Disciplined people. Disciplined thought. Disciplined action.
Disciplined people
Which companies, over a period of 15 years, go from good to great. And which don’t?
- Inside CEO performed in 10/11 good to great companies. 6 times more often, other non-great companies hired outside CEOs.
- Compensation is not correlated with success
- Strategy matters. But not life changing.
- What to not do, and what to stop doing was very important for GtG
- Technology has virtually nothing to do with GtG transformations. It can accelerate.
- M&A didn’t make any researched GtG companies great
- GtG paid scant attention to motivation, alignment, or managing change. These things came more naturally.
- No name, no launch event, no tag line.
- They are unaware of transformation sometimes
Revolutionary process is not revolutionary results. Revolution requires evolution.
Greatness is a matter of conscious choice.
The great leaders didn’t start with vision. They got the right people together, removed the not great people, and kept going from there. The great leaders were more Socrates than Caesar.
Though people are not your greatest asset.
The right people are.
If you have disciplined culture and people, you don’t need bureaucracy and hierarchy. With discipline in the team you don’t need control.
It is amazing what you can accomplish if you do not care who gets the credit. - Harry S. Truman
Leadership
Good to great executives were LEVEL 5.
Level 1: Highly Capable Individual
At this level, you make high quality contributions with your work. You possess useful levels of knowledge; and you have the talent and skills needed to do a good job.
Level 2: Contributing Team Member
At Level 2, you use your knowledge and skills to help your team succeed. You work effectively, productively and successfully with other people in your group.
Level 3: Competent Manager
Here, you’re able to organize a group effectively to achieve specific goals and objectives.
Level 4: Effective Leader
Level 4 is the category that most top leaders fall into. Here, you’re able to galvanize a department or organization to meet performance objectives and achieve a vision.
Level 5: Great Leader
At Level 5, you have all of the abilities needed for the other four levels, plus you have the unique blend of humility and will that’s required for true greatness.
Great leaders also leave their successors with a legacy that steers the whole company’s future to a long term success. It’s the long game.
Level 5 leaders showed: stoic willpower and personal humility (ambitious for the cause, not himself).
You can develop into level 5.
A trait of L5 leaders was that they got the right people on the bus, the wrong people off the bus and only then started to develop/give clear directions. Wasn’t so top down.
The right people don’t need to be tightly managed. They are self disciplined and self motivated to make something great.
Great vision without great people, is irrelevant.
Insight: a risk of hierarchy is that the higher layer benefit from less talented and strong willed lower levels: they don’t want too much competition and challenging of their ideas. This is really bad. you need strong leaders on every level. The top should welcome challenge.
ESSENTIAL: First: right people onboard, wrong people off board. THEN figure out where to drive it.
It’s who you pay, not how
The evidence does not support the idea that the specific structure of executive compensation acts as a key lever in taking a company from good to great.
This includes bonuses, salary amounts, stock. Long term and short term. No correlation with greatness.
The only significant difference: the good to great executives received slightly less total cash compensation, 10 years after the transition, than their mediocre counterparts.
It’s about WHO, not what. The right people, will do the right things, and deliver the best results they’re capable of, regardless of the incentive system.
In short: There is no such thing as an incentive system. There is no such thing as a motivational compensation system. There is instead attraction and retention system. Compensation is about attracting and retaining the right people who are self motivated and self disciplined and who will produce results because it’s who they are.
The great companies also ended up being straight to new employees upon an acquisition; if you don’t fit the rigorous culture, you should leave. Not in a hard way, but to preserve the mission. Endless restructuring is not seen in great companies.
Rigorous, not ruthless.
When in doubt, don’t hire
The ability to get and keep enough of the right people is the ONLY throttle for growth.
DO NOT COMPROMISE.
If u need to manage someone, U probably made the wrong hire. The best people don’t need to be managed. Guided, taught or lead: yes. Managed: no.
