January 25, 2015 at 11:14From good to great. Part 1
We continue to read good books from this list from Milfgard , and I continue to write extracts from them. I do this for two reasons: to apply in our studio, and so that others can familiarize themselves with the summary and understand for themselves whether it is worth reading the source. The book is called Jim Collins's Good to Great. She tells about what the companies that became not only good, but great did and were able to maintain this success.
We quickly get used to the good and, therefore, we stop seeing opportunities to do really great things. One well-known technique is known everywhere: “don’t fix what works”. This also applies to companies. There are simply good companies, and there are outstanding companies that achieve outstanding results. The team of Jim Collins conducted a large-scale study, which they spent more than 10 man-years on and the result is worth it.
Researchers have selected companies that:
The study was conducted regardless of the industry the companies worked for. The study selected 11 prominent companies: Abbott, Circuit City, Fannie Mae, Gillette , Kimberly-Clark, Kroger, Nucor, Philip Morris , Pitney Bowers, Wal greens, Wells Fargo . Honestly, from this list I only heard about two and highlighted them in italics. These companies are not as famous as Coca-Cola, General Electric or Intel, however, their performance exceeded the average market more than three times over 15 years!
But researchers did not stop only at outstanding companies. For each company, they found a large analog company with which they could compare, but which did not achieve the same success. As a result, a number of points were found that distinguish outstanding companies from mediocre ones.
It turned out that each of the outstanding companies was headed by a level 5 manager. And there are only five levels developed by the researchers, and here are the following:
The fifth level is the highest degree of the hierarchy of abilities for top management. There is no need to move sequentially from the first level and higher. The qualities of managers of lower levels can be developed later, but it is important to understand that level 5 includes the qualities of all lower levels.
What qualities are inherent in level 5 managers? - Modesty + will. They are both modest and strong-willed, shy and courageous. Level 5 manager thinks about successor, the main thing for them is the success of the companyand not their personal success. They do not exalt themselves and do not like publicity. They have an unwavering determination to do what needs to be done. They will sell the plants or fire their brother if this is necessary for the company to flourish. When it comes to company failures, they “look in the mirror”, i.e. blame themselves; when it comes to success, they “look out the window”, i.e. Do not attribute these merit to others or good luck.
Interestingly, in 10 out of 11 outstanding companies, a level 5 manager was found among his own employees. They did not invite the “star” -top manager from the side, and he ended up inside the company.
It often happens that when we have an idea, we begin to look for a team for its implementation. The great thing is that the leaders of prominent companies act differently. The first thing they start with is the team. They select the right people and (attention!) Get rid of unnecessary. Only after that did they decide where they would go. Cadres do not just decide everything. The basic idea is that WHO is more important than WHAT. It is more important than vision, strategy, organizational structure.
The companies did not follow the strategy of “genius and 1000 assistants”, where a talented leader defines a strategy and the entire enterprise rushes to its intended purpose. The problem is that this model stops working as soon as the leader leaves. Thus, a company cannot develop stably over a sufficiently long period of time.
The leaders of great companies are strict (but not cruel) in making decisions regarding personnel. Yes, they cut people if necessary, but they do it in extreme cases and much less than other companies. They make decisions and quickly translate it into action. When it is necessary to fire 1,600 people, they do it one day, without stretching the “pleasure” for months or years.
The management teams of the most successful companies are fiercely arguing with each other, developing the necessary solutions, but act as a united front in the implementation of this decision.
The three main principles of personnel issues came out:
If you see a trend in your market, do not hide your head in the sand like an ostrich. You need to look around and see that the picture has changed. For example, when the level of people's well-being grew, the citizens of my city began to like clean stores more, but a little more expensive than cheap dirty grocery stores with a queue at the checkout. In our city, there is a striking difference between the Lenta or 7th stores compared to Magnets. The leaders of the latter would be well to reduce the level of rudeness and increase the level of cleanliness.
Consumers feel the attitude and go to the stores where they think about them. Successful companies often completely rebuilt their business and did everything in new ways in accordance with new trends. They redid shops, closed pharmacies, reoriented to other market segments, while ordinary companies simply closed their eyes with their hands and pretended to see nothing.
Facts are better than dreams. If you carefully analyze the situation, the right decisions become obvious. And vice versa: without enough information about the situation, you cannot make the right choice. But in order to always be in the know about the events, your company must have an atmosphere where the truth is heard. Four principles can be applied for this:
Belief in success is a very important thing. You can challenge Goliath and not only not lose, but also possibly win. The relatively small Kimberly-Clark corporation challenged Procter & Gamble when the latter entered the market. All other competitors in the industry simply surrendered, but Kimberly-Clark remained the only P&G competitor in the field of consumer goods from paper and now we can see its products in all stores in the world. They did not lose faith in success and this was a source of pride for KC employees. Victor Frankl also believed in success and also won.
