Business Case Studies, Executive Interviews, Jim Collins on Level 5 Leadership

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Executive Interviews: Interview with Jim Collins on Level 5 Leadership
January 2008

Jim Collins
Founder of Management Laboratory in Boulder,

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  • How do you study greatness?
    We employ a rigorous matched-pair research method, comparing companies that became great with a control group of companies that did not, and we make empirical deductions directly from the data. In Good to Great, we studied companies that made a leap from good performance to exceptional performance sustained for at least fifteen years in direct contrast to companies that failed to make a similar leap in performance, and we asked a simple question: what principles explain the difference? All of our research involves research teams, of up to twenty people over the course of a project, and each research

    project generally requires about five years to completion.

  • Where should leaders begin if they want to build a great company?
    The first most important decisions are people decisions. The corporate leaders we studied who ignited transitions from good to great practiced the discipline of First Who: First get the right people on the bus, the wrong people off the bus, and the right people into the right seats and then figure out where to drive the bus. To be clear, the First Who principle is not the only requirement for building a great company, it is one of eight concepts we have identified in our research, but it is the first principle in sequence. Until you have 90% to 100% of your key seats filled with the right people, there is no more important priority.

  • Can you illustrate what you mean by First Who?
    When we studied Wells Fargo Bank in contrast to its comparison company during the era of deregulation, we found that Dick Cooley at Wells Fargo practiced the principle of First Who, and the comparison leaders did not. Instead of first developing a strategy for how to handle the turbulence of deregulation, he created the best, most adaptable team in the industry. Thats how you build the future, said Cooley. If I am not smart enough to see the changes that are coming, they will. And they will be flexible enough to deal with them. Dick Cooley understood that in a volatile world, the ultimate hedge against uncertainty is to have the right people who can adapt to whatever the world might throw at you like having the right climbing partners with you on the side of a big, dangerous and unpredictable mountain.

  • How did the leaders you studied get the right people on the bus?
    They adopted the approach: Lets take the time to make rigorous A+ selections right up front. If we get it right, we will do everything we can to try to keep them on board for a long time. If we make a mistake, then we will confront that fact, so that we can get on with our work and they can get on with their lives. Early assessment mechanisms turn out to be as important as hiring mechanisms. There is no perfect Interviewing technique, no ideal hiring method; even the best executives make hiring mistakes. You can only know for certain about a person by working with that person.

  • What would you see as the most common mistake that impeded progress toward greatness?
    Looking for the dramatic big decision that will catapult a company to greatness in one fell swoop; greatness just doesnot happen that way. When you study the long course of great companies, looking at their development over years, we see that no decision no matter how big accounts for more than a small fraction of the companys total momentum. Greatness gets built by a series of good decisions, executed supremely well, added one upon another, over a long period of time what we came to call The Flywheel effect. Certainly, some decisions are bigger than others Kimberly Clarks decision to sell the mills, Gillettes investment in the Sensor shaving system, Boeings big bet on the 747, IBMs bet on the 360, and so forth but even these decisions account for a small fraction of the total outcome. In the long arc of a great company, no single decision makes for even 10% of the ultimate greatness of the institution.

  • Where did the term BHAG come from, and what does it mean?
    BHAG (pronounced Bee-Hag) stands for Big Hairy Audacious Goal. The term popped out one day when teaching my course at Stanford Business School. We were discussing the Patagonia case (about the outdoor clothing company) and we were trying to capture the sheer audacity of the companys ambitions to serve as a role model for social change. In the conversation, out popped the term BHAG, and it stuck. A BHAG is only a true BHAG if it takes 10 to 25 years to achieve.

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