Great companies churned better: people either stayed long, or left quickly. These companies churned better.
The only way to become great, is to build on your opportunities.
When you decide to sell off your problem, DO NOT sell off your best people.
An easily missed, but essential thing: the great companies had a sensation of love. They were surrounded by loving people. Have an environment of GOOD people.
ASK YOUR HIRES EVERY HALF YEAR: Do you still enjoy being on the bus with us?
Three disciplines:
- When in doubt, don’t hire. But: limit growth to get the right people if needed.
- If you need to make a people change, act! But: be sure you don’t actually have someone in the wrong seat
- Put your best people on your biggest opportunities. Not your biggest problems. But: don’t sell off your best people.
Conclusion: first who, then what.
Disciplined thought
The comparison companies had people that thought first about what the CEO thought. This made them slow and less innovative. They didn’t think about what they themselves could do with the company.
Charisma can be both a liability and an asset. A strong personality is risky; it could become too much about you, not reality.
How to prevail, principles:
- Lead with questions, not answers
- Engage in dialogue and debate. Not coercion and manipulation
- Conduct autopsies, without blame
- Build red flag mechanisms that turn information into information that cannot be ignored
You shouldn’t motivate people. You should prevent demotivating them. Do this by facing the brutal facts together (or for the rest).
Hedgehog vs fox
Hedgehog concepts are brought to one single concept. Not many interconnected ones that are kind of ‘scrambled’. Also as a person, a hedgehog has one simple view instead of complicating things by seeing things in many kinds of ways (which could be correct as it’s a more broad view of the world, but it’s also less.. actionable).
A hedgehog concept has three circles that it’s built on top of:
- What you can be the best in the world at, and what you cannot be the best in the world at. Look broad out of the box
- What drives your economic engine. How to most effectively sustained and robust cashflow. A single denominator. Profit per X
- What you are deeply passionate about.
Vital concept: the hedgehog. Listen to it or read it in chapter 5.
How to find what you are best at: ask yourself what you can do and rank it. Maybe together with others.
How to find the one denominator (or multiple): remember that it’s about the thought process and not the one answer. The point is to find out what your economic model is, through asking this question. Thought: it’s important to find the denominator (X) that is profoundly resembled by important points of performance (like deployments per day, MTTR)
Iterate through cycles; questions, debate, decisions, autopsies. Until you get deep enough understanding.
This is best done in a small group, fit for constant neutral inquisitive discourse, of around 5-6 people.
Great companies set their (hedgehog) concept through calm, realistic, honest understanding. Not chest beating bravado like the comparison companies.
The great companies took an average of 4 years to find their hedgehog concept.
Content vs process hedgehog: hedgehogging on a specific business vs a process that you can apply in many industries/verticals like GE did/does.
The purpose of bureaucracy is to compensate for incompetence and lack of discipline.
The space for freedom in a disciplined system: it’s freedom within. Within a highly developed disciplined system.
Hire self-disciplined people that don’t need to be managed. Then manage the system. Not the people.
Rinse your cottage cheese. Dave Scott (won multiple Ironmans) rinsed his cottage cheese because he thought a low fat high carb diet would make him perform even better. There is, however, no scientific proof for this. And this is the crux; it’s about doing things that might not seem super rational, but are a result of your dedication and hunger to squeeze out performance (being open minded enough to rinse cottage cheese regardless of the general oddness of it).
Kinda; be stoic. Don’t comfort yourself. It makes you weak.
An essential aspect is to never lose focus on disciplined people, thought and action WHILE preserving ultimate focus on the hedgehog concept (the single thing you excel at).
If you divide attention, or diversify too much outside of the hedgehog concept (or your three circles) - your chances of failing are very, very high. According to this study. Philip Morris redefined its hedgehog concept but stayed WITHIN the three circles. They started investing in not so healthy consumables like chocolate, beer, etc
The challenge is not the opportunities but selecting them properly. Companies sooner die from TOO MUCH opportunity. Stay within the three circles.
