Good to Great Test on Corporate Leaders

goodtogreatAs diverse as some of my posts have been, I’ve still tried to highlight impacting personalities, whether positive or negative.

I’ve written many posts about leaders of business, probably because I am a businessman.  Some showed humility like Haruka Nishimatsu, CEO and President of JAL.  Others showed innovation like T.A. McCann of Unfortunately, some business leaders showed poor judgement.  Paul Johnston, former Entellium CEO, was charged with wire fraud, and Jeff Hawn of Attachmate pleaded guilty to animal cruelty for illegally killing buffaloes.

I’ve also given my critical assessment of the “three stooges of Detroit” and why leadership needs to change within the big three US automakers.

So, in this post I want to write about leadership, especially from Jim Collins’ perspective as outlined in his book, “Good to Great”.  I am a true fan of Jim and his work.  He uses empirical research and tries to find out what is in the “black box” that determines whether a good company turns great or not.

In his book, he outlines six vital components of any company becoming great, as defined by being able to sustain extraordinary results for at least 15 years.  These were:

  • Level 5 Leadership (need to read the book for explanation on Level 5)
  • First Who… then What
  • Confront the Brutal Facts
  • Hedgehog Concept
  • Culture of Discipline
  • Technology Accelerators

For this post, I’m going to focus on “Level 5 (Great) Leadership”.  What does this mean?  Well, if you were to close your eyes and think about effective leadership, what would you imagine?  You might imagine a visionary, with an articulate tongue?  Does charismatic leaders like General Patton or Caesar come to mind?

According to Good to Great research, effective leaders of the elite companies “channel their ego needs away from themselves and into the larger goal of building a great company.  It’s not that (these) leaders have no ego or self-interest.  Indeed, they are incredibly ambitious — but their ambition is first and foremost for the institution, not themselves.”

In fact, great corporate leaders are more like Abraham Lincoln and Socrates than Patton and Caesar.  The common thread among the elite companies that Jim and his team  studied was a leader with this simple duality:  modest and willful, humble and fearless.  Humility + Will = (great, effective) leadership.

Here are other commonalities among these leaders of great companies:

  •  They all set up their successors for even greater success in the next generation.  By comparison, many flamboyant egocentric leaders often set up their successor for failure.
  • Compelling modesty, self-effacing and understated.  In contrast, two-thirds of the comparison companies had leaders with gargantuan personal egos that contributed to the demise or continued mediocrity of the company.
  • Fanatically driven, infected with an incurable need to produce sustained results. They are resolved to do whatever it takes to make their company great, no  matter how big or hard the decisions.
  • Display a workmanship diligence — more plow horse than show horse.
  • Look out the window to attribute success to factors other than themselves.  When things go poorly, however, they look in the  mirror and blame themselves, taking full responsibility.  The comparison CEO’s often did just the opposite — they looked in the mirror to take credit for success, but out the window to assign blame for disappointing results.

According to Jim, one of the  most damaging trends in recent history is the tendency (especially by boards of directors) to select dazzling, celebrity leaders and to de-select potential leaders with humility + will.

So, let’s meet again Haruka Nishimatsu, CEO of JAL.  His airline company is struggling as is the whole airline industry.  However, his humility and will to “do whatever it takes” to make his company successful bodes well for JAL.  Mr. Nishimatsu embodies many of the positive characteristics described in Good to Great.

In comparison, the private jet extravagance of the Detroit CEO’s, or the humongous bonuses taken by leaders of our failed financial institutions are sure examples of what Good to Great discribes as the typical behavior of “comparison company” CEO’s.

Good to Great research was done in the US, not Japan.  Why won’t more boards of US companies heed its warning, especially as our economy struggles?  We need great (Level 5) leaders to lead our companies back to greatness.