Mar 11, 2019 in Book Report

The book Good to Great: Why Some Companies Make the Leap…and Others Don’t by Jim Collins was originally published in 2001. Just like his previous book, Build to Last, Good to Great it defined and continues to define the contemporary management theory and practices. In the book, Collins seeks to identify and evaluate the mitigating factors and variables that can aid or hinder an average organization from leveraging its potentials and transcend to greatness. This book report summarizes the contents of the chapters of this book, in the process identifying the management, personnel, practices, and employee behavior among other factors that are essential in transitioning from a good company to the great one.

  • Chapter 1: Good is the Enemy of Great

Jim Collins starts the book by identifying complacency as the primary enemy of progress. Collins (2001) observes that good companies become so satisfied with their progress that they do not aspire to become greater than what they already are. This first chapter extensively provides the foundation for the study including the definition of the criteria for determining good and great. The set of criteria used by his research team identifies the companies that have made the good-to-great transition. Some of the most vital factors under consideration were the period of growth of the enterprise and the growth of sustainability. The companies identified for inclusion in the study were Walgreens, Wells Fargo, Nucor, Circuit City, Gillette, Abbott, Kimberley-Clark, Kroger, Fannie Mae, Pitney Bowes, and Philip Morris (Collins, 2001).

The author established that contrary to widely-held beliefs, CEO compensation, state of the art technologies, and change management among other factors are not the primary factors in enabling the good-to-great transition. Instead, Jim Collins and his team of researchers identified disciplined people, disciplined thought, and disciplined action as the key enablers of the transition. These three factors form a 3-stage framework formulating a timeless principle that can invoke the transformation process from good to great for any organization. The bottom-line, according to Collins (2001), is that disciplined people hold disciplined thoughts that, in turn, fashion a culture of discipline, which is essential in ushering in disciplined action. Finally, Collins concludes by identifying the relationship between the Built to Last concepts and those explicated later on in the book.

  • Chapter 2: Level 5 Leadership

This chapter begins to explicate the unique factors that set apart great companies from good ones. One of those key defining factors is the quality and nature of leadership exhibited in great organizations (Collins, 2001). Jim Collins identified this unique style of leadership common among all great enterprises simply as Level 5 leadership. It is the top-most level in the five-level hierarchy of leadership. Level 1 leadership consists of leadership by highly capable individuals who make positive contributions to organizations through talent, knowledge, and skills among others. Level 2 leadership consists of contributing team members leveraging their unique individual capabilities to achieve synergetic benefits and the overall objectives of the organization. Level 3 leadership entails the use of a competent manager to organize people and resources effectively to obtain the company’s objectives. Level 4 leadership exhibits an effective leader who eagerly pursues a compelling vision with the vigor rubbing off on others stimulating higher performances. The ultimate level, level 5 leadership, is the executive style of leadership that conjures up greatness through a perfectly-balanced blend of humility and professionalism (Collins, 2001).

Collins established that all great companies had leaders that displayed an unusual and extensively-sustained blend of profound humility and intense determination. The main reason why level 5 leaders are apt in actualizing the transition from good to great is that they value and give precedence to the ambitions of the organization as opposed to their individual endeavors (Collins 2001). The duality of personal humility and professionalism will help to optimize their effectiveness in meeting the group’s objectives through other employees via generation of long-term positive results. Crucially, Collins discounted the idea of appropriating a celebrity CEO to rescue a flailing firm. The study established that 10 of the 11 enterprises that made the good-to-great transition had a CEO that came from inside the company after climbing the corporate ladder (Collins, 2001). Firms, therefore, ought to promote from within to attain the desired good-to-great transformations.

  • Chapter 3: First Who, then What

In this chapter, Jim Collins stresses the importance of having the right personnel to enable the good-to-great transition. Collins underscores the old adage that people are the most valuable asset in any organization. If a company has the right personnel in the right positions of leadership then it will, more often than not, develop the right overarching strategies for the firm (Collins, 2001). It would be pointless to have a great, capable, brilliant visionary leader without the relevant people around to assist him or her to achieve the vision. To make the transition effectively, just like in the case of Nucor, Collins argue, it is imperative that these individuals be of high quality, with immense talent and possess level 5 leadership abilities (Collins, 2001). Collins further argues that such arrangement to acquire the right personnel should dissipate the inherent problems of troublesome personnel including the wasteful use of resources.

Crucially, this chapter presents a rigorous people-management framework that great companies employ in all their personnel decisions. The framework insists on hiring only the right employees and disregarding hiring if there are none in the available pool of workforce. When the employees are underperforming, Collins recommends to move them to other positions instead of terminate them so as to leverage their other talents. Lastly, Collins advises companies to give their best employees their most promising opportunities and prospects (Collins, 2001). It hedges against brain drain when an underperforming section has to be disposed of.

  • Chapter 4: Confront the Brutal Facts (Yet Never Lose Faith)

In this chapter, Collins lays down another key ability that great firms have that differentiates them from good and mediocre ones. It is the ability to identify and assess their company’s defining facts and those of the industry at large. Great enterprises have leaders who are able to examine current reality and embrace or otherwise address the brutal facts they unearth (Collins, 2001). Collins observes that these unique abilities are vital in keeping the company abreast of the changing trends in consumer tastes and preferences among others that have a direct and significant impact on the firm’s profitability. Appropriating the example of Kroger and A & P, Collins demonstrated how Kroger thrived after identifying and embracing the modernization of the grocery industry whereas A & P, which failed to adapt, eventually deteriorated in oblivion (Collins, 2001).

