Good to Great By Jim Collins Harper Business, 300 pages, $42
They may well be the greatest CEOs of the last half century, but you've probably never heard of them: George Cain, Alan Wurtzel, David Maxwell, Colman Mockler, Darwin Smith, Jim Herring, Lyle Everingham, Joe Cullman, Fred Allen, Cork Walgreen, Carl Reichardt and Ken Iverson.
They headed the 11 companies that made the difficult transition from good performance to great performance in that era, moving from cumulative stock returns at or below the general U.S. stock market for 15 years to cumulative returns at least three times the market for 15 years.
When management researcher Jim Collins unearthed them through statistical analysis, he found to his surprise that the CEOs who led the transitions at those companies dramatically defied our stereotype of leadership. Each CEO was remarkably understated and humble. They all had an unwavering resolve to do what had to be done, yet they attributed their success to others -- and to luck.
Mr. Collins notes that although their style contrasts vividly with the charismatic leadership that most boards of directors seek, it appears to far more successful. For each of the 11 companies that made the good-to-great shift, he found a comparison company in the same industry and with comparable revenue that failed to make the leap. "In over two-thirds of the comparison companies we noted the presence of a gargantuan personal ego that contributed to the demise or continued mediocrity of the group," he writes in Good to Great.
When he began the research project about five years ago, he expected to find that the first step in moving out of mediocrity would be to set a new vision and strategy, and then to get people committed to it. Again that conventional wisdom was wrong. First these leaders set out to hire the right people -- and shed the wrong ones. Then, the new team figured out where to head.
The strategies of the teams didn't emerge suddenly but took four years, on average, to clarify. "The good-to-great companies had no name for their transformations. There was no launch event, no tag line, no programmatic feel whatsoever. Some executive said that they weren't even aware that a major transformation was under way until they were well into it," he notes.
The key to success was confronting the facts of their situation, without losing faith that they would prevail. "You absolutely cannot make a series of good decisions without first confronting the brutal facts. The good-to-great companies operated in accordance with this principle and the comparison companies generally did not," Mr. Collins writes.
They also developed what he calls a "hedgehog complex," whereby the leaders focused on three crucial elements. They figured out at what they could be the best in the world (and what they couldn't). They determined what drove their economic engine, and how to most effectively generate sustained and robust cash flow. They also developed some crucial metrics to keep tabs on progress. Finally, they determined what activities ignited their personal passion.
Mr. Collins co-authored Built to Last, one of the best books on business. In Good to Great he again opens our eyes showing us how to make an organization successful, presenting his ideas clearly and with lots of examples. If you're toiling away at a good company that you want to be great, his book points the way.
Harvey Schachter