Ken Iverson his book? Prevent all class distinctions.
If you follow all above principles; it increases the chance you’ll end up with a business portfolio in which you are RIGHT.
Being right isn’t that hard if you have all the pieces in place.
Have a stop-doing list.
Technology
In the Great companies, it wasn’t technology itself that made the difference. It was the application of it. Carefully selected and applied.
When used right, technology becomes an accelerator of momentum. Not a creator.
Key insight; it is not technology that makes companies better than others. It is their use of it. It will always be the organization of people, their focus, communication and collective goals and values that truly inspire greatness. Technology, similar to having power, is only an acceleration of the potential greatness that is - sometimes hidden in clear sight - already in an organization.
Ken Iverson on what made Nucor great: Their consistency of the company and the ability to project its philosophies through the company, enabled by its lack of layers and bureaucracy.
Mediocrity results from management failure. Nothing else.
Those who built the great companies, were primarily stimulated and motivated by a deep creative urge, and an inner compulsion for sheer unadulterated excellence for its own sake. NOT the fear of being left behind.
Great companies (and I personally think people) have a productive neuroses. A compulsive response to mediocrity.
The good to great companies didn’t call it anything. There was no special name or concept for the change they went through, internally. They just did it. Some said they weren’t even aware that they were going through a major transformation!
They described it as a step by step process, that happened quite naturally, collectively.
I think it were the habits and practices that made them special. Not the revolutionary plan. Just calm but powerful action.
From buildup to breakthrough, the buildup time varied a lot. But in all cases, it was evolutionary and not revolutionary.
One company announced 15% earnings growth, but set the internal goal to 25. Then invested the surplus in a list of new projects. They didn’t focus on one ‘Big bang’ approach. They systematically compounded their progress.
They went on and realized; Hey! If we keep pushing on this thing, there is no reason we couldn’t accomplish ‘X’!
The doomloop is stimulated by bravado, lack of focus (lead by buzzwords etc) and U turns due to fear of missing out
Crux is: build sustained momentum. Build up -> breakthrough flywheel.
Two doomloop engines:
- Misguided use of acquisitions (more fun than doing hard work; it’s gambling)
- Switches in leaders that undo work from past leaders
The great companies did acquisitions or mergers as further stimulation of the flywheel and after formulation of the hedgehog concept. Not to look for quick breakthrough results. Put in the work.
Two mediocrities bound together cannot make greatness. You cannot buy your way to greatness.
Break out of the doomloop by acknowledging hard facts.
Alignment follows from results and momentum, not big words.
Read built to last book too
ALSO HERE: core values. Have them. Doesn’t really make a huge difference what they are, as long as you have them and stand by them.
4 core ideas - good to great findings also in built to last book:
- Clockbuilding, not time telling - don’t build around a single great leader or idea
- Genius of the and; embrace both extremes on a number of dimensions at the same time. AND over OR
- Embrace a core ideology; core values, purpose. Beyond making money, guiding decisions for a lasting purpose over many many years and decades
- Preserve the core, stimulate progress. Change all practical things, stick to values.
BHAG; Big Hairy Audacious Goal
A BHAG should fall in the middle of your three circles of the hedgehog concept. Like Boeing moved into commercial aircraft building from the military field, they found that they were better than competitors because they knew big airplanes well (as opposed to the commercial small propeller aircrafts in the 1950s), they loved the idea of building a commercial aircraft and they saw they could make a lot of money with it.
Listen to bookmark ‘The secret’
The strive for greatness is meaningful. If you do what you really care about, then it’s impossible to imagine not making it great.
What matters is antifragility.
In any aspect of life try to make level 5 decisions as much as you can. No one is perfect. Always try to ask; what is best for the team? Or company?
The quiet knowledge of high quality, of the back of the statues, is the higher standard that only you know, is what is truly rewarding.