Good to Great Why some companies make the

Good to Great Why some companies make the leap… and others don’t. Issued by: Eric Way 2006 -12, Slide 1

Good to Great Author: Jim Collins • • • Professor at Stanford Graduate School of Business Founded his Management Laboratory in Boulder, Colorado Quantitative and Qualitative Scientific Study of Business Issued by: Eric Way 2006 -12, Slide 2

Good to Great Method • Company Selection: Only 11 companies found (Fortune 500) Average performing company compared to peers (15 yrs) Transition Beat market by >3 times for at least 15 years • Analysis based on Published Financial Data Press Articles/ Interviews Direct interview with Managers Issued by: Eric Way 2006 -12, Slide 3

Good to Great Method Issued by: Eric Way 2006 -12, Slide 4

Good to Great Companies • • • Compared to Market average Abbot Medical Supplies 4 x Circuit City Appliances/ Electronics Retailer 18 x Fanny Mae Real Estate Finance 8 x Gillette Shaving Products 7 x Kimberly Clark Consumer paper products 3 x Kroger Supermarkets 4 x Nucor Mini Steel Mills 5 x Philip Morris Tobacco 7 x Pitney Bowes Postal Machines 7 x Walgreens Drugstores 7 x Well Fargo Bank 4 x Issued by: Eric Way 2006 -12, Slide 5

Good to Great Comparison Companies Direct Comparison: • • • Upjohn Silo Great Western Warner-Lambert Scott Paper A&P Bethlehem Steel R. J. Reynolds Addressograph Eckerd Bank of America Issued by: Eric Way 2006 -12, Slide 6 Unsustained Results: • Burroughs • Chrysler • Harris • Hasbro • Rubbermaid • Teledyne

Good to Great Findings 1. 2. 3. 4. Level 5 Leadership: Modest; Determined 5. 6. 7. Flywheel: Continually build momentum The Right People First, in the Right Job Stockdale Paradox: Reality + Hope Hedgehog Principle: Do one thing better than anyone else Culture of Discipline, not restraining bureaucracy Vision: Core Ideology + Envisioned Future Issued by: Eric Way 2006 -12, Slide 7

Good to Great 1. Level 5 Leadership • 100% of Companies had managers with the same personality type • “We were lucky. ” “I had the chance to work with an exceptional group of people. ” “It just sort of happened. ” • Often people who had a life changing experience: cancer/ religious/ etc. • Modest and Willful. Shy and Fearless. Self-Effacing = weak • • Ambitious for the cause, not for self Successful successor = “Après moi, le déluge” Issued by: Eric Way 2006 -12, Slide 8

Good to Great “Great” Leaders • • Darwin Smith Colman Mockler Joseph F Cullman Ken Iverson Charles “Cork” Walgreen George Cain Alan Wurtzel – Kimberly Clark – Gillette – Ph Morris – Nucor – Walgreen – Abbott Labs – Circuit City (beat Jack Welsh x 6 ‘ 81 -’ 00) Issued by: Eric Way 2006 -12, Slide 9

Good to Great Level 5 Leadership Why isn't level 4 the best for long term? • Charisma can be a hindrance • People fear the boss more than they fear reality (Wasa Ship) • Dialogue and Debate among management is good • Can you learn to be a Level 5? …. Maybe. • Advice: Do what they “do” Issued by: Eric Way 2006 -12, Slide 10

Good to Great Leadership in Non-Profits • CEO of Girlscouts: Frances Hesselbein "What's it like being on top? ” Issued by: Eric Way 2006 -12, Slide 11 "I'm here in the center"

Good to Great Leadership in Non-Profits • "You always have power, Humble Determined …If you just know where to find it. " • Executive vs. Legislative Power • Level 5 leadership is then even more essential to the Social Sectors Issued by: Eric Way 2006 -12, Slide 12

Good to Great 2. The Right People First • The people were brought on board before deciding on a Strategy • Human issues first. Get the best fit for the person and the job, as soon as possible and everyone is happier • The company or group had a strong identity, and those who didn't identify weren't happy and looked elsewhere • Companies hired qualified people even w/out a job opening: a real "human resource" Issued by: Eric Way 2006 -12, Slide 13

Good to Great Motivation • Level 5 CEOs on average were paid slightly LESS than their peers • People had the impression they were part of “something big, ” “something great” • People are motivated by participating in a successful undertaking • • Manage the system, not the people • These companies were not a "neutral" place to work. You love it or you hate it Focus on avoiding what “demotivates” people, not how to motivate them Issued by: Eric Way 2006 -12, Slide 14

Good to Great Non-Profits • Can't fire and hire. • BUT… You can still be selective! • Teach for America: Wendy Kopp, Princeton Class of 1988 1 st yr: 500 grads from the Ivy League $26, 000 2005: 97, 000 applicants for 14, 100 spots $40 MUSD Annual Support Issued by: Eric Way 2006 -12, Slide 15

Good to Great Non-Profits • Craving for Meaning • Money is a commodity, Talent is not. Time and talent can compensate for lack of money, But Money can never compensate for the lack of the Right People. Issued by: Eric Way 2006 -12, Slide 16

Good to Great 3. Stockdale Paradox: Reality + Faith • • • James B. Stockdale P. O. W. in Vietnam “The optimists were the first to go. ” Courage to stare reality in the face Unwavering Faith that obstacles will be overcome Need a culture where the Truth can be Heard No “Emperor's New Clothes” • Autopsies w/out Blame Issued by: Eric Way 2006 -12, Slide 17

