Anna Rendon Ashley Hoptay

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Good To GreatChapter 3 First WhoThen What
There are going to be times when we cant wait
for somebody. Now, youre either on the bus or
off the bus. - Ken Kesey

• Anna Rendon Ashley Hoptay
• Olivia Erwin Paige Stone
• Brandon Laviage Chase Mueller
• Tanner Gilreath

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Transforming From Good to Great

• The executives who ignited the transformations
  from good to great did not first figure out where
  to drive the bus and then get people to take it
  there.
• What did they do then?
• They FIRST got the right people on the bus and
  the wrong people off of the bus, and THEN they
  figured out where to drive it.

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What They Said

• Look, I dont really know where we should take
  this bus. But I know this much If we get the
  right people on the bus, the right people in the
  right seats, and the wrong people off the bus,
  then well figure out how to take it someplace
  great.

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Three Simple Truths

• Begin with the Who rather than the What.
  Helps you adapt to a changing world.
• If you have the right people on the bus, the
  problem of how to motivate and manage people
  largely goes away. The right people are
  self-motivated to produce the best results.
• Going in the right direction with the wrong
  people will never produce a great company. Great
  vision without great people is irrelevant.

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Excerpts From Obamas Inaugural Address

• This is the journey we continue today. We remain
  the most prosperous, powerful nation on Earth.
  Our workers are no less productive than when this
  crisis began. Our minds are no less inventive,
  our goods and services no less needed than they
  were last week or last month or last year. Our
  capacity remains undiminished. But our time of
  standing pat, of protecting narrow interests and
  putting off unpleasant decisions -- that time has
  surely passed. Starting today, we must pick
  ourselves up, dust ourselves off, and begin again
  the work of remaking America.
• For everywhere we look, there is work to be done.
  The state of the economy calls for action, bold
  and swift, and we will act -- not only to create
  new jobs, but to lay a new foundation for growth.
  
• Where the answer is yes, we intend to move
  forward. Where the answer is no, programs will
  end. And those of us who manage the public's
  dollars will be held to account -- to spend
  wisely, reform bad habits, and do our business in
  the light of day -- because only then can we
  restore the vital trust between a people and
  their government.
• Know that America is a friend of each nation and
  every man, woman and child who seeks a future of
  peace and dignity, and that we are ready to lead
  once more

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What Does this Show?

• Obamas Inaugural Speech shows he is a level five
  leader in many ways
• He doesnt focus on himself he focuses on
  everyone.
• In this situation, he knows that in order to turn
  America around, he has to get everyone on the bus
  before he drives it in the right direction.
• Another example
• Picking the right cabinet. One of the first
  things Obama did was make his new Cabinet sign a
  new code of ethics his way of making sure he
  has the right people on the bus
• But he allowed someone on the bus who was a
  lobbyist in the area he is working?
• William Lynn Deputy Defense Secretary

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Wells Fargo

• CEO Dick Cooley foresaw that the banking industry
  would eventually undergo change.
• Instead of focusing on change, he focused on
  finding the right people.
• Focused on injecting an endless stream of
  talent directly into the veins of the company.
• Hired outstanding people whenever and wherever
  they found them, often without any specific job
  in mind.

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Wells Fargo

• Thats how you build the future, Cooley said.
  If Im not smart enough to see the changes that
  are coming, they will. And theyll be flexible
  enough to deal with them.

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Wells Fargos Success

• By getting the right people on the bus, Wells
  Fargo outperformed the market by over three
  times.
• This occurred at a time when its sector of the
  banking industry fell 59 behind the general
  stock market

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Bank of America

• Bank of America took a different approach Weak
  generals, strong lieutenants
• If you pick strong generals for key positions,
  their competitors will leave. But if you pick
  weak generals placeholders, rather than highly
  capable executives then the strong lieutenants
  are more likely to stick around.

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BOA Management Climate

• Weak generals would wait for direction from
  above.
• Sam Armacost, who inherited the weak generals
  model, said, I came away quite distressed from
  my first couple of management meetings. Not only
  couldnt I get conflict, I couldnt even get
  comment. They were all waiting to see which way
  the wind blew.

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Bank of Americas Success

• Lost 1 billion
• Ended up recruiting a gang of strong generals to
  turn the bank around.

