“Good To Great” launch120, Inc. Debra Chanda firstname.lastname@example.org
Flywheel Buildup…Disciplined People Disciplined Thought Disciplined Action „You can accomplish anything in life, provided that you do not mind who gets the credit,‟ Harry S. Truman
Level 5 Leadership Case Study • Kimberly Clark Example • Stodgy Old Paper Company • Stock fallen 36 percent behind general market in last 20 years • Darwin Smith, CEO, stunning transformation: turning KC into the leading paper-based consumers products company in the world • Stock Returns 4-1 • Beat Rivals, Scott Paper and Procter and Gamble • Outperformed Hewlett Packard, Coca-Cola, 3M.
How Did This Happen?• Decided that traditional Core Business—Coated paper was doomed (economics bad, competition weak)• Announced Decisions to sell the Mills• Throw all proceeds into the consumer business, investing in brands like Huggies and Kleenex• The business media called the move stupid and downgraded the stock• Smith never wavered• 25 years later Kimberly Clark owned Scott Paper and beat P & G in 6 out of 8 product categories.
How Did This Happen?Through Level 5 Leadership Level 5 Executive Builds enduring greatness through a paradoxical blend of Level 5 Personal humility and professional will. Effective Leader Level 4 Catalyzes commitment to and vigorous pursuit of a clear and Compelling vision, stimulating higher performance standards. Competent Manager Level 3 Organizes people and resources toward the effective and Efficient pursuit of predetermined objectives Contributing Team Member Level 2 Contributes individual capabilities to the achievement of Group objectives and works effectively with others in a group Highly Capable Individual Level 1 Makes productive contributions through talent, knowledge, Skills, and good work habits.
Level 5 Leaders• Channel their ego needs away from themselves into the larger goal of building a great company• Their ambition is first and foremost for the institution, not themselves• A Study in Duality: modest and willful, humble and fearless• Example of Colman Mockler, CEO of Gillette from 1975 to 1991• Faced three attacks (hostile takeover bids from Revlon, Coniston Partner—investment group)• Had Gillette been flipped to Perelman, shareowners would have reaped an instantaneous 44 percent gain on their stock• Colman did not capitulate, choosing instead to fight for the future greatness of Gillette• Bet on technologically advanced systems, later known as the Sensor and Mach3. They felt that the future profits and share price in these secret development plans outweighed the short term take over offers• If flipped, shareholders and Mockler would have come out 3 times worse.
The Two Sides of Level 5 Leadership Professional Will Personal Humility• Creates superb results, a clear • Demonstrates a compelling catalyst in the transition from modesty, shunning public good to great. adulation.• Demonstrates an unwavering • Acts with quiet, calm resolve to do what must be determination; relies principally done to produce best long term on inspired standards, not results. inspiring charisma, to motivate.• Sets the standards of building • Channels ambition into the an enduring great company; Will company, not the self; sets up settle for nothing less. successors for even greater• Looks in the mirror, not out the success in the next generation. window to apportion • Looks out the window, not in the responsibility for poor mirror, to apportion credit for the results, never blaming other success of the company – to people, external factors, or bad other people, external luck. factors, and good luck.
Level 5+ A “Genius with a Management Team Thousand Helpers” Level 5 Leader Level 4 Leader First Who First WhatGet the right people on the bus. Set a vision for where to drive the bus.Build a superior executive team. Develop a road map for driving the bus. Then What Then WhoOnce you have the right people in Enlist a crew of highly capable “helpers”Place, figure out the best path to To make the vision happen.Greatness.
Three Circles of theHedgehog Concept What are you deeply Passionate about What you can What drives be best in the your world at Economic Engine
What is the Hedgehog?• Simple crystalline concept that flows from deep understanding about the intersection of the preceding three circles.• Hedgehogs see what is essential and ignores the rest.
Economic DenominatorThis table shows the economic denominator insight attained by the good-to-greatcompanies during the pivotal transition years. Company Key Insight Shift from profit per product line to Abbott: per employee profit per employee fit with the idea of contributing to cost-effective health care. Shift from profit per single store to Circuit City: per geographic profit per region reflected local region economies of scale. Fannie Mae: per mortgage Shift from profit per mortgage to profit per mortgage risk level risk level reflected that managing interest risk reduces dependence on the direction of interest rates. Gillette: per customer Shift from profit per division to profit per customer reflected the economic power of repeatable purchases times high profit per purchase.
Economic Denominator (cont.) Company Key InsightKimberly-Clark: per Shift from profit per fixed asset (the mills)to profit per consumer brand; wouldconsumer brand be less cyclical and more profitableKroger: per local population Shift from profit per store to profit per local population reflected that local market share drove grocery economics.Nucor: per ton of finished steel Shift from profit per division to profit per ton of finished steel reflected unique blend of high-productivity mixed with mini-mill technology.Philip Morris: Per global Shift from profit per sales region to profit per global brand reflected thebrand category understanding the the key to greatness lay in brands that have global power.Walgreens: per customer visit Shift from profit per store to profit per customer visit reflected a symbiotic relationship between convenient (and expensive) store sites and sustainable economics.
Preserve the core, Stimulate ProgressPreserve PreserveCore values Passion for creativityCore purpose Fanatic attention to detail Abhorrence of cynicism The “Disney Magic” Change 1920s: Cartoons Change 1930s:Full-length features Cultural and Operating Practices 1950s:TV, MMC Specific goals and Strategies 1960s:Theme Parks 1980s:International 1990s:Cruise Line Preserve the Core/Stimulate Progress at Walt Disney Company, 1920s – 1990s
Summary• Every good-to-great company had Level 5 leadership during the pivotal transition years• Level 5 leaders set up their successors for even greater success in the next generation, whereas egocentric Level 4 leaders often set up their successors for failure• Level 5 leaders display a workmanlike diligence—more plow horse than show horse• Good-to-great leaders began the transformation by getting the right people on the bus (the wrong people off) and then figured out where to drive it• Good-to-great leaders were rigorous, not ruthless, in people decisions. They did not rely on layoffs and restructuring as a primary strategy for improving performance
Summary• Good-to-great leaders began by getting the right people on the bus and the wrong people off• Good-to-great leaders were rigorous, not ruthless, in people decisions. They did not rely on layoffs and restructuring as a primary strategy for improving performance• Good-to-great management teams consist of people who debate vigorously in search of the best answers, yet who unify behind decisions, regardless of parochial interest• Understand what you can be the best in the world at, and equally important what it cannot be the best at• Good-to great companies set their goals and strategies on understanding not bravado• Short term pressures of Wall Street were not inconsistent with this model. The key is in managing them.
“There is no worse mistake in public leadershipthan to hold out false hopes soon to be sweptaway.” Winston Churchill