BE 2.0 (Beyond Entrepreneurship 2.0): Turning Your Business into an Enduring Great Company
By Jim Collins and Bill Lazier
What Is a Great Company? We define a great company as one that meets the following four criteria:
Performance
A great company generates enough cash flow (through highly profitable operations) to be self-sustaining; it also has a solid track record of meeting other objectives set by its leaders and owners. Although it has ups and downs—and perhaps even some dire times—a great company always recovers and eventually regains high performance.
Impact
A great company plays a significant leadership role in shaping its industry. It isn’t necessarily the biggest company; it can influence by innovation as well as size.
Reputation
A great company is admired and respected by people outside its walls, often being used as a role model.
Longevity
A great company has staying power, remaining healthy for decades. The greatest companies are self-renewing institutions whose greatness endures for generations of management, transcending the presence of the individuals who originally shaped the company. When you think of enduring greatness, think of building a company that remains great for 100 years. A company need not be perfect to be great. No company is perfect; all have their warts. A great company, like a great athlete, trips up now and then, briefly tarnishing its reputation. But a great company is also resilient, and bounces back from its difficult periods—just like a great athlete bounces back from a slump or an injury.
Book Outline
We begin Chapter 1 with leadership style. It’s impossible to build a great company without an effective leadership style. It all starts with you. In Chapter 2, we move to the function of effective corporate leadership: catalyzing a vision. Every great company has at its foundation a compelling vision. What is vision, why is it so important, and how do you set one? We answer these questions and present a useful framework for setting corporate vision. In Chapter 3, we de-mystify the topic of strategy. Once the vision is clear, you need to make good decisions and have a road map for making the vision happen. In Chapter 4, we move to an exciting and integral part of greatness: innovation. How do you stimulate creativity and keep your company innovative as it evolves? We present a framework and a plethora of specific suggestions and examples. Finally, we finish Chapter 5 with the importance of tactical excellence: how to translate vision and strategy into tactics and, most important, how to create an environment that produces consistent tactical excellence.
I got hit with a lightning bolt of “who luck,” the type of luck that comes as a chance meeting with a person who changes your life.
Stanford MBA classroom, filling in for a star professor. Bill placed upon me a huge burden of responsibility—he trusted me, he believed in me—and I didn’t want to let him down. He also gave me the lecture about performing best when it counts.
If you spend your life keeping your options open, that’s exactly what you’ll do . . . spend your life keeping your options open.
“Jim, this is one of the big forks in the road of life. On one path, you first assume that someone is trustworthy and you hold that view until you have incontrovertible evidence to the contrary; on the other path, you first assume that someone isn’t trustworthy until he or she proves to you that trust is merited. You have to choose which path you want to walk and stick with it.”
Build a Meaningful Life by Building Relationships
“You can go at life as a series of transactions, or you can go at life building relationships,” Bill once told me. “Transactions can give you success, but only relationships make for a great life.” Something to think about
“How do you know if you have a great relationship?” I asked. Bill thought about it for a moment, then answered, “If you were to ask each person in the relationship who benefits more from the relationship, both would answer, ‘I do.’” “Isn’t that a bit of a selfish way to look at it?” I puzzled. “No, the whole idea is that each person contributes so much to the relationship that both feel enriched,” Bill explained. “Let me ask you, Jim, who do you feel benefits more from our relationship?” “Oh, that’s easy . . . I do! You’ve given so much to me.” “Ah, that’s my point,” Bill smiled. “See, I’d answer that I benefit more than you do.”
In Bill’s view, entrepreneurial success shouldn’t be primarily about what you do but about who you are. Just as a great painting or piece of music reflects the inner values of the artist, so, too, a great company reflects the core values of its entrepreneurial leaders.
If you define success by money, you always lose. The real scorecard in life is how well you build meaningful relationships and how well you live to your core values.
Values First
This means that values come before goals, before strategy, before tactics, before products, before market choices, before financing, before business plans, before every decision. I gleaned from Bill the idea that a company should start not so much with a business plan, but almost with a Declaration of Independence that begins with a statement of values: We hold these truths to be self-evident. Values come first, and all else follows—in business, in career, in life.
One core value that Bill instilled in me is the sacred nature of commitments. “Be very careful what you commit to. Because there’s no honorable way to fail a commitment freely made.”
He taught me that you must continually self-correct, like a ship at sea being guided by a constellation of stars—sometimes you get a bit off, but you resight on your values and tack back on course. And you do this forever, across the entirety of any life well lived.
So, if life is short—even if you live one hundred years—the main question isn’t how to extend life as long as possible but how to live a life worth living all the way along, to live a life that you’d feel good about whenever it gets taken away.
I hung up the phone and turned to Joanne, “Bill’s dead.” When my father died, I cried only for what I’d never had. But when Bill died, I cried for what I’d lost.
I sat there and pictured every person like a vector moving through time and space, each with an altered trajectory because Bill had had an impact on their values and choices. If one indicator of a life well led is that you have changed the lives of others—that some people’s lives are different and better because of you—it would be hard to have a better life than Bill’s.
Chapter 2 GREAT VISION WITHOUT GREAT PEOPLE IS IRRELEVANT
Take our 20 best people away and I tell you that Microsoft would become an unimportant company. -Bill Gates
Reflecting on more than a quarter century of rigorous research into what makes great companies tick, I’ve come to see “first who” as the one principle above all others that you must not get wrong. First in importance, above every other activity, is the imperative to get the right people on the bus. My research team and I identified the “first who” principle (first get the right people on the bus and then figure out where to drive it) in Good to Great.
If you’ve hired people for only a specific strategy, you’ve created higher odds of failure right from the start. Even if you’re an uber-visionary, perhaps even the next Steve Jobs, the single most important skill for building a great company is making superb people decisions. Without the right people, you simply cannot build a great company, period.
Ed Catmull built Pixar on the idea that the first question is not “What are the great stories to bet on?” The first question should be “Who are the great people to bet on?”
If the first two decades of the twenty-first century have taught us anything, it’s that uncertainty is chronic; instability is permanent; disruption is common; and we can neither predict nor govern events. There will be no “new normal”; there will only be a continuous series of “not normal” episodes, defying prediction and unforeseen by most of us until they happen. And that means doubling down on the “first who” principle. If you’re going to climb a big, scary mountain that’s never been climbed before, your best hedge against unexpected obstacles is making sure you have the right partners on the other end of the rope, people who can adapt to whatever you encounter on the mountain. Even the most visionary among us cannot always predict which ideas will work. And no one can reliably predict what the future will throw at us or even what’s coming just around the corner.
Track the Number One Metric
And what’s that metric? The percentage of key seats on the bus filled with the right people for those seats. Stop and think: What percentage of your key seats do you have filled with the right people? If your answer is less than 90 percent, you’ve just identified your number one priority. To build a truly great company, you’ll need to strive for having 90 percent of your key seats filled with the right people.
I’ve asked multitudes of gatherings of executives this question: “Which of the following two categories of mistakes have you more frequently made? Category 1: In retrospect, you waited too long before you acted to move the person out of the key seat. Category 2: In retrospect, you acted too quickly and you should have been more patient. Stop and think: Which mistake do you make more frequently?” In response to this question, the vast majority of hands go up for Category 1, waiting too long before taking decisive action.
Develop or Replace?
I’ve distilled years of reflection down to seven questions that I offer here to stimulate your thinking when you face the “develop or replace” conundrum.
