Jim Collins’ book “Good to Great” is a treasure trove of insights into the pivotal role of human capital in building a successful company. Through rigorous research, Collins reveals that prioritizing the right people is the cornerstone of greatness. This blog post delves deeper into the core concepts presented in “Good to Great” and explores how disciplined team building can transform a good company into a great one.
In the complex world of business transformation, it is often tempting to start by crafting a brilliant vision or devising an innovative strategy. However, what if the secret to achieving greatness lies not in the “what” but in the “who?” In his ground-breaking book, Jim Collins dives into the crucial role that people play in driving companies from good to great. His research reveals that the most successful organizations begin their journey by ensuring the correct individuals are on board. By emphasizing the importance of rigorous people decisions, prioritizing character traits and innate capabilities over specific skills, and fostering a culture of disciplined thought and action, companies can set the stage for sustainable success as we explore the transformational journey of companies like Wells Fargo, the significance of putting “who” before “what” becomes evident. Let’s look at critical insights and lessons from Jim Collins that can guide businesses in their quest for greatness, placing people at the heart of their success.
The Right People Make the Right Decisions
In the quest for greatness, the first order of business is getting the right people on board and weeding out those who don’t fit. It’s not so much about a game-changing strategy or an audacious vision; it’s about having a team of the right individuals to steer the company in the right direction. The right people bring diverse skills, character traits, and innate capabilities. They are not just passive passengers on the bus but active drivers who contribute to informed decision-making, craft better strategies, and are more adept at executing plans effectively.
The Importance of “Who” Before “What”
Collins emphasizes asking “who” questions before making “what” decisions. Before even considering the company’s vision, strategy, organizational structure, or tactics, having the right people in the right roles is paramount. This disciplined approach of putting people first is a recurring pattern observed in companies that have successfully made the leap from good to great. A well-assembled team, comprised of the right individuals, will inevitably have better insights and generate smarter decisions regarding the company’s direction.
The Pitfall of the “Genius with a Thousand Helpers” Model
The “genius with a thousand helpers” model is an often followed but flawed approach where a single visionary leader dictates the strategy and then employs a cadre of capable individuals to execute it. Collins’ research reveals that such a model often falls apart significantly when the genius leader departs in the long run. Companies transitioning from good to great avoid relying on a single genius figurehead. Instead, they prioritize building a solid team of people who collectively contribute to the company’s direction and success.
Being Rigorous, Not Ruthless, in People’s Decisions
Good-to-great companies distinguish themselves by being rigorous rather than ruthless in their people’s decisions. Unlike comparison companies that rely heavily on layoffs and restructuring as a primary strategy for improving performance, great companies ensure they have the right people in the right seats. They don’t hastily resort to downsizing; instead, they take a thoughtful approach to ensure that every team member is a good fit for their role and contributes positively to the organization’s goals.
Three Key Disciplines for Effective People Decisions
Collins identifies three practical disciplines that help make effective people decisions:
- When in doubt, don’t hire. If you are not entirely sure about a candidate, keep looking. Limit the company’s growth to its ability to attract the right people. It’s better to take the time to find the right fit than to hire hastily and regret it later.
- Act when you know a people change is needed. If you know someone is not the right fit, don’t delay the decision to change. Ensure you’re not shuffling people around—verify that you’re moving them to the right roles where they can thrive and contribute.
- Put your best people on your most significant opportunities, not your biggest problems. Focus your top talent on areas of growth and opportunity rather than fixing problems. Avoid losing your best people if you divest problematic regions, departments, or industries.
The Role of Vigorous Debate in Good-to-Great Management Teams
Great management teams are not echo chambers of agreement. They are composed of individuals who aren’t afraid to challenge one another and engage in rigorous debates to arrive at the best answers. While they may have spirited disagreements, these teams unite behind decisions once they’re made, putting aside personal interests for the company’s greater good. This willingness to have open, honest discussions and to support collective choices is a hallmark of teams in companies that have achieved greatness.
Understanding Executive Compensation in the Shift to Greatness
A surprising finding from Collins’ research is the lack of a consistent pattern linking executive compensation to the transformation from good to great. Compensation should not be seen as a tool to “motivate” the right behaviors from the wrong people. Instead, it should be structured to attract and retain the right people in the first place. Incentives and rewards play a role, but they are secondary to ensuring that the company has a team of individuals who are intrinsically driven to contribute to the organization’s success.