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Wells Fargo VS BOA

• In 1998, the cumulative value of 1 invested
• Wells Fargo 74.47
• General Market 19.86
• Bank of America 15.60

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Good to Great Distinctions

• Get the right people on the bus and the wrong
  people off the bus before you figure out where to
  drive it.
• The degree of sheer rigor needed in people
  decisions in order to take a company from good to
  great.

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David Maxwell

• CEO of Fannie Mae during its darkest days
• Held off on developing a strategy until he got
  the right people in place, while the company was
  losing 1 million every single business day with
  56 billion of loans underwater.
• Focused on getting the right people on the Fannie
  Mae management team.

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Maxwells A Team

• Maxwell made it absolutely clear that there would
  only be seats for A players who were going to put
  forth A effort, and if you werent up for it,
  you better get off the bus, and get off now!
• Example think of our teams we want only A
  players who will put forth an A effort. The
  alternative is getting fired.
• 14 of the 26 executives left the company

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Wells Fargo and Fannie Mae Lessons

• Who questions come before what questions
  before vision, before strategy, before tactics,
  before organizational structure and before
  technology.
• Exemplified a Level 5 style
• I dont know where we should take this company,
  but I do know that if I start with the right
  people, ask them the right questions, and engage
  them in vigorous debate, we will find a way to
  make this company great.

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Genius With a Thousand Helpers?

• 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 companys success, is a
  GREAT asset.. AS LONG AS THE GENIUS STICKS
  AROUND!
• Companys who take this approach are usually
  successful UNTIL the genius of the company
  leaves.
• Ex. Steve Jobs

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Level 5 Management Team
A Genius With A Thousand Helpers
(Comparison Companies)
(Good To Great Companies)
Level 5 Leader
Level 4 Leader
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.
Then What
Then Who
Enlist a crew of highly capable helpers to make
the vision happen.
Once you have the right people in place, figure
out the path to greatness.
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Good to Not So Great Companies- classic scenarios

• Eckerd Corporation, led by Jack Eckerd expanded
  the Eckerd Empire with over 1000 stores across
  the southeastern U.S. In the late 1970s,
  Eckerds revenues equaled Walgreens. But when
  Jack Eckerd left to pursue his passion for
  politics, Eckerd Corp. took a toll for the worse
  as the company began a long decline and
  eventually taken over by J.C. Penny.
• Henry Singleton, owner of Teldyne had proclaimed
  a small enterprise to number 293 in the Fortune
  500 list in only 6 YEARS! The company dominated
  the marketplace from exotic metals to insurance.
  Once Singleton stepped away, soon the company
  crumbled.
• Each of these cases failed utterly at the task of
  building a great company.

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Its Who You Pay, Not How You Pay Them

• Top Executives, Managers and Employees
• Compensation
• Stock Options
• Huge Incentives (Jets, Vacations, company cars,
  etc)
• Examples Big 3 Auto Makers, Lehman Brothers,
  Merrill Lynch
• Do these things really increase performance and
  create great results?
• NO!

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Data Inputs

• Collected weeks of data from proxy statements
• Preformed 112 separate analyses looking at
  patterns and correlations
• Qualifications Cash vs. Stock, LT vs. ST
  Incentives, Salary vs. Bonus, etc..
• Outcome No significant patterns related to
  executive compensation, and no systematic
  differences on compensation packages

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Main Point

• Good to Great
• Received slightly less total cash compensation 10
  years after the transition than others in
  mediocre companies
• Not that these people will work for free
• But do better work with less incentives because
  they want what's best for the company
• The right people will do the right things and
  deliver the best results they are capable of
  regardless of the incentive system

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Nucor Example

• Built on the idea that you can teach farmers to
  make steel but you cant teach a farmer work
  ethic, to people who dont have it in the first
  place
• Plants Crawfordsville, Indiana Norfolk,
  Nebraska Plymouth, Utah
• They generated as high as 50 turnover in the
  first year, followed by very low turnover as the
  right people settled in

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Nucor Environment

• Workers
• Teams of 20 to 40 people
• Team Bonus mechanism with over 50 tied directly
  to the productivity of the team
• Highest paid steel workers in the world
• Arrived to work 30 minutes early and ready to go
  when the shift bell rang
• The system did not aim to turn lazy people into
  hard workers, but to create an environment where
  hardworking people to thrive and lazy ones to fail