Jim Collins concludes this chapter by outlining a process that guarantees utmost awareness of the emerging and changing trends to keep companies abreast of the new developments. The first step is to cultivate a culture of inquiry through leading with questions, as opposed to answers (Collins, 2001). The second step is to identify data-driven solutions through engaging employees in debates and dialogue instead of employing coercion to get tasks done (Collins, 2001). The third step is to explore mistakes in order to promote learning and understanding. Collins crucially cautions that the autopsies should be devoid of blames. The last step is to design a red flag mechanism to note the information that one cannot ignore for decision-making purposes (Collins, 2001).

  • Chapter 5: The Hedgehog Concept (Simplicity within the Three Circles)

This chapter appropriates the metaphor of the hedgehog to demonstrate the inherent greatness in simplicity. Jim Collins points out that when the hedgehog is under attack it simply rolls itself into a ball, in the process fending away its predators. As simple as it looks, the strategy works. Collins insists that the bottom-line is that more is not always better. This chapter effectively establishes that a key practice of the companies that have experienced the good-to-great transformation has not been to do a host of things well but rather to identify and concentrate on a single thing, which it does better than its competitors (Collins, 2001). The author advises firms to take their time and invest their resources in identifying the single function that can allow the enjoyment of the benefits of the hedgehog concept.

The author concludes the chapter by identifying the criteria that one can use to identify the single function that the firm enjoys a competitive advantage in. First, the company should determine the functions it can excel beyond the competitors and those it cannot. Then it should establish the economic drivers and finally determine the functions it is passionate about (Collins, 2001). Collins argues that by using the hedgehog concept great companies are able to define on their own how to produce exceptional economic results.

  • Chapter 6: Culture of Discipline

This chapter underlines the importance of an organizational culture of discipline in transforming a company from good to great. However, Collins (2001) is keen to point out that a culture of discipline is not synonymous with a culture of authoritarianism or assumption of tyrannical disciplinarian roles. A culture of discipline, according to Collins, is the possession of the unrelenting determination by all the components of an organization to succeed in a task. As such, a disciplined organization has a workforce that is personally invested in not only the success of their individual tasks but also that of the organization (Collins, 2001). The organization has disciplined individuals that hold and engage in disciplined thought and complement these with disciplined action. Collins establishes that the culture of discipline thrives on the tenets of freedom and responsibility within a framework. Consequently, in great companies, as opposed to merely good ones, the managers are responsible for managing systems as opposed to people since the people already know how to function within the system (Collins, 2001). The duty of the leaders is to manage and inspire the already disciplined people to dedicate all they can within their means to fulfill their responsibilities. Firms that experience the good-to-great transition have the culture of discipline that motivates the employees to work with a fanatical devotion and single-minded intensity to meet the overall objectives of the company.

  • Chapter 7: Technology Accelerators

This chapter interrogates the erroneous use of technology accelerators as the answer to all the company’s challenges. As the proliferation of technology continues, so does increased dependency on technology for business solutions (Collins, 2001). However, Collins cautions against this blind appropriation of technology accelerators to address every problem, real and perceived. Collins, instead, advises firms to approach technology, especially new and emerging, with caution through undertaking due diligence. Crucially, Collins recommends that firms align their technology accelerators with their hedgehog concepts. As such, companies should only appropriate those technologies that will enhance their competitive advantage and help to meet their pre-determined objectives (Collins, 2001). Using every technology only results in diseconomies and reduces efficiency, increases overheads, and barely optimizes the firm’s competitive advantage.

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Collins concludes this chapter by asserting that great companies, unlike ordinary ones, use technologies to accelerate the momentum of their progress, not to create it. While they are proactive rather than reactive, they are still keen to acquire the relevant technologies only and quickly adapt as technology and times change. As such, to actualize the good-to-great transition, enterprises should only leverage technologies that are compatible with their objectives, and that will accelerate their attainment. Collins advises that the ideal approach to technologies should be pause, crawl, walk, and then run (Collins, 2001).

  • Chapter 8: The Flywheel and the Doom of Loop

In this chapter, Collins establishes that the fate of a business, whether it succeeds or fails, determines by the accumulation of incremental positive or negative consequences of the business decisions made over time. Unlike the popular misperception that business failure or success comes suddenly, Collins establishes that it happens over time (Collins, 2001). As such, there are two cycles, the flywheel cycle and the doom of loop cycle. The flywheel cycle invokes the flywheel effect through making business decisions that are proactive and consolidate as well as reinforce the organization’s hedgehog competencies. Consequently, firms that use the flywheel cycle initiate positive momentum and accumulate positive tangible outcomes that help them in transition from being a good company to a great one (Collins, 2001). The opposite is also true. The doom of loop cycle initiates a reactive decision-making domino effect that entails following short trends, frequent change of the management staff, loss of job satisfaction and employee morale, and failing results (Collins, 2001). Good companies try to create momentum often failing due to chronic inconsistencies whereas great ones utilize the accumulated energy, momentum, and the already realized progress to further transcend into greatness.

Conclusion

In conclusion, it is evident that the book Good to Great: Why Some Companies Make the Leap…and Others Don’t by Jim Collins is an authoritative text on contemporary management theories and practices. It provides meaningful insights that, if appropriated, can transform a good company into a great one. Good firms should not settle for good; they should always strive to become better until they attain greatness. This book provides not only the frameworks but also the practical solutions and extensive knowledge of how others have managed the transition to greatness. Jim Collins’ book is highly informative and should prove a good read for all business persons and leaders.

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