Good To Great

Good to Great by Jim Collins

Category: Business Rating: A

I don't read to many business-oriented books any more but decided to try this one after reading an excerpt in the Harvard Business Journal. Collins is an business consultant and former professor at Stanford Business School. This book documents a five year study undertaken in to what makes a company "great". There approach was pretty interesting. They first defined what they meant by a "great" company -- basically a public company that significantly outperformed the market for a sustained period of time -- more than 15 years. They then identified comparison companies - usually the same industry and roughly equivalent starting points. By their criteria, only 11 companies in the Fortune 500 qualified as "great" for the purposes of this study. The team then collected everything they could find about the companies - financial data, compensation data, news stories and interview results. By letting the data speak for itself, they were able to they identified a the distinguishing factors that made these companies great.

It's a highly readable book and it didn't hurt that I agreed with just about everything they said about what distinguishes a great company from a merely good one. I do recommend the book to just about anybody that works in management at any level. Given, however, that most of you probably won't go running to read a business book, I'll summarize some of the findings here. Some of the major factors that Collins found were:

1. To be great, you need a "Level 5" leader. These were usually low-key insiders whose ambitions for the company far outstripped their personal ambitions. When asked, they tend to divert credit from themselves and give it to others or, frequently, to luck. None of the leaders of the great companies were particularly charismatic.
2. Get the right people on the bus and the wrong people off. Most of the great companies hired the best people and then worried about what strategy they were going to pursue. They lived the theory that skills and specific knowledge can be taught but the subtler values were inherent in the right people.
3. Act like a "hedgehog". The hedgehog survies in the world by doing exactly one thing really well - basically rolling up in a ball. In business, decided what you can be the best in the world (however you define your world) and then sticking to that, is critical. The discipline to say "no" is vital.

There were other factors that Collins talks about, but (a) I think these are the most important and (b) there has to be some reason that at least a few of you will give this really interesting book a try.

Interestingly, given a lot of things that Carolyn and I are in to these days, Collins also published a brief (30 page) monograph that talks about how the findings of Good to Great can be applied (or not) to the social sector. This is a great addition to the information in the book itself.