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Rigorous, Not Ruthless

• Good to great companies are not ruthless cultures
  they are rigorous
• Ruthless Hacking and Cutting or Wantonly firing
  people without any thoughtful consideration
• Rigorous Consistently applying exacting
  standards at all times and all levels
• The best people need not to worry about their
  positions and can concentrate fully on their work

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Wells Fargo Example

• Acquired Crocker Bank in 1986
• Consolidation
• Removed 1600 managers and top executives
• However some Crocker managers took positions in
  Wells Fargo because they were better qualified
  then the ones originally in that spot
• The only way to deliver to the people who are
  achieving is not to burden them with the people
  who are not achieving.

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Wells Example Cont

• Ruthless
• To let the workers stay employed and waste
  precious time when other job opportunities might
  arise
• Rigorous
• To deal with it up front and let people move on
  with their lives

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How to Be Rigorous

• 3 Practical disciplines for being rigorous rather
  than ruthless
• When in doubt, dont hirekeep looking.
• When you know you need to make a people change,
  act.
• Put your best people on your biggest
  opportunities, not your biggest problems.

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When in doubt, dont hirekeep looking

• For growth, companies should not focus on
• The markets
• Technology
• Competition
• Instead, they should concentrate on finding and
  keeping enough of the right people.

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Packards Law

• No company can grow revenues consistently faster
  than its ability to get enough of the right
  people to implement that growth and still become
  a great company.

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Circuit City- Always Looking for Great People

• Focused one getting the right people from top to
  bottom.
• Alan Wurtzels (CEO) goal was to build the best,
  most professional management team in the
  industry.
• Delivery drivers wore uniforms, were clean
  shaving, and had to be professional.

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Practical Discipline 2

• When you know you need to make a people change,
  act.
• The best people dont need to be managed, but
  instead guided and taught

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What Happens With The Wrong People

• When you let the wrong people stay around, the
  right people always need to be compensating for
  the inadequacies of the wrong people
• They are constantly on your mind and are a
  constant drain on your energy

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Why Do People Wait

• Mainly cause it can be an inconvenience to get
  rid of them, they constantly come up with excuses
  on why they should wait
• But meanwhile it constantly affects the right
  people

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Churn?

• Turnover within a period of time
• The good-to-great did not churn more, they just
  churned better, meaning that people either stayed
  for a long period of time or they left quickly

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A Selections

• The good-to-great companies didnt have the
  theory of try a lot of people and see who
  works. They took their time and would find the
  perfect person for the position
• When Colman Mockler became CEO of Gillette, he
  spent 55 of his time in his first 2 years
  changing or moving 38 of the top 50 people of his
  management team

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When Is It Time?

• 2 key questions can help
• 1.) If you are trying to place someone somewhere,
  ask your self, Would you hire them again?
• 2.) If the person came to you and told you that
  he/she was leaving would, Would you feel
  disappointed or relieved?

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Practical Discipline 3

• Put your best people on your biggest
  opportunities, not your biggest problems.
• There is an important corollary to this
  discipline When you decide to sell off your
  problems, dont sell off you best people. This is
  one of those little secrets of change. If you
  create a place where the best people always have
  a seat on the bus, theyre more likely to support
  changes in direction.
• One of the crucial elements in taking a company
  from good to great is somewhat paradoxical. You
  need executives, on the one hand, who argue and
  debate sometimes violently in pursuit of the
  best answers, yet, on the other hand, who unify
  fully behind a decision, regardless of parochial
  interests.
• The good to great companies made a habit of
  putting their best people on their best
  opportunities, not their biggest problems.

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First Who, Great Companies, and A Great Life

• Good to great management teams consist of people
  who debate together vigorously in search of the
  best answers, yet who unify behind decisions,
  regardless of parochial interests.
• The old adage People are your most important
  asset is wrong. People are not your most
  important asset. The right people are.
• The right person has more to do with character
  traits and innate capabilities than with specific
  knowledge, background, or skills.

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Conclusion Main Points

• Find the right people for the job
• Focus on who is running the company, not what is
  running it
• Find level 5 leaders
• Tie compensation into performance
• 3 Disciplines
• When in doubt, dont hire..keep looking
• When you know you need to make a people change
• Put your best people on your biggest
  opportunities, not your biggest problems