Another Spin on Leadership and Change
Jim Collins has a different spin on leadership and change. His research, detailed in the book Good to Great, implies that a lot of the conventional wisdom about how companies should transform themselves from mediocre to great performers is, well, unwise.
Collins and his team of researchers analyzed the performance of 1,435 companies on the Fortune 500 list between 1965 and 1995. They looked for companies whose cumulative stock returns were at or below the general market for 15 years and then, in a turnaround, enjoyed 15 years during which their returns were at least three times that of the general market. What's more, their turnaround had to be independent of their industry. Only 11 companies met those criteria, averaging returns 6.9 times greater than the market's. They included Abbott Laboratories, Circuit City Stores, Federal Home Loan Mortgage, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens and Wells Fargo.
What did Collins learn from his five-year study? For one thing, the best long-term leaders are not necessarily those most in vogue in recent years - that is, the strong, charismatic CEOs recruited from outside organizations. In fact, of the 11 leaders most responsible for their firm's transition to "greatness," 10 came up through the ranks. Moreover, these leaders tend to be, at least outwardly, self- effacing and humble people who are more interested in the good of the company than self-aggrandizement. Collins refers to them as Level 5 leaders.
Rather than arriving and immediately forging strong strategic visions of the future, they ask lots of questions. They spark internal debate and look for answers in a thoughtful, deliberate way. They don't build companies around their personalities, an action that Collins feels is damaging to an organization over the long haul. Yet, they're not weak-willed, either. "They are ferocious and fearless. These qualities together in one person are the essential ingredients for an unstoppable leader," says Collins, as quoted in PR Newswire.
Their secret to success begins with building a workforce made up of capable, self-motivated people. Hiring the right people, and getting rid of the wrong ones, is essential. The right people will be easy to manage and motivate, and they'll be better prepared to adjust to any new strategies that emerge. The second key to success for Level 5 leaders is the creation of a culture in which people are heard and the truth is acted on. This requires leaders to lead with questions, to engage in dialogue, to analyze failure without assigning blame, and to build in mechanisms that flag information that shouldn't be ignored.
Such leaders don't rely on overnight successes. Instead, they find out what works and stick with it as long as it's appropriate. Collins uses the metaphor of a large, heavy flywheel. It's hard to get spinning at first, but if you keep pushing it in the same direction, it gathers momentum until "there's this sense of breakthrough, where all of a sudden all that weight that was against you is sort of with you," says Collins. Few of the leaders in his study could point to one moment or decision that turned everything around for their companies. Instead, they emphasize the team effort of the right people pushing in the same direction. As with a flywheel, there is no single big push that makes it go.
Collins believes that his study disproves many of the "myths" associated with change management. The companies that made the good-to-great transition did not adopt change-management programs. They didn't create a "burning platform" to motivate people or embark on major mergers or acquisitions. They didn't usually "grease the wheels of change" with major stock options, bonuses or other incentives; neither did they make massive investments in technology unless it fit in with a larger plan. Instead, they created disciplined cultures in which people were, nonetheless, free to exercise their clear responsibilities.
None of this is meant to suggest that these 11 companies discovered the secret to perpetual greatness. Gillette has seen some declines since 1998, and Nucor often trailed major stock indexes in the 1990s. Wells Fargo was taken over. The transition from good to great can work in reverse. It may be comforting to know, however, that some companies can make long-term changes for the better without the advent of savior CEOs, massive mergers, or mind-bending strategic brilliance.
For more information on Good to Great, please see
http://www.fastcompany.com/online/51/goodtogreat.html
For more information on Jim Collins, see
http://www.jimcollins.com/ or
http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml&doc_id=20709
Collins and his team of researchers analyzed the performance of 1,435 companies on the Fortune 500 list between 1965 and 1995. They looked for companies whose cumulative stock returns were at or below the general market for 15 years and then, in a turnaround, enjoyed 15 years during which their returns were at least three times that of the general market. What's more, their turnaround had to be independent of their industry. Only 11 companies met those criteria, averaging returns 6.9 times greater than the market's. They included Abbott Laboratories, Circuit City Stores, Federal Home Loan Mortgage, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens and Wells Fargo.
What did Collins learn from his five-year study? For one thing, the best long-term leaders are not necessarily those most in vogue in recent years - that is, the strong, charismatic CEOs recruited from outside organizations. In fact, of the 11 leaders most responsible for their firm's transition to "greatness," 10 came up through the ranks. Moreover, these leaders tend to be, at least outwardly, self- effacing and humble people who are more interested in the good of the company than self-aggrandizement. Collins refers to them as Level 5 leaders.
Rather than arriving and immediately forging strong strategic visions of the future, they ask lots of questions. They spark internal debate and look for answers in a thoughtful, deliberate way. They don't build companies around their personalities, an action that Collins feels is damaging to an organization over the long haul. Yet, they're not weak-willed, either. "They are ferocious and fearless. These qualities together in one person are the essential ingredients for an unstoppable leader," says Collins, as quoted in PR Newswire.
Their secret to success begins with building a workforce made up of capable, self-motivated people. Hiring the right people, and getting rid of the wrong ones, is essential. The right people will be easy to manage and motivate, and they'll be better prepared to adjust to any new strategies that emerge. The second key to success for Level 5 leaders is the creation of a culture in which people are heard and the truth is acted on. This requires leaders to lead with questions, to engage in dialogue, to analyze failure without assigning blame, and to build in mechanisms that flag information that shouldn't be ignored.
Such leaders don't rely on overnight successes. Instead, they find out what works and stick with it as long as it's appropriate. Collins uses the metaphor of a large, heavy flywheel. It's hard to get spinning at first, but if you keep pushing it in the same direction, it gathers momentum until "there's this sense of breakthrough, where all of a sudden all that weight that was against you is sort of with you," says Collins. Few of the leaders in his study could point to one moment or decision that turned everything around for their companies. Instead, they emphasize the team effort of the right people pushing in the same direction. As with a flywheel, there is no single big push that makes it go.
Collins believes that his study disproves many of the "myths" associated with change management. The companies that made the good-to-great transition did not adopt change-management programs. They didn't create a "burning platform" to motivate people or embark on major mergers or acquisitions. They didn't usually "grease the wheels of change" with major stock options, bonuses or other incentives; neither did they make massive investments in technology unless it fit in with a larger plan. Instead, they created disciplined cultures in which people were, nonetheless, free to exercise their clear responsibilities.
None of this is meant to suggest that these 11 companies discovered the secret to perpetual greatness. Gillette has seen some declines since 1998, and Nucor often trailed major stock indexes in the 1990s. Wells Fargo was taken over. The transition from good to great can work in reverse. It may be comforting to know, however, that some companies can make long-term changes for the better without the advent of savior CEOs, massive mergers, or mind-bending strategic brilliance.
For more information on Good to Great, please see
http://www.fastcompany.com/online/51/goodtogreat.html
For more information on Jim Collins, see
http://www.jimcollins.com/ or
http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml&doc_id=20709