BA 291.

2 Anne Catherine Ortiz

GOOD IS THE ENEMY OF THE GREAT Reading Summary

Can a good company become a great company and, if so, how? This is the main question the article/book aims to provide timeless and universal answers that can be applied by any organization. This will serve as the enduring physics of great organizations. To provide the answer, the team underwent four phases. Phase 1 involved the search for companies showing the good-to-great pattern led by a research time. Good-to-great companies must have a 15-year period of cumulative stock returns at or below the general stock market that is independent of its industry. The duration was determined in order to exceed the average tenure of most CEOs, separating great companies from companies that just happened to have a single great leader. Phase 2 involved comparing the good-to-great companies to its direct comparisons (in the same industry) and to unsustained companies those who have achieved greatness in a short period of time. Phase 3 involved exploring different factors which led to the transformation of the companies. The research team had several findings in this phase. It was noticeable that the CEOs came from inside the companies but their executive compensation and strategy are largely irrelevant to the transformation. Also, irrelevant factors included technology because it only accelerates the transformation and not cause it. These companies did not just focus on what to do but also on what not to do and what to stop doing. Phase 4 was the final stage wherein the findings are generalized to concepts which define a good-to-great company. In this phase, it was concluded that the transformation was a process of buildup followed by a breakthrough in three major considerations (1) Disciplined people; (2) Disciplined thought; and (3) Disciplined action. The characteristics of good-to-great companies are as follow. First, these companies all have Level 5 Leadership, having a combination of personal humility and professional will. Second, these companies have the philosophy of First Who, Then What giving emphasis on finding the right people. Third, they confront brutal facts, yet maintaining unwavering faith that they will prevail in the end. Fourth, is the application of hedgehog concept with the belief that just because youve been doing it for years does not necessarily mean you can be the best in the world at it. Other characteristics are a culture of discipline, technology acceleration, building momentum until a point of breakthrough, and being Built to Last showing sustained great results. Level 5 leadership is essential and ever present in good-to-great companies. Level 5 leaders build enduring greatness through a paradoxical blend of personal humility and professional will. The characteristics of Level 5 leaders can be categorized to its Professional Will and its Personal Humility. Having the professional will allows Level 5 leaders to create superb and long-term results. They have unwavering resolve to do what must be done, doing whatever is needed to make the company great. They set the standard of building an enduring great company and will settle for nothing less. They look out the window to apportion credit to factors outside themselves when things go well. At the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly. Comparison leaders do just the opposite. With their personal humility, they have a compelling modesty, shunning public adulation as compare to the I-centric style of comparison leaders. They have an ambition for the company and they want to see the company even more successful in the next generation. They are comfortable with the idea that most people wont even know that the roots of that success trace back to their efforts.

Though there are people who exhibit these traits explicitly, there are those who have the potential to evolve to Level 5. It is just important to look for situations where extraordinary results exist but where no individual steps forth to claim excess credit. Good-to-great companies give emphasis on First Who Then What principle. They accept three simple truths. (1) Beginning with who, rather than what allows the company to easily adapt to a changing world. (2) Having the right people on the bus eliminates the problem of how to motivate and manage them. (3) Great vision without great people is irrelevant. For good-to-great companies, it is a combined effort of a Level 5 Leader and the management team. The Level 5 leader gets the right people on the bus and builds a superior executive team. Once they have the right people in place, they figure out the best plan to greatness. On the other hand, comparison companies have a different approach following the strategy of A Genius with a Thousand Helpers wherein the Level 4 leader sets the vision and the draws the road map, then enlists a crew of highly capable helpers to make the vision happen. The towering genius, the primary driving force in the companys success, is then a great asset which makes the company susceptible to failure when he leaves the company. Leaders of good-to-great companies place little emphasis on what they get in return. It was evident in the findings that good-to-great executives received slightly less total cash compensation ten years after the transition. However, the principle lies on not how executives are compensated but on which executives have to be compensated in the first place. Good-to-great executives do not act because of what they will get for it, but because they simply cannot imagine settling for anything else. Moreover, good-to-great companies have rigorous cultures. They consistently apply exacting standards at all times and at all levels, especially in upper management. They start first at the top, focusing on those who hold the largest burden of responsibility. In order to attain these, there are three practical disciplines. (1) Not hiring and continuing the search when in doubt. (2) Knowing when to act, especially when change is needed. The best people dont need to be managed and letting the wrong people hang around is not just unfair to all the right people but may also have negative implications. The best people would find themselves compensating for the inadequacies of the wrong people, and might even get de-motivated and be driven away. (3) Putting the best people in the biggest opportunities and not the biggest problems because building opportunities is the only way to become great. Achieving greatness for companies extend beyond its transformation period. Experiences went beyond just mutual respect to lasting comradeship. It built great lives for the people who made greatness possible. The right people became the closest link between great companies and great lives.