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REEDINGS . . .
Notes on Books by Gerard Reed
November 2005 Number One Hundred Sixty-seven
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“BUILT TO LAST” and “GOOD TO
GREAT”
I rarely read books on
“leadership” or business management, finding them generally focused on “bottom line” issues and generally irrelevant
(or even contrary) to the academic and religious world that’s always been my primary concern. Some recent treatises, however, merit consideration, for they explore both the
realm of economics and the deeper recesses of human nature. Economics, in
its most basic sense, means household management and obligates one to act wisely for the good of one’s family and
community—certainly a central concern for any ethic. And the ways people
do business, in any society, obviously offers many clues to the nature of human nature.
A decade ago James C. Collins and Jerry I. Porras published Built to Last:
Successful Habits of Visionary Companies, setting forth the data and insights gained from a six-year
research project at the
The authors focused on some “truly exceptional companies that have stood the test of time” (p. xxiii),
wondering how they lasted while competitors came and went. What they
discovered, first of all, was the difference between “clock building and time telling.”
Patiently constructing a well-honed organization, with less attention to quarterly statistics, matters much in
the long run. Lasting success comes through institutional soundness, not
dramatic leadership or ephemeral enthusiasm. “Luck favors the persistent. This simple truth is a fundamental cornerstone of successful company builders. The builders of visionary companies were highly persistent, living to the
motto: Never, never, never give up” (p. 29).
The best companies were almost uniformly devoted to “more than profits.”
Their main concern has been to preserve their “core values.” The
premier “architects” of great companies generally established a “core ideology” that has persisted, in some instances,
for more than a century. Though Henry Ford himself certainly had some
unattractive traits, he seemed to care more for making lots of cars than maximizing his fortune. “I don’t believe we should make such an awful profit on our cars,” said Ford. “A reasonable profit is right, but not too much,” said he. “I hold that it is better to sell a large number of cars at a reasonably small
profit . . . I hold this because it enables a larger number of people to
buy and enjoy the use of a car and because it gives a larger number of men employment at good wages. Those are the two aims I have in life” (p. 53).
Though one should always place such rhetoric in perspective, Ford’s claim rings true for his and a number of
built-to-last companies. Collins and Porras conclude: “Contrary to business school doctrine, we did not find ‘maximizing
shareholder wealth’ or ‘profit maximization’ as the dominant driving force or primary objective through the history of
most visionary companies. They have tended to pursue a cluster of
objectives, of which making money is only one—and not necessarily the primary one” (p. 55).
Paul Galvin, the
founder of Motorola, consistently defined profits as the means to the company’s goal, making a good product,
not its raison de etre. Galvin’s son and successor, Robert, wrote a
series of essays in 1991, stressing such things as “creativity, renewal, total customer satisfaction, quality, ethics,
innovation, and similar topics; not once did he write about maximizing profits, nor did he imply this was the
underlying purpose—the ‘why’ of it all” (p. 82). Motorola’s competitor,
Zenith, by contrast, lacked such a commitment and, following the death of its founder, focused almost singularly on
profits and market share, losing its way in the process.
Importantly: “You do not ‘create’ or ‘set’ core ideology.
You discover core ideology. It is not derived by looking to
the external environment; you get at it by looking inside. It has
to be authentic” (p. 228). Furthermore:
“You cannot ‘install’ new core values or purpose into people. Core
values and purpose are not something people ‘buy in’ to. People must
already have a predisposition to holding them. Executives often ask, ‘How
do we get people to share our core ideology?’ You don’t. You can’t! Instead, the task is to
find people who already have a predisposition to share your core values and purpose, attract and train these people,
and let those who aren’t disposed to share your core values go elsewhere” (pp. 229-230).
