Saturday, March 11, 2006

Good to Great: Why Some Companies Make the Leap . . . and Others Don’t

I read “Good to Great: Why Some Companies Make the Leap . . . and Others Don’t” by Jim Collins sometimes ago, and I would say it was quite an eye opener and especially useful to help you understand the current health and future growth of the company you are working for. If the company has none of the great signs, probably you should consider seeking alternative. Like I once said about my ex-company, “She is good, but she is never great”.

First of all, what symptoms should we look for to identify a great company in Malaysia?
  • Level 5 leader. We need CEO who is modest and wilful, humble and fearless. Someone who put the company’s interest above himself, who never let his ego get in the way of his primary ambition for the larger cause of an enduring great company. Some one who is able to set the standards, and do whatever must be done to produce the best long-term results, no matter how difficult. Someone who would even plan and nature a successor, for the wellness of the company even when he is no longer around.
  • Internal Talent. If you keep looking for someone from outside to reform the company or create miracle, you know there will be more challenges for the new guy to understand the company and perhaps dissatisfaction among your existing generals (either no in house talent is available or you just couldn’t identify one, either one of these is bad). The best people for the job are usually from within, look carefully; use outsider as supplement.
  • Focus on what not to do and stop doing. Rather than focusing on what to do in order to change things around, perhaps we should look at what we should stop doing to stop the bleeding and to create better health. Without a good health and a strong base, you couldn’t possibly undertake new effort to make the company better.
  • No merger & acquisitions (M&A). If you think M&A is going to make your company big and strong, think again. How many greats companies had failed miserably in M&A (e.g. AOL/Warner Merger), either because it is too huge to handle or no one have the skill and experience to understand what’s going on or how things should be done. M&A expose us to much risk of mistake and wrong doing, as it is not an exact science. Big does not equal strong. Perhaps being big could give you some reputation advantage, but reputation could be earned elsewhere.
  • Manage Change, Motivate People. So many CEOs tried to save the company by creating more business opportunity and bring in more sales, but no one seems to be bothered to save the company from the inside. Perhaps the change within is so difficult to be achieved that people wouldn’t even dare to touch on it, as it would upset a lot of low performers and those resistant to change. But difficult doesn’t means it does not need to be done. And how many CEO is able to play the role of cheerleader to motivate their staff to achieve more, and reward them for their extra effort? Change has to come from within, form a new culture and start motivating people towards the new direction. Motivation is intangible, but it is nevertheless vital.
  • Get the right people on the bus, the wrong people off the bus and the right people on the right seat. In reality, you end up getting everyone on the bus, but dare not ask anyone to go down from the bus and have totally no idea what people should be on what seats.
  • Hire like 5, Work like 10, Pay like 8. If someone is as productive or create as much value as 10 people, shouldn’t we pay him ten times the average salary? Perhaps not, but perhaps 2-3 times above average sounds fair and justifiable, but in reality no once practice that because it is not the norm or they have no idea how productive their staff is. If compensation is tied directly to the productivity of the team, team member will have lazy people out.
  • Be rigorous, not ruthless. Always get the wrong people off the bus, as they not only have low productivity, but spread low morale among the team as well. They are not only counter productive, there are in fact destructive. The best people need no worry about their position.
  • Selective Reward & Retrenchment. When you reward someone, you don’t give everyone the same amount of bonus; that is lazy and irresponsible. It is you job to find out who deserve more, and give them much more so they know that they are appreciated. Giving a letter which said, “The Company Appreciate You Hard Work and Effort” while the lazy bump next door get the same amount of bonus just doesn’t help. When you retrench, you don’t retrench the whole department just because they are loosing money. Retrench the low performers and reward the high performers (give them a raise and bigger challenges)
  • A Culture of Discipline. Entrepreneur success is fueled by creativity, imagination, bold moves into uncharted water and visionary zeal. The death is caused by too many disorganized staff, bureaucracy and procedures. Bureaucracy is to compensate for incompetence and lack of discipline. Build a culture around freedom and responsibility, where everyone is responsible for their own ROI. Hire self discipline people which don't need to be managed, and then manage the system.
  • Confront the brutal facts. You must first admit what’s wrong with you, and then only you could make a change towards recovery. Face the reality; believe the fact; make the change (no head-hiding in the sand). If you have no idea or do not recognize what is wrong with you, you shall stand no chance of being great, and good is the enemy of great.
There is no miracle in transformation. Like the Flywheel, it takes many people pushing it to get in running slowly at first. Once the momentum is built-up, the greatness is infinity. The sad thing is, the same applied to the Doom Loop (once you start going down, you go all the way down). Only through consistency and time will you get the result.

Refer to Jim Collin’s website for some free material online, for some short and simple teachings. To get a better understanding, get the book instead.

I like the book, it is sort of an awarness book, giving you some perspectives on how you see your company :)


hanyi said...

hi. good analysis there and thanks for sharing. i will go and get that book too. often, being good is not enough ... only by being great can we survice in the highly competitive 21st century. cheers :)

d_luaz said...

Good or Great, there are some fundamental principles and practices we should be aware of to make us better.

Anonymous said...

What about your current company?
Do Base practise it?:p

d_luaz said...

since I can't find a company that do, thus I work for myself, haha.