Why People Aren’t Your Most Important Asset, but the Right People Are
The adage “People are your most important asset” is somewhat misleading. It’s not just any people; it’s the right people who are a company’s most important asset. The differentiation lies in their character traits and innate capabilities. It’s not just about specific knowledge, background, or skills. Having the right people means having those who are disciplined, dedicated, and aligned with the company’s values and objectives.
Character Traits and Innate Capabilities vs. Specific Knowledge and Skills
The right people are defined more by their character and inherent capabilities than by their specific knowledge or skills. Companies transitioning from good to great value individuals bring discipline, integrity, and a willingness to engage in disciplined thought and action. While learning and skills can be acquired, character traits and innate capabilities are fundamental to an individual’s ability to contribute positively to the organization.
Disciplined People, Disciplined Thought, and Disciplined Action
The transition from good to great requires discipline at multiple levels: disciplined people, thought, and action. Having disciplined people means having individuals who consistently make the right decisions, even when no one is watching. Disciplined thinking involves facing brutal facts, being honest about the company’s situation, and making informed decisions. Disciplined action requires consistently focusing on priorities, avoiding distractions, and diligently executing the company’s strategy.
The Case Study of Wells Fargo and the Storm of Deregulation
The story of Wells Fargo during the storm of deregulation illustrates the importance of putting people first. Faced with the challenges of deregulation, CEO Dick Cooley didn’t start by crafting a vision or a strategy. Instead, he focused on getting the right people on the bus. With the right team, he focused on deciding where to drive the company. This example underscores the value of prioritizing the “who” before the “what.”
“Who” is the Foundation of Strategy, Tactics, and Business Ideas
The best executives intuitively understand the importance of putting the right people first. By prioritizing the “who,” they set the stage for successful strategies, tactics, and business ideas. The company can successfully navigate the journey from good to great with the right people.
- Priority of People: The most crucial step in a company’s journey to greatness is ensuring the right individuals are in place. The “who” question should precede the “what” decision, emphasizing the importance of getting the correct people on board before crafting the company’s vision, strategy, or tactics.
- Avoiding the Genius Trap: Companies should avoid the flawed “genius with a thousand helpers” model, where a single visionary leader dictates strategy and direction. Instead, prioritize a team of the right individuals who can collaboratively contribute to the company’s success.
- Rigorous People Decisions: Make people’s decisions with rigor, not ruthlessness. Good-to-great companies avoid relying on layoffs and restructuring as a primary performance-improvement strategy, ensuring that every team member is in the proper role and contributes positively.
- Practical People Disciplines: Implement three disciplines for influential people decisions: don’t rush to hire, make people changes promptly when needed, and assign your best people to your most significant opportunities rather than your biggest problems.
- Vigorous Debate and Unity: Encourage lively debate among management teams, valuing open and honest discussions that lead to better answers. Once decisions are made, unite behind them, setting aside personal interests for the company’s greater good.
- Compensation for Attraction and Retention: Executive compensation should focus on attracting and retaining the right people rather than attempting to motivate the right behaviors from the wrong people.
- The Right People Are Assets: The right people, not just any people, are a company’s most important asset. Value character traits and innate capabilities over specific knowledge, background, or skills.
- Triple Discipline: Achieving greatness requires discipline at three levels: disciplined people, thought, and action. These elements are essential for consistently making informed decisions, facing brutal facts, and executing strategy with focus and diligence.
The most pivotal step in the journey from good to great is prioritizing the right individuals. As Jim Collins emphasized in his book “Good to Great,” assembling a team of individuals with the appropriate character traits and innate capabilities lays the foundation for informed decision-making and effective strategy execution. The focus should be on attracting and retaining these individuals, encouraging rigorous debate among them, and applying disciplined thought and action at every stage. By valuing people over visionary leaders, fostering a culture of disciplined rigor, and assigning top talent to key opportunities, companies can navigate the challenging path to greatness.
This book provides invaluable insights into the role of human capital in building successful companies. Companies can set a strong foundation for greatness by prioritizing the right people. The right people bring the discipline, dedication, and drive needed to craft better strategies, make smarter decisions, and ultimately build a great company. This is something that all CEOs, business managers, and investors should consider when making decisions.