In addition to preserving core values, great companies continually find
innovative ways to “stimulate progress.” Their identity remains constant
but their strategies ever evolve. This, in fact, is “the central concept
of this book: the underlying dynamic of ‘preserve the core and stimulate
progress’ that’s the essence of a visionary company” (p. 82). Successfully
doing so involves five things, each given a separate chapter by Collins and Porras:
1) Big Hairy Audacious Goals; 2) Cult-like Cultures; 3) Try a Lot of Stuff and Keep What
Works; 4) Home-grown Management; 5) Good Enough Never Is.
Henry Ford’s Big Hairy Audacious Goal was “to democratize the automobile.” General Electric, under the legendary Jack Welch, sought to “become #1 or #2 in
every market we serve and revolutionize this company to have the speed and agility of a small enterprise” (p. 95). Boeing, in 1965, determined to build the 747 jumbo jet at all costs—and it
nearly cost everything, stretching the company to its absolute maximum.
McDonnell Douglas, by contrast, consistently refused to risk losses and thus failed to successfully compete with
Boeing.
Cult-like Cultures characterize companies like Nordstroms.
All employees start at the bottom, working on the floor as salesmen. There
they’re on trial, seeing whether they truly satisfy customers. Employees
receive a card—WELCOME TO NORDSTROM—stating the company’s character:
“We’re glad to have you with our Company. Our number one goal is to
provide
outstanding customer service. Set both your personal and professional goals high. We have great confidence in your ability to achieve them. Nordstrom Rules: Rule #1:
Use your good judgment in all situations.
There will be no
additional rules” (p. 117). The company is fanatically committed to this
simple rule, and customer satisfaction has validated its effectiveness.
“Nordstrom reminds us,” say the authors, “of the United States Marine Corps—tight, controlled, and disciplined,
with little room for those who will not or cannot conform to the ideology” (p. 138).
Still more: “This finding has massive practical implications. It means that companies seeking an ‘empowered’ decentralized work environment
should first and foremost impose a tight ideology, screen and indoctrinate people into that ideology, eject the
viruses, and give those who remain the tremendous sense of responsibility that comes with membership in an elite
organization. It means getting the right actors on the stage, putting them
in the right frame of mind, and then giving them the freedom to ad lib as they see fit.
It means, in short, understanding that cult-like tightness around an ideology actually enables a company
to turn people loose to experiment, change, adapt, and—above all—to act”
(pp. 138-139).
Built-to-last
companies continually adapt to the evolving marketplace by trying “a lot of stuff” and keeping “what works.” In the methodological sense they are totally pragmatic, remarkably Darwinian. They tenaciously retain their core values but freely change their modus
operandi. They have a “vision” but rarely craft detailed “long range”
plans. Thus “Bill Hewlett told us that HP ‘never planned more than two or
three years out’ during the pivotal 1960s” (p. 144), and they learned from their mistakes. As R.W. Johnson Jr., said, regarding Johnson & Johnson: “Failure is our most important product” (p. 147). A Wal-Mart store in
Welch personifies the
“Home-Grown Management” the authors find in most successful companies.
Bringing in an outsider—whether because of his charismatic gifts or her politically correct sex or some alleged
need for “fresh blood” rarely helps a company. Welch succeeded at GE
because he followed a century of highly successful CEOs. Amazingly,
“across seventeen hundred years of combined history in the visionary companies, we found only four individual cases of
an outsider coming directly into the role of chief executive” (p. 173).
Companies that nourish employees’ development, recognize their talent, and reward their commitment find able leaders
to assume control of the corporation. Companies that don’t—such as Disney
in the ‘70s—flounder while hiring outsiders like Michael Eisner.
“Good Enough Never
Is” means that successful companies never rest on their laurels. Their
CEOs demand continual improvement. Thus J. Willard Marriott, Sr., said: “Discipline is the greatest thing in the world.
