GOOD TO GREATCHAPTER 3

Group 3;Mason MitchellSarah YelvertonRandy GreinertAlec Cooper

“There are going to be times when we can’t wait for somebody. Now, you’re either on the bus or off the bus.”

-Ken Kesey

First Who... Then What

If you begin with “who.” rather than “what,” you can more easily adapt to a changing world.

If people join the bus primarily because of where it is going, what happens if you get ten miles down the road and you need to change directions? -Could be a major problem.

But if people are on the bus because of who else is on the bus, its much easier to change directions.

First Who... Then What

If you have the right people on the bus, the problem of how to motivate and manage people largely goes away.

If you have the wrong people, it doesn’t matter whether you discover the right direction; you still wont have a great company.

Great vision without great people is irrelevant.

Wells Fargo –Dick Cooley1970’s-1980’s Built the best team, according to

investor Warren Buffett. Foresaw that the banking industry

would eventually undergo wrenching change.

Team reminded people of the famed “whiz kids” recruited to Ford Motor Company in the late 1940s.

Bank of America

Took a different approach than Wells Fargo.

“Weak generals, strong lieutenants” model

If you pick strong generals for key positions, their competitors will leave. But if you pick weak generals – placeholders , rather than highly capable executives –

then strong lieutenants are more likely to stick around.

The real truth

Per one dollar invested in the firm

Bank of America $15.60

Banking Market (avg) $19.86

Wells Fargo $74.47

(nearly 5 times as much profit as BoA)

Not a Genius “with a thousand helpers”

Good to great companies are built deep and have strong executive teams

Contrastingly other companies followed “genius with a thousand helpers” model

Genius cases

Primary driving force in company’s success is the genius

Geniuses seldom build great mgmt teams because they don’t need/want one

Problems arise when genius leaves

Eckerd

What before who 2 stores in Delaware to 1000 stores

in SE USA Left when neck and neck with

Walgreens to pursue his passion, politics

Began long decline eventually being acquired by JC Penney

Eckerd vs. Walgreen

Eckerd’s Genius at…

Picking right stores to buy

Picking store locations

Walgreen Genius at...

Picking right people to hire

Seeing which people should go in what seats

Eckerd vs. Walgreen

Eckerd’s Failure

Selection of a successor

Built no executive team, just helpers

Walgreen’s sucess

Developed multiple outstanding candidates

Built best executive team in industry

Level 5 mgmt vs Genius w/1000 helpers

Good-to-great

Level 5 Leader

First who

Then What

Comparison companies

Its who you pay, not how you pay them

First who principle: It’s not how you compensate your execs, it’s which execs you have to compensate in the first place

If you have right execs on bus, they will do everything within their power to build a great company, not because of what they will “get” for it, but because they can’t imagine settling for less

Simple Truth

Good to great companies understand a simple truth: The right people will do the right things and deliver the best results they are capable of, regardless of the incentive system

Nucor example

Built idea on you can teach people how to make steel, but can’t teach work ethic to people who don’t have it in the first place

Located plants in known hardworking farm towns like Norfolk, Nebraska

Paid workers more than any other steel company in the world

“we hire five, work them like ten, and pay them like eight”

Hired right people by focusing more on attributes than on educational background or experience

Food for thought

Good-to-great exec said his best hiring decision often came from people with no industry or business experience

One case hired a manager who’d been captured twice during WWII and escaped both times.

Said that anyone who could do that shouldn’t have trouble with business

According to the text:

Rigorous culture: consistently applying exacting standards at all times and at all levels, especially in upper management

Ruthless culture: hacking and cutting, epecially in difficult times, or firing people without any thoughtful consideration

Rigorous, Not Ruthless

Wells Fargo terminated most of the Crocker management team

The majority of Crocker managers were the wrong people for Wells Fargo’s bus

Wells Fargo standards were ferocious and consistent

Crocker managers did not have the same ability as Wells Fargo managers and would have soon failed in the Wells Fargo performance culture

Wells Fargo was rigorous by dealing with it up front and letting people get on with their lives

Wells Fargo acquired Crocker Bank 1986

Upper management suffered more on a percentage basis than lower-level workers in the consolidation

Rigor, in good-to-great companies, starts at the top and focuses on the people who hold the largest responsibility

“Six of the eleven good-to-great companies recorded zero layoffs from ten years before the breakthrough date all the way through 1998, and four others only reported one or two layoffs.”

Layoffs were used five times as frequently in comparison companies

Layoffs

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 biggest opportunities, not your biggest problems

Three Practical Steps on how to beRigorous

When in doubt, don’t hire-keep looking

Great companies are built by those who have the ability to get and keep enough of the right people

When asked at what point to compromise when looking to fill a position, Alan Wurtzel said, “ You don’t compromise. We find another way to get through until we find the right people.”

Practical Discipline # 1

Circuit City: Focused on getting the right people on the bus Built the best, most professional management

team Made simple deliveries a priority

Silo: Focused on the right stores to buy Goal to grow as fast as possible Reputation for not being able to do the basics

Circuit City vs. Silo

When you know you need to make a people change, act

Act when people need to be tightly managed

- The right people only need to be guided, taught, and led

Act when time is invested trying to properly manage the person

Act when energy is spent on an individual when it should be spent on developing and working with all the right people

Practical Discipline #2

Waiting to long before acting is unfair to the people who need to get off the bus

In good-to-great companies people either stay on the bus for a long time or got of the bus quickly

Colman Mockler (CEO of Gillette) invested time in finding the right seat for individuals

- He moved 38 of the top 50 people in the management team to different positions

Continued

Here are a few questions to ask:

1. Rather than asking yourself if this person should get off the bus, ask yourself if you would hire this person again?

2. If the person told you they are leaving to pursue another job opportunity, would you be disappointed or secretly relieved?

How do you know when you know?

PRACTICAL DISCIPLINE #3

Put your best people on your biggest opportunities, not your biggest problems.

Phillip Morris Kimberly-Clark

First who, great companies, and a great life

Build a great company and also build a great life?

Love affair

Love what you do Be with people you love and respect And have fun