Brandon, Brett, Ryan, Kara, William, Scott Courtney, Gerald Good to Great Chapter 3

Preview 3 simple truths about the “bus” Right people being on the bus Motivating and managing problem goes away Having the wrong people in the right direction won’t make a company great Excerds/Walgreens Case Study Wells Fargo “injecting endless stream of talent” Who you pay, not how you pay them Being Rigorous Best people on biggest opportunities, not biggest problems

“Genius With a Thousand Helpers” Does this business have any value beyond the value of its assets? In this model, the company is a platform for the talents of an extraordinary individual. - In these cases, the towering genius, the primary driving force in the company’s success, is a great asset; as long as the genius sticks around… Ex. Henry Singleton -The “Sphinx”

Level 5 v. Level 4 Level 5+ Management Team (Good-to-Great Companies) A “Genius With a Thousand Helpers” (Comparison Companies) Level 5 Leader ↓ First Who Get the right people on the bus. Build a Superior executive team. ↓ Then What Once you have the right people in place, figure out the best path to greatness. Level 4 Leader ↓ First What Set a vision for where to drive the bus. Develop a road map for driving the bus. ↓ Then Who Enlist a crew of highly capable “helpers” to make the vision happen.

Good to Great? − A genius for picking the right stores to buy − A genius for picking the right people to hire. − A gift for seeing which stores should − A gift for seeing which people should go in what go in what locations. seats. − No executive team, but instead a − Built the best team in the industry. bunch of capable helpers assembled to assist the great genius. Cork WalgreenJack Eckerd

Case Study Eckerd's transformed from good to great. From two little stores in Delaware, to a drugstore empire over a thousand stores. Jim Collins asked a Walgreens executive to estimate when the good-to-great transformation happened. His answer: “Sometime between 1971 and 1980.” By the late 1970’s, Eckerd's had equaled Walgreens’ revenues, and it looked as if Eckerd's would run the industry. Jack Eckerd retires 1986.

Its Who you Pay, Not how you Pay them. What they expected to find Amount and structure of compensation will play a key roll in going good to great What they actually found No pattern linking executive incentives to the good to great process.

When comparing good to great vs. other companies. Use of stock, high salaries, bonus incentives, or long-term compensation; in any combination showed no differences. Only difference found was that Good to Great executives received less compensation than the mediocre companies. Idea is not that executive compensation is irrelevant, you just have to be reasonable. Once the compensation is structured, the element of incentives or compensation leading to a making the company great falls away.

Its Who you Pay, Not how you Pay them. Why? Manifestation of “first who” principle. Its not how you compensate, but which people you have to compensate. The purpose of compensation should not be to get the right behaviors out of people, but to get the right people on board, and keep them there.

Its Who you Pay, Not how you Pay them. Example is the Nucor steel company Looked for the workers who understood how to work hard Built steel plants in farming areas Farmers grow up with habit of getting up early and working hard. To attract and keep these workers they used a team incentive system Compensation depended on the success of a person team This caused the teams to kick people out who did not work hard… Nucor was able to get the wrong people out, the right workers in, and keep them there with incentives.

People aren’t your most important asset, the right people are. We’ve learned of different organizational cultures in other classes.

Organizational Culture and Keeping the right people. Strong Organizational Culture Business will have a set of values and norms New employees “buy in” to these values If not these new employees will not stay in the company. Many businesses have these strong cultures, and provide incentives for keeping the right people around. - SAS, and Google

Rigorous, Not Ruthless Rigorous – “..consistently applying exacting standards at all times, and at all levels, especially in upper management.” Ruthless - Callous and needless firing of workers without any real consideration, particularly in hard times

Wells Fargo acquires Crocker Bank - Didn’t integrate with Crocker, decided they were the, “wrong people on the bus” - 1,600 Crocker managers let go on day one, counting almost all top executives - Like a sports team, only the best made the cut

Wells Fargo Exec, “We all agreed this was an acquisition, not a merger..” Higher management at Wells Fargo lost more on a percentage basis than lower ranking employees Wells Fargo did fewer big layoffs than competition

Rigorous, Not Ruthless “Rigor in a good-to-great company applies first at the top, focused on those who hold the largest burden of responsibility.” Rigorous - Better to deal with it upfront and be straightforward and let people move on to different jobs.

How to Be Rigorous 1) When in doubt, don’t hire – keep looking. 2) When you know you need to make a people change, act. 3) Put your best people on your best opportunities, not your biggest problem.

When in doubt, don’t hire – keep looking. Packard’s Law No company can grow revenues consistently faster than its ability to get enough of the right people to implant that growth and still become a great company. ”…the ultimate throttle on growth for any great company is not markets, or technology, or competition, or products. It is the one thing above all others: the ability to get and keep enough of the right people.” - Jim Collins

Continued… – Alan Wurtzel– Sidney Cooper “You don’t compromise. We find another way to get through until we find the right people.”  Spent 80% of his time focusing on the right stores to buy “Silo developed a reputation for not being able to do the basics...” – Jim Collins “Silo developed a reputation for not being able to do the basics...” – Jim Collins

When you know you need to make a people change, act. Quality NOT Quantity Look for A+ talent Don’t waste each others time Don’t waste a portion of a bad employees life by keeping them around Bad employees are unfair to good employees Instead of firing, sometimes an employee may be a good or better fit at another position. Wrong seat vs. wrong person

Put you best people on your biggest opportunities not you biggest problems! Joe Cullman (chainman and CEO) It’s not a “what” answer, but a “who” George Weissman #1 executive who controlled 99% of operations Now controlling 1% of operations (international) Took Marlboro to best-selling cigarette in the word BEFORE it was the best-selling cigarette in the U.S.

F IRST W HO, G REAT C OMPANIES, AND A G REAT L IFE Is it possible to build a great company and also build a great life? Ex. Colman Mockler, CEO of Gillette during transition from good-to-great Members of good-to-great teams tend to remain friends for life. Teams enjoy working together during both good times and bad.

Good-to-great companies loved what they did mainly because they loved who they did it with “If we spend the vast majority of our time with the people we love and respect- people we really enjoy being on the bus with and who will never disappoint us- then we will almost certainly have a great life, no matter where the bus goes.” -Collins

Key Points Get the right people on and the wrong people off the bus. First who then what- as a rigorous discipline, consistantly applied The „Genius with a thousand little helpers“ model fails when the genius departs Rigorous not ruthless with people decisions, comparison companies used layoffs to a much greater extent. Good-to-great management teams debate vigorously in search of answers, yet unify behind decisions regardless of parochial interests. Three dsciplines for being rigorous When in doubt don´t hire- keep looking Act quickly when you need to make a people change but make sure they aren´t in the wrong seat first. Put your best people on your best opportunites, not your biggest problems

Works Cited Collins, Jim. Good to Great. 1st ed. New York, NY: HarperCollins Publishers Inc., Print.