Good to Great 4. Hedgehog Principle: Be the Best at One Thing • A hedgehog can do basically one thing: dig a hole. But he does it very well. Not a fox. • Decided what their organization COULD do better than anyone (not necessarily what they do best internally, today): ex: Abbot: Pharmaceuticals Cost Saving Medical Supplies Nucor: Instruments for Nuclear Reactors Mini-Steelmills Kimberly Clark: Bulk Paper Consumer Paper Products GE: Managers GE: General ? Issued by: Eric Way 2006 -12, Slide 18

Good to Great Hedgehog Principle: Three Circles *includes core values and purpose Issued by: Eric Way 2006 -12, Slide 19

Good to Great Hedgehog Principle: Be the Best at One thing • • Find your passion! Stop doing the wrong things: “Sell the mills” Determine your “Profit per X”, the Denominator. BHAG: Big Hairy Audacious Goal = The Mountain to Climb Issued by: Eric Way 2006 -12, Slide 20

Good to Great 5. Flywheel: Continually Build Momentum • Continual small pushes in the same direction • No big “programs, ” no “save the world” projects or campaigns • Internally people can’t pinpoint a transition date/ program/ decision Issued by: Eric Way 2006 -12, Slide 21

Good to Great Flywheel: Keep pushing in the same direction Arms and Body Pushing Forward Feet planted on the Ground Issued by: Eric Way 2006 -12, Slide 22

Good to Great Flywheel: Social Sectors - Building the Brand • Virtuous Circle of Credibility • Success breeds Support and Commitment • Time telling vs. Clock Building • Tangible results and emotional "Share of Heart" • Supporters believe in your Mission, …and in your Ability to carry it out. Issued by: Eric Way 2006 -12, Slide 23

Good to Great 6. Culture of Discipline • • Not a Police State or Procedure-ocracy • Avoid unnecessary bureaucracy that hinders self-motivating/ self-disciplined individuals • • • Opportunistic flexibility People don’t have jobs, They have responsibilities Freedom within a Framework Entrepreneur Issued by: Eric Way 2006 -12, Slide 24

Good to Great 7. Vision: Core Ideology + Envisioned Future • People were “Fanatical” about Company Purpose and Vision • • • Vision is Bigger than any one Person/ Leader • Outcome is the BHAG: The Mountain to Climb = Challenging Long Term Goal Maintains Focus for the Hedgehog Concept Maintains Endurance for pushing the Flywheel Issued by: Eric Way 2006 -12, Slide 25

Good to Great “Core Purpose” Examples Walt Disney Boeing Sony Merck Nike Teaching Co Fannie Marriott Mary Kay WL Gore Patagonia Wal-Mart To make people happy To push the leading edge of Aviation, taking on huge challenges and doing what others cannot do To experience the sheer joy of advancing and applying technology for the benefit of the public To preserve and improve human life To experience the emotion of competition, winning, and crushing competitors To ignite in all people the passion for learning To strengthen the social fabric by democratizing home ownership To make people away from home feel they are among friends and really wanted To give unlimited opportunity to women To have fun doing innovative things that make money To be a role model and tool for social change To give ordinary folk the chance to buy the same things as rich people Even a 10 yr old can “get it!” Issued by: Eric Way 2006 -12, Slide 26

Good to Great Michelin Contribuer de manière durable au progrès de la mobilité des personnes et des biens en facilitant toujours plus la liberté, la sécurité, l’efficacité et le plaisir de se déplacer. To make a sustainable contribution to progress in the mobility of people and goods by constantly enhancing freedom of movement, safety, efficiency and pleasure when on the move. Issued by: Eric Way 2006 -12, Slide 27

Good to Great To create a better everyday life for the many. Offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. Issued by: Eric Way 2006 -12, Slide 28

Good to Great What? No mention of Profits? Passion? If you go to a Famous French Restaurant and see a sign that says: “We wash our plates after every use. ” Would this sign reassure you? Or scare you? "For Great Companies, profitability is a necessary condition for existence and a means to an end, but not the end in itself. Profit is like oxygen, food, water and blood for the body, they are not the point of life but without them, there is no life. " Issued by: Eric Way 2006 -12, Slide 29

Good to Great Example of Vision Framework: Issued by: Eric Way 2006 -12, Slide 30

Good to Great How do we bring out our Passion? • Are we sitting on untapped resources? • How do we formulate our purpose and values to better pull out that Passion among Club Members? PASSION Issued by: Eric Way 2006 -12, Slide 31

Good to Great Conclusions/ Further Investigations • Level 5 Management: very compatible with FAWCO leadership historically • Flywheel: For 75 years FAWCO has pushed in the same direction • • Passion is about “Pull” not “Push. ” • Passion has to touch the child/ soul in you – and that’s a GOOD thing, don’t be ashamed of it. A more sexy Statement of Purpose would perhaps evoke greater Passion Issued by: Eric Way 2006 -12, Slide 32

Good to Great • Disciplined People: 4 Phases to Greatness Level 5 management "People First" • Disciplined Thought: e Build-Up Confront the Brutal Facts, with Hope The Hedgehog Concept • Disciplined Action: Culture of Discipline Flywheel • Building Greatness to Last: Clock Building vs. Time telling Preserve the Core and Stimulate Progress Issued by: Eric Way 2006 -12, Slide 33 hr t ak Br o h g u

Good to Great In our Organizations • • Define our circles Hedgehog Concept: - Core Values & Purpose Passion Best in the World Profit Lever/ Resource Engine - Issued by: Eric Way 2006 -12, Slide 34 Then BHAG (Big Hairy Audacious Goal) with Vivid Description of the Future

Good to Great More Info & Workshop Guidelines www. jimcollins. com Issued by: Eric Way 2006 -12, Slide 35