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Book Review Good To Great Companies – Chapter 3 Summary

4 October 2009 One Comment

good2greatIn chapter three, Collins would begin by saying when it comes to producing good to great companies it was the matter of putting the right people on the “bus” and getting the wrong people off the “bus”. However, had talk briefly about that in chapter one, chapter three would seem to get to the important aspect of defining the right people and wrong people. Collins talks about three truths when it comes to using the right people and the wrong people, the first one he talks about who can easily adapt to a changing world.

The second truth Collins would talk about is that with the right people any problems the company will have, most of them go away and can produce a bit better and work more cohesive. He would continue by saying that the right people would be able to self-motivate without the need to fire them up. The final truth Collins would mention is if you have the wrong people, no matter what you do, “you still won’t have a great company.” Therefore, it would seem that not even two pages in Collins really wants to strike home with what management has to do in order to make a great company.

He really sets this in stone when he talks about how Wells Fargo set itself up for success from one CEO to another. They hired the best people they could find and it didn’t matter what position they were hired in but pick them out from performance. When Carl Reichardt took over in 1983 the team that was there building the company up all become CEO’s of various banking firms. One of those CEO talks about getting the best people and then builds them up to be great managers. The only risk to this pattern was the fact those who are built up would move on to bigger and better things. Overall, the important factor that Collins has been driving at in the first few pages that it did not matter the what, but it was “the who” that made these companies great. So, if you have the right management team then you will have the great success, but if you don’t then it will backfire and you be going through managers like candy.

Another model that Collins talks about that some of the companies have done is called the “genius with a thousand helpers” and its premise is based on that one great person and then those who with that smart person. Of course, the downside to this is that if the genius leaves you might have some problems. Some of those examples were mentioned in chapter two such as Stanley Gault “genius” and how he build up Rubbermaid, but when he left, everyone felt completely loss while trying to mimic his leadership style. Another example they provide was Henry Single, who built a company from the ground up and the company was in great success until he left the company and afterwards it floundered until Allegheny bought them out. While this method seems good at first it has the problem of not being able to maintain it after the “genius” leaves and thus create a major problem for those who do follow that model.

However, what really stood out was the assumption that was made for executives, the assumption was the more benefits they receive the better they do. Well Collins pretty much sum up the results of that part of the research by saying, “We were dead wrong in our expectations.” It is funny though that you hear in the news about all those big time executives getting all these perks when the company is struggling to make a profit or being bailed from the government. However, Collins would mention, though very arguable, that with the right people they will do the right things regardless of what incentives are giving to them.

After talking the benefits and incentives, Collins would continue by making a difference between companies who are rigorous or ruthless. He would clearly define ruthless by the means of “hacking and cutting, especially in difficult times, or wantonly firing people without any thoughtful consideration.” However, to be considered rigorous, a good to great company has to be “consistently applying exacting standards at all times and at all levels, especially in upper management. To be rigorous, not ruthless, means that the best people need not worry about their positions and can concentrate fully on their work.” However, it would seem those two distinctions are very grey as it seems to be a constant pattern of companies being ruthless during the down time and barely being rigorous after coming back from that slump. However, Collins does maintain that a good to great company doesn’t go swinging the preverbal ax and that “Endless restructuring and mindless hacking were never part of the good-to-great model.”

In the last section of chapter three, Collins breaks down being rigorous and he starts by talking three practical disciplines. The first practical discipline is “when in doubt, don’t hire-keep look”, it also went by another name as well, Packard’s Law. The premise that Collin’s is trying to make is that without the having the right growth of the right people. Then you have the problem of not growing your revenue consistently. Of course, he would solidify this discipline by saying if the revenue growth outpaced people growth, then your company cannot achieve that status of being great.
The next discipline Collin’s talks about is, “When you know you need to make a people change, act.” With this discipline it was a matter not hiring the right people but putting people in the right positions and the reason for that is not everyone is good at one particular task, however, if you were to move them somewhere else you have good odds that something might click and then become a better performer. However, you sometimes have to move people around more than once and so your risk would be moderately high that each new move would be even less effective and make the person very unmotivated.

The final discipline Collins would talk about, is “Put your best people on your biggest opportunities, not your biggest problems.” It would seem that Collins is driving to the fact if a good to great company had the potential to do something even greater, they would select the best of the best of that group of right people and let them to go to work. To give an idea about this Collins talks abut how Joe Cullman of Phillip Morris, took his best executive, George Weissman, and put him in the front seat to help develop the international market. At first, people were trying to figure why this move was made, even George Weissman thought that as well when he said, “Here I was running 99% of the company and the next day I’d be running 1 % or less.” However, in just 20 years, the international market grew and grew big. IT grew so big that its Marlboro cigarettes were number one in the market three full years before they were in the US. So, by following this discipline when a company sees that opportunity, they have the chance to become a good to great company.

I think what really brought home this chapter was the last section simply titled “First Who, Great Companies, And A Great Life.” in this Collins talks about how a good to great leader is life or rather how they find the right balance to his or her work life and home life. He would end by talking to an executive and his wife about Colman Mockler and that thanks to the right people in the right spots, Mockler had the time to enjoy life and be able to spend time at home, at Harvard, working with charities and such. Then the executive’s wife would mention that on the day of Mockler’s funeral she “looked around and realized how much love was in the room.” I would say that two things happen here; the first is if your person who can balance your work life and home life and manage the company greatly, you would reach that level five status and in turn would help produce a good to great company.

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