Where there is no discipline, there is no character. And without
character, there is no progress. . . . Adversity gives us opportunities to
grow. And we usually get what we work for” (p. 188). His son sustained his “Mormon work ethic,” putting in 70-hour weeks and
diligently traveling to make sure his facilities were first-rate. Howard
Johnson’s son, however, left the details of the organization to others while he enjoyed the “good life” in
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Having analyzed
companies that were “built to last,” Jim Collins (assisted by 10 researchers) sought to explain why a few of them
truly excel in Good to Great: Why Some Companies Make the Leap and
Others Don’t (
Some of the things
they didn’t find are striking. “Larger-than-life, celebrity leaders
who ride in from the outside are negatively correlated with taking a company from good to great” (p. 10). Financial packages for top executives matter little. Long-range planning strategies aren’t a factor.
Nor do cutting-edge technologies, mergers and acquisitions, motivational novelties, or various other voguish
“keys” make for success. Conversely—and far less flamboyantly—what truly
mattered, as companies climbed to greatness, was “a process of buildup followed by breakthrough, broken into three
broad stages: disciplined people, disciplined thought, and disciplined
action” (p. 12). Great “companies have a culture of discipline. When you have disciplined people you don’t need hierarchy. When you have disciplined thought, you don’t need bureaucracy. When you have disciplined action, you don’t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you
get the magical alchemy of great performance” (p. 13).
It all begins with what Collins calls a “Level 5 Executive,” such as Darwin E. Smith at Kimberly-Clark, who
blends “personal humility and professional will” (p. 20) and orchestrates the transformation. A shy, self-effacing, hard-working farm boy who slowly moved up the ranks of
the company, Smith brought a “ferocious resolve” to renew an aging paper producer and did so. Like Smith, Level 5 leaders are “incredibly ambitious—but their ambition is
first and foremost for the institution, not themselves” (p. 21). The
eleven CEOs whose companies “met the exacting standards for entry into this study” (p. 28) were remarkable men, but
they’re largely unknown! The rarely graced the cover of People Magazine
or appeared on 60 Minutes or dined with Barbara Streisand! They rarely
talked about themselves, and admiring outsiders tended to focus on the companies, not the executives who ran them! Level 5 Executives take responsibility for failures and generously praise
others for successes. Lee Iacocca, by contrast, often seemed to lead
Chrysler as a means of self-promotion, so “that insiders at Chrysler began to joke that Iacocca stood for ‘I Am
Chairman of Chrysler Corporation Always’” (p. 30). And Iacocca’s
flamboyant success in the 1980s resembled a soaring, then quickly deflated, balloon.
The second phase in moving from good to great is finding the right (and eliminating the wrong) people. People matter more important than plans.
“First who, then what,” guides the great companies.
Nucor succeeded because the company found “that you can teach farmers how to make steel, but you can’t teach a farmer
work ethic to people who don’t have it in the first place” (p. 50). So the
company established steel plants in rural areas and focused on hiring men who knew how to work. Great companies consider an employee’s character more important than job
training or school degrees.
Thirdly, great companies “confront the brutal facts (yet never lose faith)” (p. 65). In the 1960s, while the grocery giant A&P faltered by clinging to antiquated
practices, “Kroger began to lay the foundations for a transition” (p. 65) that made it the number one grocery chain by
1999. Facing facts, not dreaming dreams, distinguish solid leaders. The reason “charismatic” leaders often fail, in the long run, is because of
their penchant for casting unrealistic visions. Winston Churchill had
great oratorical ability, and his words inspired the world in the 1940s.
But he was adamantly realistic, demanding to know the “brutal facts” during the war, and his decisions were rooted in
reality, not rhetoric. Leaders aren’t cheerleaders. “If you have the right people on the bus, they will be self-motivated. The real question then becomes: how
do you manage in such a way as not to de-motivate people? And one of the
single most de-motivating actions you can take is to hold out false hopes, soon to be swept away by events” (p. 74).