When a fox runs up to a hedgehog, the hedgehog performs one effective and simple action: it curls up into a ball. When we want to create a great company, we need to think about what simple actions can lead us to success. All great companies made seemingly simple decisions and followed them. How to make a simple decision? The answer is given in the form of three circles.
It is important to find the intersection of all three circles and work in this area of activity.
In order to develop an understanding of the solution within the three circles, you must begin to develop this solution. And to do this periodically with the help of informal meetings. Here are the characteristics of the board:
Great companies took an average of 4 years to develop a concept, so it makes sense to start immediately.
PS: About half of the book is included in this article. Most of them are yet to come, so the next article will be coming soon. You can wait for its release, however, I highly recommend that you familiarize yourself with the source. The book is quick to read and exciting.
UPD: In this publication you can familiarize yourself with selected quotes, and spmbt also shared a link to the source in a comment .
UPD 2: Released the second part of the article .
If someone has experience in applying at least part of the principles set forth above, please share your experience in the comments.
1. Research
We quickly get used to the good and, therefore, we stop seeing opportunities to do really great things. One well-known technique is known everywhere: “don’t fix what works”. This also applies to companies. There are simply good companies, and there are outstanding companies that achieve outstanding results. The team of Jim Collins conducted a large-scale study, which they spent more than 10 man-years on and the result is worth it.
Researchers have selected companies that:
- at first for five years they were middle peasants
- there was some tipping point
- then their combined profitability grew to a level 3 times the average for the market
- kept the achieved result for 15 years or more (you can’t be lucky for 15 years in a row)
The study was conducted regardless of the industry the companies worked for. The study selected 11 prominent companies: Abbott, Circuit City, Fannie Mae, Gillette , Kimberly-Clark, Kroger, Nucor, Philip Morris , Pitney Bowers, Wal greens, Wells Fargo . Honestly, from this list I only heard about two and highlighted them in italics. These companies are not as famous as Coca-Cola, General Electric or Intel, however, their performance exceeded the average market more than three times over 15 years!
But researchers did not stop only at outstanding companies. For each company, they found a large analog company with which they could compare, but which did not achieve the same success. As a result, a number of points were found that distinguish outstanding companies from mediocre ones.
2. Level 5 managers
It turned out that each of the outstanding companies was headed by a level 5 manager. And there are only five levels developed by the researchers, and here are the following:
- The head of the fifth level. His leadership allows us to achieve exceptional and long-term results, thanks to a paradoxical combination of outstanding personal qualities and strong professional will.
- Effective Leader. Forms a vision of the future of the company and consistently strives for the company to move along the intended path. Provides high standards of quality work.
- Competent manager. Organizes people, rationally distributes resources in order to fulfill assigned tasks.
- Valuable member of the team. Makes a personal contribution to achieving the goals of the company. Effectively works with other team members.
- Highly professional employee. He contributes through the active use of his abilities, knowledge, experience and ability to organize his work.
The fifth level is the highest degree of the hierarchy of abilities for top management. There is no need to move sequentially from the first level and higher. The qualities of managers of lower levels can be developed later, but it is important to understand that level 5 includes the qualities of all lower levels.
What qualities are inherent in level 5 managers? - Modesty + will. They are both modest and strong-willed, shy and courageous. Level 5 manager thinks about successor, the main thing for them is the success of the companyand not their personal success. They do not exalt themselves and do not like publicity. They have an unwavering determination to do what needs to be done. They will sell the plants or fire their brother if this is necessary for the company to flourish. When it comes to company failures, they “look in the mirror”, i.e. blame themselves; when it comes to success, they “look out the window”, i.e. Do not attribute these merit to others or good luck.
Interestingly, in 10 out of 11 outstanding companies, a level 5 manager was found among his own employees. They did not invite the “star” -top manager from the side, and he ended up inside the company.
3. First who ... then what
It often happens that when we have an idea, we begin to look for a team for its implementation. The great thing is that the leaders of prominent companies act differently. The first thing they start with is the team. They select the right people and (attention!) Get rid of unnecessary. Only after that did they decide where they would go. Cadres do not just decide everything. The basic idea is that WHO is more important than WHAT. It is more important than vision, strategy, organizational structure.
The companies did not follow the strategy of “genius and 1000 assistants”, where a talented leader defines a strategy and the entire enterprise rushes to its intended purpose. The problem is that this model stops working as soon as the leader leaves. Thus, a company cannot develop stably over a sufficiently long period of time.
The leaders of great companies are strict (but not cruel) in making decisions regarding personnel. Yes, they cut people if necessary, but they do it in extreme cases and much less than other companies. They make decisions and quickly translate it into action. When it is necessary to fire 1,600 people, they do it one day, without stretching the “pleasure” for months or years.