Are you beginning to lose other people by keeping this person in the seat?
Do you have a values problem, a will problem, or a skills problem?
Does the person lack (or has the person lost) the will to develop to meet the demands of the seat? If not, can you ignite their will? Great leaders never underestimate how much people can grow, but they also know that growth depends on the humility and relentless will to improve.
What’s the person’s relationship to the window and the mirror? The right people in key seats display window-and-mirror maturity. When things go well, the right people point out the window, giving credit to factors other than themselves; they shine a light on other people who contributed to the success and take little credit themselves. And when things go awry, they don’t blame circumstances or other people for setbacks and failures; they point in the mirror and say, “I am responsible.” People who look in the mirror—who always ask, “What could I have done better? What did I miss?”—will grow. People who always point out the window to explain away problems or affix blame elsewhere will be stunted in their growth.
Does the person see work as a job or a responsibility?
Has your confidence in the person gone up or down in the past year? The critical variable is the trajectory of that confidence over time. When someone says, “Got it!” do you increasingly set your worries aside or do you increasingly feel the need to follow up? Do you have a bus problem or a seat problem? Sometimes you might have a right person on the bus but in the wrong seat. You might have put the person in a seat misaligned with his or her capabilities or temperament.
How would you feel if the person quit? If secretly relieved, then you might have already concluded that he or she is a wrong person on the bus.
When you’ve reached the demarcation line and have decided to replace someone in a key seat, keep in mind an essential distinction: Be rigorous, not ruthless. Rigor means applying self-honesty and confronting head-on the need to remove someone from a key seat. But being rigorous in decision making doesn’t mean being ruthless in how you go about making the change.
If You Want to Grow Your People, First Grow Yourself
She learned how to hire great people and meld them into a cohesive team. She learned that culture does not merely support strategy, but that culture is strategy. She learned how to hire for values and temperament, not just smarts and experience. She learned how and when to delegate, and when not to. She learned how to hold her unit leaders accountable for keeping the culture vibrant at the front line. She learned how to make wise decisions that reduce short-term profits for the sake of long-term greatness. She learned how to stay calm and mitigate her impulse to take control from her people when things went wrong. She learned how to confront existential threats by moving outside the company to cultivate mentors she could learn from both intellectually and emotionally.
And—this is the crucial point—most exceptional leaders grow into their capabilities. Not because they want to “be” a great leader, but because they’re trying to be worthy of the people they lead. If you want the people with whom you work to improve their performance, first improve your own. If you want others to expand their capabilities, first expand your own.
One of the most destructive myths is that a founder-entrepreneur or small-business leader will almost inevitably hit his or her managerial limit and need to be replaced with a “real” CEO to build the company. Steve Jobs 1.0 bought into that myth and it nearly killed Apple; it took Steve Jobs 2.0 to save it. If someone tries to convince you of that myth, ask in response, “Well, if that’s true, how do you explain the undeniable, empirical fact that many of the great companies in history were built by a founding entrepreneur?”
In his memoir, L.L.Bean: The Making of an American Icon, Gorman tells of how, before he became president, he carried a little black notebook with him at all times in which he jotted down notes for how to improve the operation, eventually compiling more than four hundred specific ideas. Upon becoming president, he began to implement the list. Under Gorman, L.L.Bean increased revenues by more than forty times in inflation-adjusted dollars.
Leadership is a responsibility, not an entitlement; a decision, not an accident; a matter of willful action, not genetics. Whether or not you learn to lead greatly is, in the end, a choice.
Make the Most of “Who Luck”
Just think of the “who luck” in your own life. It could be the luck of stumbling across a life-altering mentor. It could be the luck of finding a great friend or an ideal life partner or an incredible boss or teammate.
To practice “first who” means recruiting all the time, keeping yourself highly attuned to stumbling upon great talent wherever you might be. You never know when you’re going to get “who luck,” but you’ll get it, repeatedly. If you look through a “first who” lens in everything you do—if you change every “what” question into a “who” question—you’re likely to recognize your “who luck” when it comes.
When I look back on my first six decades, I now see them more defined and shaped by “who” than “what,” consisting largely of “who luck” incidents—mentors, teachers, friends, colleagues, and partners who have altered and shaped the arc of my
Focus on Your Unit and Take Care of Your People—Not Your Career
Unit leadership = The cellular structure of any truly great organization is the well-led unit, for this is where great things get done. Great leadership at the top doesn’t amount to very much without exceptional leadership at the unit level. If you want to build a truly great company or social-sector enterprise, you need to cultivate legions of unit leaders who, in turn, create unit cohesion in pursuit of audacious objectives. If you want to scale your culture, if you want to make the journey from great company to enduring great company, you must invest in building a pipeline of the right unit leaders.
I never saw General Austin pass up an opportunity to shine a light on his people.
Take care of your people, not your career. Every responsibility you get, every minibus you drive, every unit you lead—no matter how small—make it a pocket of greatness.
Lemann and his partners focused on building a “People Machine” to hire and train an ever-larger pool of aggressive, ambitious, young leaders for eventual deployment. Their ultimate “strategy” was to find passionate, driven young people; put them in an intense meritocratic culture; challenge them with audacious goals; and give them a stake in the outcome—what they summarized as Dream-People-Culture. That they didn’t know what businesses they might eventually deploy into didn’t matter; what mattered, first and foremost, was having enough people with the right cultural DNA to deploy into giant opportunities. And those opportunities just kept coming and getting bigger. Lemann and his partners eventually merged their beer business with Interbrew of Belgium to create InBev.
Never underestimate the power of sustaining momentum.
Sicupira had created such a powerful momentum machine. From their very earliest days operating as a tiny start-up, they obsessed over finding great people, attracting great people, developing great people. They didn’t hire principally to get people with particular skills or to fill an open position or to achieve a specific goal or to pursue a market opportunity. They inverted the entire equation, making a leap of faith that if they filled the machine with fanatically driven people, they’d ignite a virtuous cycle of momentum.
First, you get great people.
Then you need to give them something big to do. If you pick something big enough, you’ll need more great people.
Then you have to come up with bigger things to do, which requires getting more great people, which then sends you off in search of even bigger things to do.
Repeat, again and again, never stopping, never slowing, never breaking the magic of momentum.
If You Need Financial Incentives to Motivate, Then You Have the Wrong People
In our research, we found no systematic pattern linking executive compensation to the process of companies going from good to great. Financial incentives don’t—indeed cannot—cause companies to achieve greatness, for the simple reason that you cannot turn the wrong people into the right people with money.
The Sherriff of Ramadi: “In the teams, reputation is everything. A SEAL’s reputation follows him from the training commands into the SEAL teams and on into operational deployment. It’s a small community and everyone knows everyone else—or has a close friend who does.” SEALs routinely risk their own lives to never leave a fellow SEAL behind, not because of anything financial, but because of a sacred promise to each other. Imagine being in a culture in which you know with 100 percent certainty—not 90 percent, not 95 percent, not 99 percent, but absolutely 100 percent—that no matter what happens, you’ll never be left behind. You could offer a team of SEALs a million dollars to leave a brother behind, and the nicest response you’re likely to get is blank incomprehension followed by outright disgust; you’d likely have a very bad day.
If it really is about financial incentives, how do we explain the fact that some of the best leaders in the world serve in our military? Or in our schools? Or at the best medical centers? Or in social movements fueled by the energy of thousands of idealistic young people?