Next Collins explains “the hedgehog concept, an important aspect of the breakthrough phase. Unlike foxes, who dash in a dozen different directions, pursuing the freshest
trail, hedgehogs “simplify a complex world into a single organizing idea, a basic principle or concept that unifies
and guides everything” (p. 91). Walgreens, for example, decided to
establish “the best, most convenient drugstores, with a high profit per customer visit” (p. 92). Committed to that task, Walgreens prospered while Eckerd (hungry for growth
in any area, such as video games) withered. The hedgehog concept brings
together three essentials: 1) determining “what you can be the best in the
world at;” 2) knowing that you can be well paid for your efforts; and 3) discovering that you deeply care for and love
what you do (p. 96).
The fifth step in becoming great is “a culture of discipline” that is nourished rather than imposed. Holding employees responsible, but granting them freedom to make their own
distinctive contributions, distinguishes great organizations. This
requires rigorous recruitment and hiring—getting “self-disciplined” employees who are committed to the company. “In a sense, much of this book,” says Collins, “is about creating a culture of
discipline. It all starts with disciplined people. The transition begins not by trying to discipline the wrong people into the
right behavior, but by getting self-disciplined people on the bus in the first place” (p. 126). “Throughout our research, we were struck by the continual use of words like
disciplined, rigorous, dogged, determined, diligent, precise, fastidious, systematic, methodical, workmanlike,
demanding, consistent, focused, accountable, and responsible” (p. 127).
Finally, there are “technological accelerators.” Good-to-great
companies freely utilize the latest technologies, but they think differently about them. Their core values, their hedgehog tenacity, determine the use of technologies. Rather than insisting on everything be the latest and finest, they pick and
choose precisely what new things will actually contribute to the organization’s goals.
Technologies may help, but they never create the momentum needed for success.
If the latest technology fits the goal, then every possible effort must be made to master and utilize it. Be the very best in making it work for you.
If not, let it alone.
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Quite different in its approach to organizational success is The Way of the Shepherd: 7 Ancient Secrets to Managing Productive People (
First, you must “know the condition of your flock.” This means
keeping constantly in touch with employees, getting to know them personally, attending to their daily needs. Isolated executives inevibably fail to understand the true condition of their
organizations. Nothing substitutes for walking about the workplace, asking
questions, answering questions, being available. Second, you must
“discover the shape of your sheep.” Before you hire an employee, discern
whether he or she will contribute to the health of the organization. Make
sure you get healthy sheep and monitor their condition on a regular basis.
It’s the sheep, not the shepherd, who produce the wool and mutton!
Thirdly, you must “help your sheep identify with you.” To do this you must
model “authenticity, integrity, and compassion” (p. 51). Living out the
high standards you expect of your employees, carefully and continually communicating your own values and vision,
elicits commitment from your “sheep.” Being “professional” isn’t enough,
because good leaders are primarily “personal” and they treat their workers as subjects rather than objects.
To “make your pasture a safe place” means making sure your employees don’t fight over scarce resources. There must be enough good grass to eat.
Folks who are content where they are rarely look for “greener pastures.”
Just as sick sheep must be culled from the flock before they spread contagious diseases so too must disgruntled
employees be dismissed. This helps explain the need for a shepherd’s “rod
and staff.” At times one must tap a straying ewe with a staff to rightly
direct her. When a lamb gets stuck in a crevice, the crook on the staff
enables one to rescue him. Ever out front, leading, the shepherd uses the
tools necessary to direct and encourage, to nudge or correct, his sheep.
Persuasion, not coercion, is most often the key—but there must be fence lines and limits to the freedom granted one’s
flock. The shepherd’s rod provides the means to protect the sheep from
predators—both outsiders and insiders. A shepherd uses a rod, when
necessary, to discipline a wayward lamb or a deviant rebel.
Finally—the seventh point—a good shepherd has a good heart.
Hirelings often do the shepherd’s work, but they often do it poorly because they’re hirelings. Getting paid is not a sufficient motivation to do the demanding work of a real
shepherd. Having a heart for people, actually caring for them and their
situation, makes one a really good leader. A good business is a good place
to work, and a good workplace makes good things.
The Way of the Shepherd is a quick read, obviously rooted in biblical
principles running from Psalm 23 to Jesus’ words concerning His shepherd’s role.