The management teams of the most successful companies are fiercely arguing with each other, developing the necessary solutions, but act as a united front in the implementation of this decision.
The three main principles of personnel issues came out:
- Do not hire an employee if in doubt. Keep looking. Whether a person is suitable or not is a question more of his character and abilities than his knowledge, education and experience.
- If a person needs to be fired, proceed by making sure that he is not out of place. Then he can be transferred to another position.
- Make the best people work in the most promising , not problem areas.
4. Face harsh facts, but don’t lose faith
If you see a trend in your market, do not hide your head in the sand like an ostrich. You need to look around and see that the picture has changed. For example, when the level of people's well-being grew, the citizens of my city began to like clean stores more, but a little more expensive than cheap dirty grocery stores with a queue at the checkout. In our city, there is a striking difference between the Lenta or 7th stores compared to Magnets. The leaders of the latter would be well to reduce the level of rudeness and increase the level of cleanliness.
Consumers feel the attitude and go to the stores where they think about them. Successful companies often completely rebuilt their business and did everything in new ways in accordance with new trends. They redid shops, closed pharmacies, reoriented to other market segments, while ordinary companies simply closed their eyes with their hands and pretended to see nothing.
Facts are better than dreams. If you carefully analyze the situation, the right decisions become obvious. And vice versa: without enough information about the situation, you cannot make the right choice. But in order to always be in the know about the events, your company must have an atmosphere where the truth is heard. Four principles can be applied for this:
- Lead with questions, not answers. It is good to hold informal meetings where you will ask questions like: “What bothers you as an employee? Can you tell me about this? Can you help me understand? ” In this case, the manager can see the problem and respond to it in a timely manner.
- When engaging in dialogue and argument, avoid coercion. Loud debates, heated discussions, etc. At meetings of great companies, this happened very often. The process was reminiscent of a scientific dispute, where all participants sought to find a suitable answer.
- Perform an autopsy without finding out who is to blame for the death. The leader says: “I will take responsibility for this bad decision. But you are responsible for learning all the useful lessons from this situation. Consider our financial loss as the cost of your training. ”
- Create an inevitable feedback mechanism. For example, "underpayment" allows the client to pay as much as he considers necessary on the basis of satisfaction with a product or service. The client simply circles in the invoice that product that does not satisfy him and does not pay for it. With "underpayment" it is impossible to ignore the facts. You often do not suspect customer dissatisfaction until you lose it.
Belief in success is a very important thing. You can challenge Goliath and not only not lose, but also possibly win. The relatively small Kimberly-Clark corporation challenged Procter & Gamble when the latter entered the market. All other competitors in the industry simply surrendered, but Kimberly-Clark remained the only P&G competitor in the field of consumer goods from paper and now we can see its products in all stores in the world. They did not lose faith in success and this was a source of pride for KC employees. Victor Frankl also believed in success and also won.
5. The concept of a hedgehog
When a fox runs up to a hedgehog, the hedgehog performs one effective and simple action: it curls up into a ball. When we want to create a great company, we need to think about what simple actions can lead us to success. All great companies made seemingly simple decisions and followed them. How to make a simple decision? The answer is given in the form of three circles.
- What can you be better than anyone else in the world and what kind of activity you can’t? This is more than a core competency, as core competency is simply what you can do best, but not best. But what you can become the best in the world may not be what you are doing now.
- How does your economic model work? All great companies had a clear understanding of how to maximize profits. Each great company has developed its own key indicators (often unusual), which measured business performance.
- What do you especially like to do? You have to do what you and your employees have a real passion for. You do not need to stir up a passion for what people don’t want to do, but you need to find the area where people will get high from work.
It is important to find the intersection of all three circles and work in this area of activity.
In order to develop an understanding of the solution within the three circles, you must begin to develop this solution. And to do this periodically with the help of informal meetings. Here are the characteristics of the board:
- Advice exists to understand the organization’s critical issues.
- Composition from top management. 5-15 people.
- Everyone can argue and discuss, answer and ask. But based on the interests of the company, and not on their own
- Respect for other board members.
- Everyone has a deep knowledge of certain aspects of the activity.
- Council is a permanent structure
- Council meets periodically. Not more than once a week, but at least once a quarter
- No compromise, as these are not the best solutions. The final decision is made by the head of the company
- The Council is an informal body. It is not registered in the organizational structure and it is not in the documents. He just is.
Great companies took an average of 4 years to develop a concept, so it makes sense to start immediately.
PS: About half of the book is included in this article. Most of them are yet to come, so the next article will be coming soon. You can wait for its release, however, I highly recommend that you familiarize yourself with the source. The book is quick to read and exciting.
UPD: In this publication you can familiarize yourself with selected quotes, and spmbt also shared a link to the source in a comment .
UPD 2: Released the second part of the article .
If someone has experience in applying at least part of the principles set forth above, please share your experience in the comments.