wells Fargo in the 80s and 90s knew they couldn’t compete with CitiCorp in terms of growing a global banking brand. But they realized they could be the best at providing useful banking and financial products to people in the Western United States.

By singularly focusing on that strategy, Wells Fargo transformed from just another middling bank, to one of the best performing banks in the world.

3. Passionate Decision Making

While ‘passion’ is sometimes an easy word to throw around. Collins’ study focused on the fact that good-to-great companies always deeply believe in the product or service they provided, and always partnered with vendors or suppliers that also believe in it as well.

The Bus

Collins’ continues to describe how the good-to-great companies in his study managed their ‘bus’. Who they hired to get on the ‘bus’, who needed to get off the ‘bus’ to explore a better fit, and how the people on the ‘bus’ were arranged.

Collins described the makeup of middling companies’ teams as “a genius with a thousand helpers”. These companies were primarily developed by a single person’s ideas, dreams, and strategies, with everyone else around to execute the genius’s plan, while never challenging them.

Collins describes a trend that good-to-great companies hired people with an entrepreneurial spirit who didn’t need to be managed or motivated. Not people who were obedient, but people with strong character, similar values, and leadership potential.

Collins also noted a commonality amongst good-to-great companies in their constant evaluation of their people. He noted that many good-to-great companies asked themselves two questions about their people. “Would we still hire them today?” and “IF they left tomorrow, would we be disappointed or secretly relieved?” By asking these two questions, good-to-great companies are not only able to bring people onto the ‘bus’ with consistency and excellence, but also help people off the ‘bus’ when they no longer fit.

Level 5 Leader

The last component discussed in Good to Great is the Level 5 Leader. 

Collins’ describes the first 4 levels like this:

Level 1 : Skilled Worker

Level 2: Reliable Teammate

Level 3: Organized Manager

Level 4: A Visionary With a Compelling Message

Collins describes that Level 5 leaders are so rare because they require all the characteristics of Level 1-4 leaders, but with incredible humility and resolve.

Collins describes leaders who are quick to pass along credit and easily acknowledge their blind spots as level-5 leaders, describing that those characteristics are often confused with weakness, which make Level 5 Leaders so hard to find.

“Level 5 Leaders have a stoic determination to do whatever needed to be done to make the company great”

In the end, if you want to know if your company can go from good to great, it’s important to evaluate whether or not your company expresses a hedgehog mentality, how the people on your bus are selected and managed, and how close your leadership team are to being Level 5 Leaders.

As Collins describes in Good to Great the closer you are to those characteristics you are, the closer you are to elevating your company above the competition.



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