The wrong incentives are not merely benign; they can be outright dangerous. If you’re trying to build a great company guided by a deeply held set of values, you simply cannot afford to have incentives that reinforce behavior incompatible with your core values, or worse, that reinforce the behavior of the wrong people and drive away the right people. Indeed, the wrong incentive system can encourage people to do the wrong things and perhaps even throw a company into crisis.
No company, no matter how great, is immune to the potential doom loop of misaligned incentives and the wrong people in key seats on the bus. The doom loop begins when you get some of the wrong people on the bus who behave contrary to your company’s core values and degrade the culture. Some of these people then become powerful enough to install incentives that are misaligned with the core values. This reinforces the behavior of the wrong people and drives away the right people. The culture becomes increasingly dominated by the wrong people and increasingly inhospitable to the right people. More of the right people get off the bus, and the proportion of wrong people increases to a critical mass.
The point here is not that a company should have no financial compensation mechanisms. In fact, most of the great companies in our research did employ compensation mechanisms that went beyond traditional salaries. But such compensation mechanisms work only so long as they align with a company’s values and help accomplish the fundamental function of compensation. And what is that fundamental function? In building a truly great organization, the primary purpose of a compensation system, however structured, is to make sure that you’re able to attract and retain the right people—self-motivated and self-disciplined people who embrace your core values—not to try to “motivate” the wrong people. It all goes back to the “first who” principle: get the right people on the bus, the wrong people off the bus, and the right people in the key seats.
Build a Culture Where People Depend Upon People
“What’s the purpose of boot camp? Why do you retain this somewhat brutal practice?” He told me that people mistakenly think it’s all about just finding the strongest physical specimens. The goal, he went on to describe, is not to find the strongest people, but to weed out people who, under duress, default to taking care of only themselves rather than helping those around them.
Like Manchester, he realized that people will do unreasonable things to come through—not for grand ideas or incentives or bosses or hierarchies or even recognition, but for each other.
If you start with basic respect for people, and you show trust by putting them in situations where they have to come through because others depend on them, they’ll summon whatever it takes to achieve the mission.
Chapter 3 LEADERSHIP STYLE
The key to a leader’s impact is sincerity. Before he can inspire with emotion he must be swayed by it himself. Before he can move their tears his own must flow. To convince them he must himself believe.
Simply put, it’s impossible to build a great company if you have a destructive leadership style.
The Multiplier Effect
If you are the top person, your style will set the tone for the entire organization. It is a multiplier effect—for better or worse—the tone you set at the top affects the behavior patterns of people throughout the company. If effective, your style will be a powerful factor in building a great company. If ineffective, or negative, however, it will be like a heavy, wet blanket hanging over the company and weighing it down.
Effective Leadership: Function Plus Style
Effective corporate leadership consists of two parts: leadership function and leadership style. The function of leadership—the number-one responsibility of a leader—is to catalyze a clear and shared vision for the company and to secure commitment to and vigorous pursuit of that vision. This is a universal requirement of leadership, and no matter what your style, you must perform this function.
In contrast, the style of leadership is unique to each individual. There are many styles that can be used to carry out the function of leadership.
Effective Corporate Leadership
Authenticity, Decisiveness, Focus, Personal Touch, Hard/Soft People Skills, Communication, Ever Forward
Just What Exactly Is “Leadership”?
True leadership only exists if people follow when they would otherwise have the freedom to not follow.
Many business leaders think they’re leading when in fact they’re simply exercising power, and they might discover to their horror that no one would follow them if they had no power. If you rely primarily on rank or title or position or money or incentives or celebrity or any other form of raw power to get things done, quite simply, you’ve abdicated leadership.
Leadership is the art of getting people to want to do what must be done.
First, as a leader, it’s your responsibility to figure out what must be done. You might do this by your own insight and instinct or, more likely, via dialogue and debate with the right people; but however you do it, you need to get clear.
Second, it’s not about getting people to do what must be done but about getting them to want to do it.
Third, it’s not a science; it’s an art.
Far better to be an uncharismatic leader who gets the right people to confront the brutal facts than to be a magnetic force of personality who leads compliant followers to disaster. If you have charisma, you can still build an enduring great company. But never forget: If your company cannot be great without your personal charisma to inspire, then it is not yet a great company.
Seven Elements of Leadership Style
Authenticity Decisiveness Focus Personal Touch Hard/Soft People Skills Communication Ever Forward
Leadership Style Element 1: Authenticity
The most important element of leadership effectiveness is authentically living the vision of the company. The values and ambitions of a company are not instilled entirely by what leaders say; they’re instilled primarily by what leaders do.
In a healthy company, there are no inconsistencies between what is said and what is believed deep down—the values come from within the leaders and imprint themselves on the organization through day-to-day activity.
SHOW YOUR CONVICTION
We’ve observed that effective company leaders convey a ferocious intensity about their values, beliefs, and desires. They’re unafraid to show the passion that is associated with these values, at times getting quite emotional.
BE THE BEST ROLE MODEL
Just speaking authentically isn’t enough; you also have to act authentically. Each decision and action should dovetail with your philosophy, being in itself a statement of your core values.
People in your company are going to be extraordinarily influenced by what you do.
As a corporate leader, you are like a parent or teacher, and, as such, people are likely to follow the examples you set. Don’t underestimate the extent to which your actions influence those who work for you. Manners of speech, decision-making style, ways of behaving, and other attributes will rub off. For example, within a few weeks after John F. Kennedy came to office, White House staff members were speaking in Kennedy-like staccato sentences and jabbing the air with their fingers, the way he did.
Therefore, you’ve got to be a role model of the culture you want to create. Sam Walton,
BACK WORDS WITH ACTION
Live what you say. Don’t just talk about it, do it.
What Cause Do You Serve?
I believe a big reason for what I observed is that the ethic of Service—commitment to a cause bigger than oneself—permeates the entire West Point experience.
They all lead or led in a spirit of service to a cause bigger than themselves.
X Factor of Great Leadership
My research team and I discovered the X factor of good-to-great leadership. It is the principle of Level 5. Level 5 is the highest level in a hierarchy of capability ranging from Level 1 (individual skills) to Level 2 (teamwork skills) to Level 3 (management skills) to Level 4 (leadership skills). At Level 5, a leader applies all the skills from Levels 1 through 4 in service to a cause larger than self, and does so with a paradoxical blend of personal humility and indomitable will. Level 5 leaders are incredibly ambitious. They are fanatic, obsessed, monomaniacal, relentless, exhausting. But their ambition is first and foremost for the cause, for the company, for the purpose, for the work, not themselves.
I’ve been asked many times whether people can become Level 5, and if so, how? Yes, and the best spark to ignite such leadership in yourself is to wrestle with a hard, simple question: What cause do you serve? What cause are you willing to sacrifice and suffer for, when you must make decisions that cause pain for yourself and others to advance that cause? What cause will infuse your life with meaning? It might be a grand, highly visible cause or a more private, less-visible cause; what matters is that you lead in service to that cause, rather than in service to yourself.
Leadership Style Element 2: Decisiveness
George C. Marshall pointed out that the greatest gift a leader can have is the ability to decide.
Leaders who build great companies seldom suffer from indecision. The ability to decide—to somehow come to a decision, even in the absence of perfect information (and there will never be perfect information), is an essential attribute of well-functioning teams and individual leaders.
