Good to Great is Good and Great

If you ever get the chance to read Good to Great by Jim Collins I highly recommend it. Not only because it is a well written and well described account of years of investigation into organizations and what makes them good vs. great, but also because Jim Collins has done something that I have never seen before and certainly has never been published in a such a mainstream way.

Collins looked at companies and measured their performance with the yardstick we all know and love: stock price. After a thorough analysis of hundred of companies he selected fifteen that significantly outperformed the general stock market by at least four times over a fifteen year period. So for example, if the stock market as a whole was four times what it was fifteen years earlier, then the lowest performing Good to Great company (Abbot from 1974-1989) would have increased in stock price 16 times and the highest performing Good to Great Company, (Circuit City from 1982-1997) increased its stock price 72 times. And these are not start-up companies. They are companies that that mulled along in mediocrity and then had a very distinct point of transition.

I thought it was funny that General Electric often considered a poster child of late twentieth century business practice with the fist pounding and head slashing of Jack Welsh, only beat the market by 2.8 times and didn't make the Good to Great List.

But an investigation of what companies have done well with respect to stock price is certainly nothing new or earth shattering. It's the investigation of the reasoning for this strong performance that makes Collins' work extraordinary. Collins didn't find that strong technological breakthroughs, masterful mergers or acquisitions, or fearful management styles fueled a transition from good to great, but rather it was a modest, humble group of leaders that focused on the people of the organization and their clear and concise goals.

The great irony is that the animus and personal ambition that often drive people to positions of power stand at odds with the humility required for Level 5 leadership. When you combine that irony with the fact that boards of directors frequently operate under the false belief that they need to hire a larger-than-life, egocentric leader to make an organization great, you can quickly see why Level 5 leaders rarely appear at the top of our institutions.

Relating leadership to stock price is like relating the mushy pre-Super Bowl coaches speech to wins. Collins' work is a display of soft skills vs. hard quantitative data, fist-pounders vs. hand shakers, and dare I say, liberal vs. conservative?

I suggest everybody read it. It's not a life changer but I think it could certainly alter the way you perceive the leadership of a successful organization.

Good to Great is Good and Great