Good to Great

Why Some Companies Make the Leap . . . and Others Don’t

As Jd said in the intro we are going to talk about how companies make the move from good to great but first its important to understand what is a good company and what is a great company“Greatness” as Collins defined it is when a company had generated cumulative stock returns that exceeded the general stock market by at least three times over 15 years.

This included such unnoticed companies like Abbott Laboratories (3.98 times the market), Fannie Mae (7.56 times the market), Kimberly-Clark Corp.(3.42 times the market), Nucor Corp. (5.16 times the market), and Wells Fargo (3.99 times the market). And the Kroger Co. -- a grocery chain – was considered average in it’s performance for 80 years and then remarkably escaped mediocrity to beat the stock market by 4.16 times over the next 15 years. And then form 1973 to 1998, Kroger outperformed the market by 10 times.

No miracle moment

There is no miracle that will change a company from good to great. To achieve this, JD said we need to understand what is going on as an egg hatches.

For weeks the egg sits, unaffected by the world, motionless; and if left to itself will one day break into little pieces to reveal a baby chicken. The egg did not change from a strange oblong chunk of calcium to a living baby bird in one miraculous moment. The egg was full, from the very beginning, of essential information and energy all working together towards a focuses objective of producing a chicken. The transformation from being a good egg to a great baby chicken started the very moment the egg was created inside the mother hen, and wasn’t completed until the shell finally broke and the little bird fell out. Within the shell careful and consistent actions continued to unfold, until the baby chicken had the power to break free.

No one moment was more important that the rest, each must be fulfilled in the right time and the right place. In Jim Collins article each of the companies that made the transformation form good to great had the same story: “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. ...the victory of the steadfast discipline over the quick fix.” When Mr. Collins asked an executive form Walgreens to pinpoint when the transformation took place, he said, “‘sometime between 1971 and 1980.’” As JD said in the introduction there are elements that a company must have to elevate its self above the competitors, and possessing One Miracle Moment, is not one of them.

Our Second point is DISCIPLINED PEOPLE: “WHO” BEFORE “WHAT”

A good example of who before what, is an analogy of a bus. You are a bus driver. The bus, your company is at standstill, and it’s your job to get it going. You have to decide where you are going, how you’re going to get there, and who’s going with you. Most people assume that great bus drivers 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.”

This has four primary components? 1) Get the right people on the bus.2) Get the right people in the right seats.3) Get the wrong people off the bus.4) Put who before what.

1,2Get the right people on the bus, and the right people in the right seats.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.

The third point Get the wrong people off the bus.When we know we need to make a people change—after we have given the individual full opportunity to demonstrate that he or she might be the right person—we deal with the issue. When we correct a people selection mistake, we are rigorous in the decision, but not ruthless in the implementation. We help people exit with dignity and grace so that, later, the vast majority of people who have left our bus have positive feelings about our organization. We autopsy our hiring mistakes, applying the lessons systematically to future hiring decisions. In Maxwell’s bus ride 14 of 26 executives got off the bus.

And the forth point: Put who before what.When confronted with any problem or opportunity, our natural habit is to translate the decision from a “what” question (“what should we do?”) into a “who” decision (“who would be the right person to take responsibility for this?”). A significant portion of our time is spent in one form or another with people decisions: getting the right people on the bus, getting the right people in the right seats, getting the wrong people off the bus, developing people into bigger seats, planning for succession, etc. With the right people on the bus, in the right seats, Maxwell then turned his full attention to the “what” question. He and his team took Fannie Mae from losing $1 million a day at the start of his tenure to earning $4 million a day at the end. Even after Maxwell left in 1991, his great team continued to drive the flywheel—turn upon turn—and Fannie Mae generated cumulative stock returns nearly eight times better than the general market from 1984 to 1999.

When it comes to getting started, good-to-great leaders understand three simple truths. First, if you begin with “who,” you can more easily adapt to a fast-changing world. If people get on your bus because of where they think it’s going, you'll be in trouble when you get 10 miles down the road and discover that you need to change direction because the world has changed. But if people board the bus principally because of all the other great people on the bus, you’ll be much faster and smarter in responding to changing conditions. Second, if you have the right people on your bus, you don’t need to worry about motivating them. The right people are self-motivated: Nothing beats being part of a team that is expected to produce great results. And third, if you have the wrong people on the bus, nothing else matters. You may be headed in the right direction, but you still won’t achieve greatness. Great vision with mediocre people still produces mediocre results.

Our Third point is momentum

But what is momentum? Webster Dictionary says momentum is the "impetus of a moving object." And we are the moving object! In our business, we must remain focused on moving forward toward our identified goals. Owning a business comes with ups and downs, yet the more momentum you expect of yourself, the more "ups" and less "downs." Momentum never shows up as a financial-statement line item; it's too intangible to measure. But it's a very real force, one that needs to be recognized to understand why some companies follow success with success, while others careen from one mishap to the next, and a few alternate periods of each.

Those companies that become great are like pushes on this truck. Every vehicles transmission has a flywheel, which takes extreme amounts of energy to get going. At first, each push hardly seems to register on the wheel, but each push does get easier. Many companies though, are trapped in a doom loop, a pattern of going around in circles without a consistent direction or purpose. Companies caught in this doom loop are like this truck, back and forth, back and forth. They’re addicted to flavor of the month success formulas. They try one thing, then another, changing direction and strategy every time. They are always looking for the quick fix, the faster solution, the fast track.

But on the other hand, if companies push, and continue to, with each subsequent effort, the wheel gathers more and more energy. In time it develops such momentum that it reaches a breakthrough point—the point at which success becomes inevitable. Collins contrasts the flywheel with the doom loop,. You could spend your life pushing the company in a new direction and never get anywhere. Or you can be disciplined in your actions and stay committed to one purpose.

Too often we confuse movement with progress.

No matter what type of business you run, or what type of organization you lead, one of the keys that will determine the level of your success is momentum. Momentum is defined as “the force of progress”. Like when pushing on the truck in the same direction. Each push got easier and easier. It can help decide how high your business will go and how quickly you will get there. At the same time, momentum can often prove illusive, something that seems to be hear today and yet is gone tomorrow. The two keys to momentum achieving it, and maintaining it.

In your personal life momentum is when you are meeting your goals one after another, it is when your life is in balance and everything is going right. You get the idea -- it’s like dominos where if one thing falls, the rest follows suit.

Conclusion

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So In conclusion there are three main points that we want you all to remember. 1. There is no miracle moment-there Is no quick fix for a company, no matter what you read or hear about in the

news. 2. Who before What-Before we look at the direction our company is going we must look at whos along for the ride and were they are sitting.3. Momentum- This idea of momentum, of continually pushing a company like the truck; in one

direction is so vital to a companies success. Momentum is the key to having your company move from the a good company to a great company!

Thank you