DON’T LET ANALYSIS PREVENT A DECISION
Analysis allows us to say “maybe,” but life (especially in a small to mid-sized company) does not.
All business analysis is dramatically affected by your assumptions. Two people looking at the same set of facts will often come to entirely different conclusions about those facts. Why? Because they come at those facts with different assumptions.
Just remember that the objective is to make a decision, not to pulverize it with analysis.
“When all the evidence seems to be in, I like to say yes or no at once and take my chances.”
FOLLOW YOUR GUT
How do you make a final choice based on the imperfect information? Part of the answer lies in being willing to follow your gut instinct—your intuition.
What does it take to effectively use your intuition? Here are a few suggestions.
Go right to the heart of any problem or decision.
Don’t let a myriad of data, analysis, options, and probabilities overwhelm you and push you into catatonic indecision.
Clear away the clutter—the long lists of pros and cons—and zero in on the central question.
When confronted with a problem, say to yourself, “What’s the essence of this? Never mind the details, what’s the important thing?”
Don’t dwell incessantly on all the attributes and complexities of a problem. Pare the situation down to its essential elements.
A useful technique is to distill a decision down to its core and ask a simple question: Does your gut say “Yes” or “No”?
Fear
Beware of the influence of fear on your gut instincts. Fear creates self-deception.
What passes for an intuitive decision is sometimes a fear-driven decision in disguise.
A fear-driven decision is one where, because of the risks involved, you are afraid to do what you know deep down is right. Fear-driven decisions can easily get confused with intuitive decisions because there is a false sense of relief that comes with pacifying the fear.
If you find yourself saying, “I think this is the right thing to do, but I am afraid that . . . ,” then you are in danger of making a decision that goes against your gut. To use your intuition effectively, you need the courage to do what you know is right, regardless of the risk.
BAD DECISION IS OFTEN BETTER THAN NO DECISION
No matter how smart you are, it’s impossible to have a 100% hit-rate with decisions. A good number of your decisions will be sub-optimal;Indecision is often worse than making a wrong decision. Get a jump on the problem; take the offensive rather than letting it back you into a corner where your hand will be forced.
Mistakes
You must learn to live with the fact that you will make mistakes—lots of mistakes—and that you will learn from them. Mistakes are in fact a great source of strength; making mistakes is analogous to building muscle in athletic training.
“Do not fear mistakes. Wisdom is often born of such mistakes.”
BE DECISIVE BUT NOT BULLHEADED
Being decisive does not mean being inflexible or bullheaded. Yes, you’ve got to make decisions and commit to courses of action. But you’ve also got to be willing to make adjustments and adapt to new information or circumstances.
GROUP DECISION MAKING
In general, the most effective leaders tend to make extensive use of participative decision making. The best decisions are made with some degree of participation—no one is brilliant or experienced enough to have all the answers. No one.
The degree of participation depends largely on the importance of the decision. If you seek wide participation on every single decision, even trivial decisions, people will spend all their time in meetings. However, as the importance of the decision increases, it’s generally wise to invite the participation of a wider group.
I’m going to push back on Collins here because this is not what I’ve seen take place in the organizations I’ve studied. The leaders I’ve studied have a handful of trusted advisors and to Collins point above tend to make decisions on intuition not by asking everyone in the company what to do. I’m not saying don’t get valuable input from others but I’ve rarely seen a leader get feedback from a large group of people.
Disagreement during the decision-making process is good. In making important decisions, it’s wise to have constructive argument and differing points of view. Disagreement will clarify the issues and produce a more thought-out solution. Without disagreement, you probably don’t fully understand the problem.
The fact that we were able to talk, debate, argue, disagree, and then debate some more was essential in choosing our ultimate course. . . . Opinions, even fact itself, can best be judged by conflict, by debate. There is an important element missing when there is unanimity of viewpoint.
Leaders of great companies also tend to make extensive use of delegative decision making. To build a great company—a company that has effective leaders at all levels—you need to remove yourself from many of the decisions and force people to stand on their own feet.
the most innovative companies tend to push decisions as far down in the organization as possible, giving people at all levels the opportunity to move fast, utilize their creativity, apply their intellect, and assume responsibility.
Delegating decisions doesn’t mean being detached, nor does it mean standing idly by if the whole ship is going to crash into the rocks. It simply means giving people the power to make decisions that affect their area. It gives people a chance to test themselves and build their own decision making muscle.
We offer the following rough guidelines for group decision making:
Whenever appropriate, delegate decisions downwards; give people a chance to build their decision-making “muscle.” Be crystal clear about what decisions you have delegated, and hold people accountable for those decisions.
On important decisions that require widespread commitment for successful implementation, make the decision as a group, either participative or consensus.
Enter the process with your own points of view, but be open to having your ideas influenced by others. Be clear whether the final decision is to be made by consensus or by you.
Encourage disagreement during the process.
Reserve autocratic decisions for situations where there’s no time to invite participation (e.g., when the ship is crashing on the rocks), for trivial decision, for decisions where you want to send a symbolic message to reinforce your values, and for the small set of decisions that you believe should always be made entirely by yourself. Whatever style you use, be up front about it.
Pretending to be participative or consensus-oriented in an effort to get “buy-in” to a decision that you’ve already made is terribly destructive.
ACCEPT RESPONSIBILITY AND SHARE CREDIT
It takes courage when things go awry to say, “It’s my responsibility.” But that’s exactly what you should say.
Lao-tzu pointed out 2,500 years ago, “True leaders inspire people to do great things and, when the work is done, their people proudly say, ‘We did this ourselves.’”
Good Decisions, Right Timeline
Intel installed a mechanism for decision making called “constructive confrontation.” As a member of the Intel team, you carried the burden to argue, debate, and disagree to help solve pressing problems. It didn’t matter whether you were a junior engineer or field-marketing person; if you felt the logic and facts pointed to a solution contrary to that proposed by other people in the room.
As a member of a Level 5 team, you have not only the opportunity to engage in the dialogue, you have the responsibility to do so. If you fail to advance your argument, if you fail to disagree with the most powerful person in the room, if you fail to bring solid logic and evidence to the debate, if you attack a person rather than the problem, then you’re failing in that responsibility.
But on the big decisions that matter most, especially those choices that involve big bets and/or have huge downside if they go wrong, the primary goal must not be to make people comfortable in a haze of happy consensus. The goal must be to make a good decision and to execute that decision brilliantly.
Peter Drucker’s 1st rule of decision making: do not make a decision unless you have disagreement.
George Washington—one of the few figures to achieve elite historical stature in both military and political leadership—was slow to decide, firm in decision, and rare to second-guess. His right-hand aide, Alexander Hamilton, said of Washington that he “consulted much, pondered much; resolved slowly, resolved surely.” Thomas Jefferson wrote of Washington: “Perhaps the strongest feature in his character was prudence, never acting until every circumstance, every consideration, was maturely weighed; refraining if he saw a doubt but, when once decided, going through with his purpose whatever obstacles opposed.”
Washington cultivated a culture of open dialogue, practicing his famous self-discipline of silence, encouraging arguments to compete, listening and probing, until he made up his mind to act.
Time & Decision Making
We found that some of the best decisions happened fast and some of the best decisions happened more slowly. We learned that the critical question to ask in any given situation is, “How much time do we have before our risks change?”
In some situations, you’ll incur no significant increased risk (of either catastrophe or of missing a huge opportunity) by taking more time to decide. In other situations, however, you’ll dramatically increase your risks by waiting too long.
