Good to Great Chapter 3
Brandon, Brett, Ryan, Kara, William, Scott
Courtney, Gerald
Preview
 3 simple truths about the “bus”
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Right people being on the bus
Motivating and managing problem goes away
Having the wrong people in the right direction won’t make a
company great
Excerds/Walgreens Case Study
Wells Fargo “injecting endless stream of talent”
Who you pay, not how you pay them
Being Rigorous
Best people on biggest opportunities, not biggest problems
“Genius With a Thousand Helpers”
Does this business have any value beyond the value of its assets?
In this model, the company is a platform for the talents of an extraordinary
individual.
- In these cases, the towering genius, the primary driving force in the
company’s success, is a great asset; as long as the genius sticks
around…
Ex. Henry Singleton
-The “Sphinx”
Level 5
v.
Level 5+
Management Team
(Good-to-Great Companies)
Level 4
A “Genius With a
Thousand Helpers”
(Comparison Companies)
Level 4 Leader
Level 5 Leader
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First What
First Who
Set a vision for where to drive the bus.
Develop a road map for driving the bus.
Get the right people on the bus.
Build a Superior executive team.
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Then Who
Then What
Enlist a crew of highly capable
“helpers” to make the vision happen.
Once you have the right people in place,
figure out the best path to greatness.
Good to Great?
− A genius for picking the right stores to buy
− A genius for picking the right people to hire.
− A gift for seeing which stores should
go in what locations.
− A gift for seeing which people should go in what
seats.
− No executive team, but instead a
bunch of capable helpers assembled
to assist the great genius.
− Built the best team in the industry.
Jack Eckerd
Cork Walgreen
Case Study
 Eckerd's transformed from good to great.
 From two little stores in Delaware , to a drugstore empire over a thousand stores.
 Jim Collins asked a Walgreens executive to estimate when the
good-to-great transformation happened. His answer: “Sometime
between 1971 and 1980.”
http://www.jimcollins.com/article_topics/articles/good-to-great.html
 By the late 1970’s, Eckerd's had equaled Walgreens’ revenues, and
it looked as if Eckerd's would run the industry.
 Jack Eckerd retires 1986.
Its Who you Pay, Not how you Pay
them.
 What they expected to find
 Amount and structure of compensation will play a key roll in
going good to great
 What they actually found
 No pattern linking executive incentives to the good to great
process.
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When comparing good to great vs. other companies.
 Use of stock, high salaries, bonus incentives, or long-term compensation;
in any combination showed no differences.
 Only difference found was that Good to Great executives received less
compensation than the mediocre companies.
 Idea is not that executive compensation is irrelevant, you just have to be
reasonable.
Once the compensation is structured, the element of incentives or
compensation leading to a making the company great falls away.
Its Who you Pay, Not how you Pay
them.
 Why?
 Manifestation of “first who” principle.
Its not how you compensate, but which people you have to compensate.
The purpose of compensation should not be to get the right behaviors out of
people, but to get the right people on board, and keep them there.
Its Who you Pay, Not how you Pay
them.
 Example is the Nucor steel company
 Looked for the workers who understood how to work hard
 Built steel plants in farming areas
 Farmers grow up with habit of getting up early and working hard.
 To attract and keep these workers they used a team incentive system
 Compensation depended on the success of a 20-40 person team
 This caused the teams to kick people out who did not work hard…
Nucor was able to get the wrong people out, the right workers in, and keep
them there with incentives.
 People aren’t your most important asset, the right people are.
 We’ve learned of different organizational cultures in other
classes.
 Organizational Culture and Keeping the right people.
 Strong Organizational Culture
 Business will have a set of values and norms
 New employees “buy in” to these values
 If not these new employees will not stay in the company.
Many businesses have these strong cultures, and provide
incentives for keeping the right people around.
- SAS, and Google
Rigorous, Not Ruthless
 Rigorous – “..consistently applying exacting standards at all
times, and at all levels, especially in upper management.”
 Ruthless - Callous and needless firing of workers without any
real consideration, particularly in hard times
Wells Fargo acquires Crocker Bank
- Didn’t integrate with Crocker, decided they were the,
“wrong people on the bus”
- 1,600 Crocker managers let go on day one, counting almost
all top executives
- Like a sports team, only the
best made the cut
 Wells Fargo Exec, “We all agreed this was an acquisition, not
a merger..”
 Higher management at Wells Fargo lost more on a percentage
basis than lower ranking employees
 Wells Fargo did fewer big layoffs than competition
Rigorous, Not Ruthless
 “Rigor in a good-to-great company applies first at the top,
focused on those who hold the largest burden of
responsibility.”
 Rigorous - Better to deal with it upfront and be
straightforward and let people move on to different jobs.
How to Be Rigorous
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 best
opportunities, not your biggest problem.
When in doubt, don’t hire – keep looking.
Packard’s Law
 No company can grow revenues
consistently faster than its ability
to get enough of the right people
to implant that growth and still
become a great company.
”…the ultimate throttle on growth
for any great company is not
markets, or technology, or
competition, or products. It is the
one thing above all others: the
ability to get and keep enough of
the right people.”
- Jim Collins
Continued…
– Alan Wurtzel
“You don’t compromise. We find another
way to get through until we find the right
people.”
– Sidney Cooper
 Spent 80% of his time focusing on the
right stores to buy
“Silo developed a reputation for not
being able to do the basics...”
– Jim Collins
When you know you need to make a people
change, act.
 Quality NOT
Quantity
• Look for A+ talent
• Don’t waste each others
time
• Don’t waste a portion
of a bad employees life by
keeping them around
• Bad employees are
unfair to good employees
• Instead of firing, sometimes
an employee may be a good or
better fit at another position.
• Wrong seat vs. wrong
person
Put you best people on your biggest
opportunities not you biggest problems!
 Joe Cullman (chainman and CEO)
 It’s not a “what” answer, but a “who”
 George Weissman
 #1 executive who controlled 99% of operations
 Now controlling 1% of operations (international)
 Took Marlboro to best-selling cigarette in the word BEFORE it
was the best-selling cigarette in the U.S.
FIRST WHO, GREAT COMPANIES, AND A
GREAT LIFE
 Is it possible to build a great company and also
build a great life?
 Ex. Colman Mockler, CEO of Gillette during transition from
good-to-great
 Members of good-to-great teams tend to
remain friends for life.
 Teams enjoy working together during both good times and bad.
 Good-to-great companies loved what they did
mainly because they loved who they did it with
“If we spend the vast majority of our time with the people we love and
respect- people we really enjoy being on the bus with and who will never
disappoint us- then we will almost certainly have a great life, no matter
where the bus goes.”
-Collins
Key Points
Get the right people on and the wrong people off the bus.
First who then what- as a rigorous discipline, consistantly applied
The „Genius with a thousand little helpers“ model fails when the genius departs
Rigorous not ruthless with people decisions, comparison companies used layoffs
to a much greater extent.
 Good-to-great management teams debate vigorously in search of answers, yet
unify behind decisions regardless of parochial interests.
 Three dsciplines for being rigorous
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 When in doubt don´t hire- keep looking
 Act quickly when you need to make a people change but make sure they aren´t in the
wrong seat first.
 Put your best people on your best opportunites, not your biggest problems
Works Cited
 Collins, Jim. Good to Great. 1st ed. New York,
HarperCollins Publishers Inc., 2001.
Print.
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