“We were surprised, shocked really, to discover the type of leadership required for turning a good company into a great one. Compared to high-profile leaders with big personalities who make headlines and become celebrities, the good-to-great leaders seem to have come from Mars. Self-effacing, quiet, reserved, even shy – these leaders are a paradoxical blend of personal humility and professional will. They are more like Lincoln and Socrates than Patton or Caesar.” – Level 5 Leadership, Chapter 1. Good Is the Enemy of Great, GOOD TO GREAT (Jim Collins, 2001), p13
“We expected that good-to-great leaders would begin by setting a new vision and strategy. We found instead that they first got the right people on the bus, the wrong people off the bus, and the right people in the right seats – and then they figured out where to drive it. The old adage “People are your most important asset” turns out to be wrong. People are not your most important asset. The right people are.” – First Who … Then What, Chapter 1. Good Is the Enemy of Great, GOOD TO GREAT (Jim Collins, 2001), p13
“Level 5 leaders are a study in duality: modest and willful, humble and fearless. To quickly grasp this concept, think of United States President Abraham Lincoln (one of the few Level 5 presidents in United States history), who never let his ego get in the way of his primary ambition for the larger cause of an enduring great nation. Yet those who mistook Mr. Lincoln’s personal modesty, shy nature, and awkward manner as signs of weakness found themselves terribly mistaken, to the scale of 250,000 Confederate and 360,000 Union lives, including Lincoln’s own.” – Humility + Will = Level 5, Chapter 2. Level 5 Leadership, GOOD TO GREAT (Jim Collins, 2001), p22
A Management Case That Demonstrates the Importance of People and Their Spirit!
To start, let’s imagine a case where you were brought on board as CEO to transform a company that is either in a life-or-death state or in a long-term mediocrity.
You are given a power to make critical decisions yet need to clearly show that the company is moving after all the stagnation! Where would you look at? What would you work on first?
In times of transition, I believe a leader has roughly three areas to look at: What, Why and How.
What or Why?
In his viral Ted talk(2014), Simon Sinek shared his insight on the importance of ‘Why’ over How and What through the concept of the Golden Circle. Steve Jobs, for example, was a leader who embodied this philosophy by bringing out the purpose (‘Why’) at the forefront.
In a strategic viewpoint, Cynthia Montgomery in The Strategist(2013) also discusses the importance of ‘Purpose'(‘Why’) of a company that should be placed at the center of the Strategy Wheel that consequently enables ‘Hows’ to evolve around it. Again, she shares a case on how Apple was reinvented successfully in this framework. (Refer to my in-depth book review on The Strategist)
Most of leaders in times of transition would firstly work on either What or Why such as setting up a vision or strategy. And I believe we absolutely agree on this as if a common sense. But is it everything? Are we sure we are not missing anything?
The answer seems that we are missing something.
It’s Neither What Nor Why. Then What Is It?
There is a surprising yet stirring revelation in Good to Great that convinces us that we have another important element to consider even prior to ‘Why’ or ‘What’ questions. And I believe it’s worth our attention not only for building a great business but also for our own self growth, because the subject is also closely related with our stories as a human being.
Certain subjects never fail to captivate and inspire us, especially when they are about invincible qualities of a human being. Yes, the missing element is about this – us, people, ‘Who.’
As the number of my articles that covered Good to Great on my blog proves, I absolutely appreciated every revelation hence every insight the book provides. However, I especially fell for the ‘Who’ element because the fierce ‘spirit’ people possessed was echoing throughout the book.
It’s Who: People and Their Spirit
There’s a confession made in the early part of the book. In his quest for finding the timeless, universal answers that can be applied by any organization to become a great company, Jim Collins initially considered people factor – especially leadership – out of equation.
He believed every company, successful or great, has great people so this ‘Who’ element wouldn’t cut as a differentiating factor when it comes to a discussion of great companies.
Not only that, Collins also believed the leaders of good-to-great companies would begin their quest by setting a new vision and strategy first – i.e. ‘What’ and ‘Why.’ After then, he believed leaders would work on getting people who are committed and aligned behind that new direction.
The findings, as you may have guessed, turned out differently. Actually, they were the opposite. This surprising revelation that shocked Collins made his initial rejection ultimately even more compelling.
But this revelation is not something only Collins and his research team found fascinating. We, readers, also discover it equally engaging.
In times of immense pressure and difficulty, what would matter most for a company? What should be the first step? Good to Great cases reveal that two most important factors in building a great company were about people, ‘Who’: first, a type of leaders, and second, the principle of choosing the right people to be on board over anything else – i.e. ‘Why’ or ‘What’ came only after ‘Who’ question was settled.
Who were the leaders that made this decision – Who before Why or What -, which seems out of convention when the company is failing right in front of their eyes? I found we have much to learn from the answers to these subjects.
I will try to discuss on the answer of the first question of ‘Who were the leaders?’ by defining a specific type of leadership called ‘Level 5 Leader,’ followed by ‘Who First then What principle.’ Then I will close the article with what these findings imply for our own self development.
Who Were the Leaders?