The key is to know which situation you are in, not to have a bias for “always fast” or “always slow.” You need to be good at both. The right decision made in the wrong time frame is a bad decision.
The basic architecture of executive decision making we found in our research: Determine how much time you have to decide, whether minutes, hours, days, months, or even years. Stimulate dialogue and debate—guided by facts and evidence—to determine the best options. Make a decision, firm and unambiguous, once you’re clear on what must be done and/or when the decision clock runs out; do not wait for consensus agreement. Unify fully behind the decision and execute with fanatic discipline.
In a Level 5 leadership culture, wherein members of the team put the success of the company and its cause above their own interests, people unify behind a decision once made.
Across all our research into what makes great companies tick, we found that big decisions almost always happen with disagreement still in the air. But then people commit to making the decision work, even if they had argued aggressively for a different course of action.
Without unified commitment, you’ll almost certainly fail to execute. True greatness requires a series of good decisions, supremely well executed, that accumulate one upon another over a long period of time.
Leadership Style Element 3: Focus
Do first things first—and second things not at all. The alternative is to get nothing done. Peter F. Drucker
Effective leaders focus their efforts, keeping the number of priorities to a minimum and remaining resolutely fixed on them. You can’t do everything; nor can a company on the path to greatness.
TAKE ONE SHOT AT A TIME
Create a short list of key priorities and keep the list short.
If you must have more than one priority, then keep it to a maximum of three—any more than three priorities is an admission that you don’t really have any priorities.
Does this mean that you should only have one thing on your “to do” list? Yes and no. Clearly, it is virtually impossible to lead a company and have only one “to do” on your list. But you should be spending the bulk of your time on your number one priority, concentrating your efforts on that priority until it is complete.
Additional resources for Focu
The One Thing by Garry Kellar
Focus by Daniel Goleman
MANAGE YOUR TIME, NOT YOUR WORK
Work is infinite; time is finite.
Work expands to fill whatever time is allotted to it. To be productive, therefore, you must manage your time, not your work.
The key question to ask yourself is not “What am I going to do?” but “How am I going to spend my time?”
If your work is successful, it generates more work; as a result, the concept of “finishing your work” is a contradiction in terms so blatant and so dangerous that it can lead to nervous breakdowns—because it puts the pressure on the wrong places in your mind and habits.
Uncover the unused wells of productive time in your life. The first step is to examine where your time actually goes. Periodically keep track of your time and analyze where it is being spent. Is it being spent on your top priorities? Or, is it being distracted and diverted into unimportant activities?
Winston Churchill, one of the most prolific individuals in history, took time to paint, lay bricks, feed the animals, and socialize. He then spent his work time (which often didn’t begin until 11:00 p.m.) only on the most important items.
And you must be willing to take items off the priority list.
Leadership Style Element 4: Personal Touch
Leaders who build great companies are “hands on”—always putting their personal touch on the business. There is simply no excuse for being detached, removed, distant, or uninvolved.
BUILD RELATIONSHIPS
Great companies have great relationships: relationships with customers, with suppliers, with investors, with employees, and with the general community. The emphasis in all dealings is on developing and nurturing long-term, constructive relationships.
Think of every interaction as an opportunity to establish or further develop a long-term, positive relationship. You can only do this with a personal touch. You don’t build relationships with employees by writing stale, formal memos; you do it by interacting in a more personal way.
USE INFORMAL COMMUNICATION
BE ACCESSIBLE AND APPROACHABLE
REINFORCE VALUES WITH SYMBOLIC DETAILS
The most effective leaders are obsessed with both vision and details. They are fanatical about getting the details right.
PERSONAL TOUCH VERSUS MICRO-MANAGEMENT
A personal-touch leader, on the other hand, trusts his people to make basically good choices; he respects their abilities.
Don’t Confuse Empowerment with Detachment
Like all the great creators of culture I’ve known and studied, Lemann never confused empowerment with detachment. He believed passionately in leading by getting out of the way of his best people.
He even created a department entirely separate from the normal chain of command to feed him the brutal facts, so that the unvarnished truth would reach him.
In our research, the entrepreneurs who led their companies from start-ups into some of the greatest corporations in history generally had both a hands-on style and an empowering style. No matter how big their companies became, they remained closely connected to their people, hyper-aware of facts on the ground, and directly engaged in strategic imperatives.
The goal is to become a shaper of culture and builder of people so that the company can be great for decades beyond your own life span. When you’ve found people who are as fanatic about getting the essential details right as you are, when you’ve taught them how to build and lead a system that delivers consistent tactical excellence, when they strive to far surpass what you yourself achieve during your own tenure, then you’ve truly set the foundation for an enduring great company.
Leadership Style Element 5: Hard/Soft People Skills
Leaders who build great companies master the paradox of hard and soft. They hold people to incredibly high standards of performance (hard) yet they go to great lengths to build people up—to make them feel good about themselves and about what they are capable of achieving (soft).
THE IMPORTANCE OF FEEDBACK
If we had to pick the single most underused element of effective corporate leadership, it would be feedback—especially positive feedback.
Psychologists in a variety of experiments have found that people’s performance—objectively measured—improves or declines depending on the type of feedback they get. Positive feedback tends to improve performance, whereas negative feedback tends to decrease performance.
Furthermore, the best leaders are always looking for ways to put people in positions where they’ll do well—where they’ll perform at levels that merit positive reinforcement. They’re always looking for ways to build people up, rather than tearing them down.
LEADER AS TEACHER
The most constructive approach to critical feedback follows from the concept of leader as teacher. When you need to provide corrective or negative guidance, think not of yourself as a critic—or even a boss—but as a guide, mentor, and teacher. The process of critique should be an educational experience that contributes to the further development of the individual.
First—and this is important—you don’t criticize the person. Instead, you examine the event.
The whole process is one of education and development. I make it clear that we are sitting on the same side of the table, that there is no problem with him as a person and that there is no problem between him and me. I emphasize that everyone makes mistakes, sometimes illustrating the point by referring to mistakes that I have made.
But I also make it clear that I want the person to learn how the event could have been better handled, so that it can be done better in the future.
THE ROLE OF HIGH STANDARDS
The late Steve Jobs was only inspired by “insanely great” things. He set a high bar for seemingly everything, and anything that didn’t meet his standards was summarily rejected. Try applying “insanely great” as a standard on a daily basis and see how far you get. People lower their standards in an effort to move things along and get things off their desks. Don’t do it. Fight that impulse every step of the way. It doesn’t take much more mental energy to raise standards. Don’t let malaise set in. Bust it up. Raising the bar is energizing by itself. We should all be thrilled with what we’re doing. So channel your inner Steve Jobs. Aim for insanely great. It’s much more energizing! – Frank Slootman
Just as giving people positive reinforcement tends to increase their performance, so does the presence of challenge and high expectations. Good teachers have always known that students generally want to be challenged, and that they generally respond favorably to high expectations.
A good leader offers people the opportunity to test themselves, to grow, and to do their best work.
Put people in positions where they’re required to rise to a high standard, and let them know that you believe they will do so.
This combination of push/pull, yin/yang, hard/soft, high standards/positive reinforcement is the essence of stimulating people to exercise their full capacity. By helping each person to reach his maximum capability, whatever level that might be (and there is a spectrum of abilities across any group of people), you can stimulate the entire company to jump over a very high bar.
The best book I’ve read on the yin/yang of leadership is The Tao of Leadership
Leadership Style Element 6: Communication
A great company thrives on communication. Effective leaders stimulate constant communication: up, down, sideways, group, individual, company-wide, written, oral, formal, informal. They work towards having a continual hum of communication throughout the organization.
The Fifth Discipline does a great job talking about effective communication.
USE ANALOGIES AND IMAGES
Use vivid images to convey what the company is trying to do. Use concrete examples to illustrate how the company is actually succeeding in moving towards its vision. Tell stories that illustrate the values and spirit of the organization. Analogies, parables, and metaphors, graphically described, are a powerful form of communication. Use them.
[Apple] is based on the principle that one person and one computer is fundamentally different from 10 people and 1 computer.
ADD PERSONAL TOUCH TO FORMAL COMMUNICATION
There are two basic ways to achieving this effect.
First, reveal yourself. Don’t be afraid to share stories from your own experience and observations. Telling something about yourself, your own experience, or your unique view of the world creates intimacy, even though there may not be personal contact between you and the writer or speaker.
Second, use a direct, personal, and unpretentious style. Use words like we, you, and I rather than depersonalized words like one. Use warm words like friends and comrades. Speak or write directly to the listener as if he’s sitting right in front of you. Shorten your sentences. Be vigorous. Use clear language. Use crisp words.
STIMULATE COMMUNICATION IN OTHERS
Communication shouldn’t flow only from top to bottom. It should be taking place at all levels and in all directions.
Here are a few things you might consider for stimulating communication throughout the organization:
Ask a lot of questions and leave people time to answer the questions.
Ask people to come to staff meetings (which should be scheduled at regular intervals) with at least one major point that they think everyone should know.
Ask people to come to staff meetings with at least one question they would like to ask.
Encourage them to ask any questions that are on their minds.
Respond to questions by saying, “Good question. I’m glad you asked that.” There’s nothing that will shut down communication quicker than if you make people feel stupid for asking questions.
Ask people in both informal and formal meetings to “speak what is really on your mind.” When someone disagrees with the group, ensure that the person gets a fair hearing for his disagreement.
Be spontaneous. Encourage people to get together on the spur of the moment to work on problems. Impromptu informal meetings are some of the best communication vehicles.
Reduce oppressive, stiff formality. Make people feel comfortable. Loosen your top button and tie. Roll up your sleeves. Kick off your shoes.
When there are factions or tensions, don’t play “go-between.” Tell the factions to get together in the same room and discuss the problem themselves, rather than using you as a conduit. People in companies are often like kids in a family—they come running to mom or dad to complain, rather than dealing with a problem directly. Don’t encourage this. Encourage people to express their feelings as well as their thoughts. We all have strong feelings about things. When feelings are suppressed, real communication cannot take place. Feelings in business? Yes, absolutely. Business, after all, is done by people and people have feelings.
Don’t let one or two personalities dominate all discussion. Draw out the more reticent members of your team by asking them what their views are.
Thank people for raising key issues, even if those issues are uncomfortable.
Leadership Style Element 7: Ever Forward
We would like to emphasize one final element of effective leadership style: an “ever forward” mentality. Leaders of great companies are always moving forward—progressing—as individuals (personal growth) and they pass this ever forward psychology along to the company. They have a high energy level and never become complacent.
HARD WORK
There’s no getting around the need for hard work. It’s a given. It comes with the territory.
More is not necessarily better.
IMPROVE WITH EACH DAY
Never stop trying to become a more effective leader. You can always be better. There is always a higher standard. Never stop learning or developing your skills.
Pay attention to your weaknesses and shortcomings. Ask for brutal feedback on where you are weak and what you should work on. Ask for candid criticism of your leadership style from those who work with you and for you.
Also ask brutally objective outsiders to observe your leadership style and make comment. (This is something we have done for a number of CEOs, and they have found it to be immensely helpful; but it is also painful.) Put objective, honest outsiders on your board of directors.
KEEP THE ENERGY UP
Take care of yourself physically, emotionally, and spiritually. Get enough sleep. Stay healthy. Get some exercise. Have diversions. Read. Converse with interesting people. Expose yourself to new ideas. Spend time in solitary, renewing activities. Set new challenges for yourself. Do whatever is necessary to keep yourself vibrant, stimulated, growing, and alive as a human being.
Finally, one of the best ways to maintain a high energy level is to constantly change. Try new things, get involved with new projects, change the way you do things, experiment; do whatever it takes to keep things fresh.
OPTIMISM AND TENACITY
I Psychological research has shown that the most productive and happy people have a basically optimistic view of the future.
Rose-colored glasses are dangerous indeed. However, you cannot afford to doubt that the company has the ability to make itself and its own future better than it is today.
Optimism, however, is not enough; it must go hand in hand with tenacity and persistence.
KEEP THE COMPANY MOVING “EVER FORWARD”
One of the distinguishing characteristics of a great company is that it doesn’t stop trying to change, improve, and do new things. A great company never arrives, never believes that it is good enough. Greatness is not an end point. It’s a path—a long, arduous, torturous trail of continual development and improvement. A great company reaches one plateau and then seeks new challenges, new risks, new adventures, new standards. A great company celebrates its successes, savors them, enjoys them—but only as brief stopping points along a never completed journey. Ever forward. If one thing fails, try another. Fix. Try. Do. Adjust. Move. Act.
TOUCH THE SPIRIT
The essence of leadership, as we have mentioned before, is to catalyze a clear vision that is shared and acted on by the group. But there is one additional element: touching people’s spirit.
By spiritual we do not necessarily mean religious. We are speaking of the higher side of people; the side that brings a lump to our throats when the underdog prevails; the side that wants to see the good guys win; the side that wants the world to be a better place for our children; the side that compels us to return the extra change when a clerk has given us too much; the side that hopes we would not let our comrades down in battle; the side that causes us to feel outrage at cheating and unfairness; the side that pushes us late into the night to complete an arduous task simply because we gave our word; the side that jumps instinctively into an icy river to save a drowning victim; the side that makes us heroes.
If everyone was satisfied with themselves there would be no heroes…
Again, we return to our analogy of leader-as-teacher, and we ask you to think about the teachers who have changed your life. Chances are they helped you to see more in yourself than you had seen before. They tapped something inside you that sparked new perceptions of yourself, new expectations of yourself; your ideals for yourself rose to a new level.
Like such a teacher, a leader idealizes people and has resolute conviction that people can rise to this ideal. A leader grabs the spirit in people, pulling it forward and waking it up. A leader changes people’s perceptions of themselves, getting them to see themselves in the idealized way that he sees them. The leader conveys the message: “We can accomplish our big, hairy goals. I know we can do it, because I believe in you.”
Chapter 7 STRATEGY
Strategy is easy, but tactics—the day-to-day and month-to-month decisions required to manage a business—are hard. Arthur Rock
Overview of Strategy Strategy is simply the basic methodology you intend to apply to attain your company’s current mission. “This is how we will achieve our mission.”
Instead, it’s better to simply have a clear, thoughtful, and uncomplicated methodology for attaining your mission—a methodology that leaves room for individual initiative, opportunities, changing conditions, experimentation, and innovation.
Four Basic Principles of Setting Effective Strategy
Big bets, protect flanks, extend victories and Vision First.
The strategy must descend directly from your vision.
Remember, it’s impossible to set strategy unless you have a crystal clear idea of what you’re trying to do in the first place. Vision first, then strategy! The strategy must leverage off the strengths and unique capabilities of your company. Do what you’re good at. The strategy must be realistic. It must therefore take into account internal constraints and external factors. Confront reality, even if reality is unpleasant. Strategy should be set with the participation of those who are going to be on the line to make it happen.
The Process
Setting strategy involves the following basic steps:
First, review the vision of the company. If you haven’t clarified your vision, do.
Next, do an internal assessment of the company’s capabilities. This is analogous to examining capabilities and resources of the expedition team.
Third, do an external assessment of the environment, markets, competitors, and trends. This is analogous to studying pictures of the mountain, examining weather reports, assessing new trends in technology that might help you in your ascent, and paying attention to competitors who seek to reach the summit ahead of you.
Finally, taking the internal and external assessments into account, make key decisions about how you intend to go about achieving your current mission. This is analogous to mapping out the route you are going to take up the side of the mountain. Break the strategic decisions down into each of the key components of the business. We find the following categories work well:
Internal Assessment
There are three components of a good internal assessment: Strengths and weaknesses Resources Innovations and new ideas Diagram of Vision, Strategy, Tactics
The Essence of Strategy
Where to place our big bets? How to protect our flanks? How to extend our victories?
Carl von Clausewitz profoundly influenced the entire field of strategic thinking with his work On War. Clausewitz crystalized the thesis of concentrating force into a conflict’s center of gravity (where victories would have the greatest impact on military success and achievement of national purpose). “There is no higher and simpler law of strategy than that of keeping one’s forces concentrated,”
Every great company we studied made a few exceptionally good, highly concentrated big bets at pivotal points in their histories.
Any truly successful strategy involves making carefully calibrated big bets. You need empirical validation that the big bet fits with what you are passionate about, what you can be the best at, and what drives your economic engine (your Hedgehog Concept).
The best way to know for sure something will work on a large scale is to have proven it first on a small scale. Fire bullets, then cannonballs.
I’ve concluded that the primary answer is really quite simple—failure to apply productive paranoia, not just in the short term, but also with a fifteen-plus-year time frame. When executive teams visit my management lab in Boulder, I often ask them the following three questions: What significant changes in your world (both inside your company and in the external environment) are you highly confident will have happened by fifteen years from now? Which of those changes pose a significant or existential threat to your company? What do you need to begin doing now—with urgency—to march ahead of those changes?
It’s what you do before the storm comes that most determines how well you do when the storm comes.
We’ve found that one of the most costly strategic blunders is failing to make the most of victories, failing to fully realize the flywheel effect. Turning the flywheel doesn’t mean doing the same thing, mindlessly repeating what you’ve done before. It means exploiting, expanding, extending. It means evolving and creating.
NEVER FORGET: VISION FIRST
The three elements of strategy described above (big bets, protect flanks, and extend victories) can guide your strategic thinking. But never forget, sound strategy is impossible without clear vision.
Chapter 8 INNOVATION
. . all progress depends on the unreasonable man. George Bernard Shaw Man and Superman
To be an enduring, great company, we believe it must have the ability to innovate continually—to have a constant flow of new ideas, some of which are fully implemented. We say some are implemented (rather than all) because a great company will always have more good ideas than it can fund.
Six basic elements of what it takes to be an innovative company:
Receptivity to ideas from everywhere
“Being” the customer
Experimentation and mistakes
People being creative
Autonomy and decentralization
Rewards
Corporate Innovation Element 1: Receptivity to Ideas from Everywhere
But highly innovative companies are more receptive to ideas—and not only to their own ideas but to ideas from everywhere. Furthermore, they do something about the ideas.
There is no shortage of good ideas; there is only a lack of receptivity to ideas.
Chapter 9 TACTICAL EXCELLENCE
God is in the details. Ludwig Mies van der Rohe
This notion of paying attention to the actual tactical execution of your vision and strategy, of “tying your knots right” or “getting the words right,” is crucial to corporate greatness. You can have the most inspirational leader, the most profound vision, a brilliant strategy, and a thousand great ideas, but if you don’t execute well, you’ll never be great.
An Inc. magazine survey of its Inc. 500 (fastest growing private companies) showed that 88% of CEOs attributed their company’s success primarily to extraordinary execution of an idea versus only 12% who attributed success primarily to the idea itself.
But you always have to ask, “What’s being first worth?” If you’re not committed to tactical excellence, your first-mover advantage will evaporate. That’s what impressed me about Jim; he would never cut corners in the execution of his ideas.
Deadlines
Deadlines stimulate progress. But only if they are commitments. To hit a deadline means achieving the objective with absolutely A-level work, absolutely complete, absolutely on time, absolutely without complaint, absolutely. If you establish deadlines that everyone knows will slip, then you have no deadlines.
There’s an art to setting deadlines. Some leaders prefer to simply impose a deadline, whereas others prefer to ask for a proposed deadline. I use both approaches, depending on the circumstance, but my primary pattern is to ask for a proposed deadline and then navigate to a realistic date with zero-tolerance for missing (as I did with my contractor). But however you do it, the key is to ensure that people have no ambiguity about their deadlines, that they are committed to meeting them, and that you have a culture where missing deadlines is simply not an option. And that, in turn, means you need people who have the discipline to refuse to commit to deadlines that they cannot hit. If deadline slippage becomes routine, then deadlines do more harm than good. But if you have the right people who view their deadlines as serious commitments, then you can give people tremendous freedom to manage themselves.
A culture of discipline at its best is about freedom in a framework of values and responsibilities. It is not about disciplining people; it is about finding self-disciplined people who always fulfill their commitments. It is not about expecting mindless obedience to rules or submission to hierarchy; it is about having the right people who crave wide latitude to do their best work.
Never forget a key lesson from our research into what makes great companies tick. All companies have a culture, but few have a culture of discipline, and even fewer build a culture of discipline while also sustaining an ethic of entrepreneurship. When you blend these two complementary forces together—a culture of discipline with an ethic of entrepreneurship—you get a magical alchemy of superior performance and sustained results.
From Vision and Strategy to Tactics
Once you have your vision and strategy, it’s necessary to translate them into solid tactical execution. The first step is to make sure that all key people have a copy of the vision, strategy, and the current year’s strategic priorities in front of them at all times. They should be brought to every staff meeting. They should be referred to constantly. Reinforce, Reinforce, Reinforce
SMaC Mindset
“Specific, Methodical, and Consistent.”
SMaC is a mindset. It’s a way of thinking, a way of acting, a way of keeping your wits and executing in chaos, a way of focusing on the right details, a way of getting the right details right.
To be truly SMaC involves four basic elements:
Specific, replicable processes and mechanisms that create tremendous consistency
Checking and cross-checking systems to prevent catastrophic mistakes
Rigorous thinking to consider a wide range of contingencies and backups
Continuous evolution of SMaC based on understanding the why behind SMaC processes, understanding the why so that you can update and change the what—is the crucial element that distinguishes an advanced SMaC mindset
AARs, or “After-Action Reviews.”
The idea is to set aside time after every mission to discuss, review, and learn from what happened.
Every hour spent in a disciplined AAR pays off in ten hours saved down the road while contributing directly to the consistent tactical excellence that we expect of our system.
AAR Question 1: What replicable new learning did we gain from what went well?
AAR Question 2: What replicable new learning did we gain from what did not go well?
AAR Question 3: Drawing upon questions 1 and 2, what changes can we make to our SMaC recipe to systematically improve our consistent tactical excellence?
Creating an Environment Where People Attain Consistent Tactical Excellence
The bulk of the causes of low quality and low productivity belong to the system [created by management] and thus lie beyond the power of the workforce. W. Edwards Deming
This leads us to a central tenet of tactical excellence: if your people aren’t executing well, it’s not their fault. It’s yours.
Tactical excellence isn’t an end point; it’s a path. It’s the path of continual improvement.
Leaders of great companies have faith in the ability of ordinary people to perform extraordinarily well. They know that there are very few lazy, uncaring people and that, given the right environment, most people will deliver outstanding performance. Poor performance is usually the result of poor hiring decisions, poor training, lack of clear expectations, poor leadership, inadequate appreciation, poor job design, or some other failure of the company, not the employee.
People execute well if they’re clear on what they need to do. How can people possibly do well if they don’t have a clear idea of what “doing well” means—if they don’t have clear goals, benchmarks, and expectations? People execute well if they have the right skills for the job. The right skills come from talents, temperament, and proper training. People execute well if they’re given freedom and support. No one does a good job with people looking over his shoulder; when people are treated like children, they’ll lower themselves to those expectations. Also, people need the tools and support to do their job well. To use an extreme illustration, imagine how difficult it would be for Federal Express employees to make on-time delivery without reliable trucks. People execute well if they’re appreciated for their efforts. All people want their efforts to be appreciated. We’ve consciously chosen the term appreciated rather than rewarded because it more accurately captures that excellent performers value respect and appreciation as much as, and often even more than, money. People execute well if they see the importance of their work.
People see the importance of their work—and thereby tend to be committed to doing a good job—when they know other people are depending on them.
The study asked the question: what motivates people to heroic behavior? The overwhelming answer was not glory, or country, or patriotism, or anything like that. It was primarily a person’s belief that comrades were depending on him, and he couldn’t let them down.
Are you creating an environment where people know others are depending on you?
If you can create an atmosphere where people are dependent on each other—where people think, “I can’t let these people down”—you’ll get extraordinary performance.
A Six-Part Process Creating the environment where people throughout achieve consistent tactical excellence involves a six-part, never-ending process. Hiring Inculturating Training Goal-setting Measuring Appreciating.
1. Hiring It all starts with hiring decisions.
Good people attract good people, who, in turn, attract more good people, and so on. Hiring good people requires a substantial investment of time. What is a good choice?
Good shouldn’t be defined primarily in terms of education, skills, or specific prior experience (although these will certainly factor into the choice). The primary assessment of good should be, “Does this person fit with our values? Is this person willing to buy into what we’re all about?
Do reference checks. THIS IS IMPORTANT.
2. Inculturating
By “inculturating” we mean instilling and reinforcing the vision, especially the core values. You can’t just assume that people fully understand the precepts of your organization when they walk in the door. You need to educate them. And you need to educate them early.
Inculturation should begin in the hiring process. Give applicants materials that describe your philosophy; have company representatives talk about the vision during job interviews.
Give a “starter kit” of written materials to every new hire, and make it clear he or she ought to read it. Obviously, this should include your vision statement, with special emphasis on the core values.
Write! Write! Write! Never underestimate the power of the written word. Few company leaders make good use of the most powerful human tool—the pen.
It’s a good idea to personally write a letter or article that has a touch of the company’s philosophy a few times per year.
Use writing as a way to continually reinforce the importance of people’s work. Tell stories of how people came through for others who were depending on them.
Write a history of the company that every new employee will receive upon joining.
3. Training
Even though training programs should have a good dose of inculturation, people also need specific skills training.
Keep in mind that training isn’t a perk; it’s a tremendous business advantage.
But whatever you do, don’t wait too long. Many smaller companies complain that they don’t have the resources to do training. We ask them: how can you possibly expect to develop into a great company without it?
4. Goal-Setting
Stop. Think for a minute. Does every employee in your company have specific goals? Did he take the primary role in creating them? Does he believe they’re achievable? Does he want to achieve them? Has he translated these goals into quarterly goals, weekly tasks, and daily activities? Do the goals dovetail with the company’s vision and strategy? Do the goals fit with his personal ambitions in life?
DEI Corporation, uses just such a quarterly goal-setting process. He starts with the long-term company vision and strategy, then breaks that into a set of annual goals. Then he works with his people to break those into their personal annual goals. Then he asks each of them to draw up a list of four or five quarterly goals for each quarter. They discuss them, negotiate, and reach an agreement, which they both sign.
Ideally, the process should merge the individual’s personal vision and the company’s vision, and then cascade down to quarterly goals, weekly tasks, and daily activities.
Measure
Try an experiment with yourself. Identify a household chore that you really hate to do—taking out the garbage, mowing the lawn, or doing the dishes. Measure yourself on your next chore day. Suppose it takes you 14 minutes to take out the garbage. Now, set a benchmark—say, 10 minutes with zero mistakes. Measure yourself and track your performance. Two things will probably happen. First, you’ll probably figure out a way to get better and better. Second, it’ll be more fun, like a game. The same applies to tactical execution. Figure out a way to define tactical excellence, measure it, track it, post it, learn from it, and use it as a way to continually improve. Make it fun. Make it the great game of business.
Informal appreciation.
Informal appreciation should be continuous and timely. People should be shown that they’re appreciated throughout the year, not just at review time or at the annual awards ceremony.
Awards and Recognition.
Never underestimate the power of non-financial awards and recognition. Keep in mind that the Herzberg study showed recognition as the second most important factor leading to extreme job satisfaction (behind achievement). Furthermore, what better way to highlight the importance of someone’s work than to recognize it publicly, or to give an award?
Financial. Use financial rewards as a way to further reinforce your appreciation for someone’s efforts. Make it possible for managers at all levels to grant small bonuses or other financial awards throughout the year.
Rigorous Standards
Trust is only one side of the coin. The other side is rigorous standards. There are two parts to this: values standards and performance standards.
Values standards are the most rigid. If someone disregards the core values of your company, they should be asked to leave. At first you might see if they just don’t understand the values. However, if they understand and then disregard any of your sacred tenets, then they don’t belong.
Performance standards should be less rigid, but nonetheless very high. Good performers lose respect for companies that tolerate poor performance.
OPUR (pronounced OH-purr) stands for One Person Ultimately Responsible.
For every critical task or objective, there should be a clear OPUR. When you ask, “Who’s the OPUR on this?” there should be a clear, unambiguous response from someone, “I’m the OPUR.” The key to maintaining an OPUR culture is that every individual needs to have an OPUR mentality and clear OPUR tasks. But equally, to make the OPUR idea work at its best also requires having a culture in which people willingly step up to “shovel the walks” of their neighbors.
The Final “Secret”—Respect
Therein lies the secret, if there is one. Great companies are built on a foundation of respect. They respect their customers, they respect themselves, they respect their relationships. Most important, they respect their people— people at all levels, and from all backgrounds.
They respect their people, and therefore they trust them. They respect their people, and therefore they’re open and honest with them. They respect their people, and therefore they give them freedom to act and make decisions. They respect their people, and therefore believe in their inherent creativity, intelligence, and ability to solve problems. They respect their people, and therefore expect high performance. They set high standards and stiff challenges because they believe their people can meet the standard and rise to the challenge. Ultimately, employees in outstanding companies attain consistent tactical excellence because someone believes they can.