1. Level 5 Leaders: Leadership with Rare yet Paradoxical Qualities
Surprisingly, in the discussion of good-to-great companies, the type of leadership we know loses its crown status. Those larger-than-life celebrity CEOs don’t put their names on the Level 5 leader ranks.
As the new type of leadership from in good-to-great companies is a surprising revelation, so is this revelation about our conventional belief on larger-than-life celebrity CEOs.
Collins asserts that the belief that we need larger-than-life saviors with big personalities to transform companies proves invalid for two reasons by the empirical proofs he found.
First, ‘A Genius with Thousand Helpers’ model has a weakness in it. The comparison companies frequently followed the “genius with a thousand helpers” model – a genius leader who sets a vision and then enlists a crew of highly capable “helpers” to make the vision happen. This model fails when the genius departs.
Their whole business model was built in such a way a crew of highly capable helpers serve a charismatic leader at the top to make the vision happen, so in the absence of such big personalities, sudden or expected, the model fails to sustain their business.
Second, ‘No Successor.’ The larger-than-life celebrity CEOs are put on a pedestal and often fail to build a right successor.
These two aspects were frequently found in most of the comparison companies who failed to build a sustaining business even if they built a great business.
Then who are ‘Level 5 leaders’ that successfully transformed an ordinary and mediocre business into a great one with strong foundations that even lasted for decades? What are their special traits?
Collins’s description about Darwin Smith – who became chief executive of Kimberly-Clark in 1971 whose stock had fallen 36 percent behind the general market over the previous twenty years. 1 – correctly sums up the essence of Level 5 leaders’ qualities.
“Darwin Smith stands as a classic example of what we came to call a Level 5 leader – an individual who blends extreme personal humility with intense professional will. We found leaders of this type at the helm of every good-to-great company during the transition era. Like Smith, they were self-effacing individuals who display the fierce resolve to do whatever needed to be done to make the company great.” – Not What We Expected, Chapter 2. Level 5 Leadership, GOOD TO GREAT (Jim Collins, 2001), p21
First, they possessed extreme personal humility that made them look like an ordinary person.
Second, yet, despite their personal humility, they were extremely ambitious for the company with unwavering resolve to do whatever needed to be done to make the company great. Level 5 leaders are fanatically driven, infected with an incurable need to produce results. 2
Third, this paradoxical blend of personal traits worked as a powerful driving force to build a sustaining great business that endures for decades. This was just the opposite of comparison companies whose business model failed in the absence of their larger than life and often ego-centric leader who didn’t leave a successor.
What to note is, it’s not that Level 5 leaders have no ego or self-interest – they are incredibly ambitious – but their ambition was first and foremost for the institution, not themselves. 3 This is what sets them apart. Their qualities made this new leadership transcend the conventional type of leadership (which is Level 4 leadership).
As Lincoln was a leader who never let his ego get in the way of his primary ambition for the larger cause of an enduring great nation, they didn’t let their ego stand in the way for the larger cause of an enduring great company.
There are a few insights for us to cherish and lessons to learn.
First, in my opinion, this trait of ‘compelling modesty’ is the most significant character trait of Level 5 leaders. Even if this quality can be mistaken as weakness, it’s not. As I will elaborate in a separate article on Principles by Ray Dalio, it’s a quality only people with real power can possess.
Second, partly due to their mild-manners and quiet, reserved nature, they looked seemingly ordinary people quietly producing extraordinary results. As I see it, however, they are not ordinary people.
They just didn’t make a room for themselves to scatter themselves for seemingly worldly fame. Instead, they poured in more energy to build a greatness that lasts! I see their ‘human will’ working here in devoting themselves to something larger than themselves – building a greatness that lasts for generations. I consider this is a matter of decision, than nature. This is an ultimate modesty that originates from a decision and free will.
Collins states that whereas celebrity CEOs often envisage a large purpose for themselves, Level 5 leaders envisioned larger purpose for their companies. It seems, by their nature, there’s no room for putting themselves at the center of attention and glory. They are people who cannot imagine to live any other way.
Lastly, it is their humble nature again that made them apportion credit to factors outside themselves when things go well and if they cannot find a specific person or event to give credit to, they credit good luck. At the same time, they look in the mirror to apportion responsibility never blaming bad luck when things go poorly. 4
Even more important, having their ambition first and foremost for the company and concern for its success rather than for one’s own riches and personal renown, these Level 5 leaders wanted to see the company even more successful in the next generation, comfortable with the idea that most people won’t even know that the roots of that success trace back to their efforts.
What do we learn from these level 5 leaders? What quality would we like to emulate to build ourselves as a great leader or a person? I bet you got your own answer already.
2. Who First Then What: The Importance of the Right People
And these leaders absolutely had a different idea in starting their great journey to build a great company. And I found this especially insightful. For them, the first thing to tackle was to make a ‘people decision’ more than anything else.
The case of Fannie Mae typically illustrates this principle.
When David Maxwell became CEO of Fannie Mae in 1981, the company was losing $1 million every single business day with $56 billion of loans underwater. 5
His sheer discipline shows how he valued people decisions in the difficult and pressing situation. He held off on developing a strategy until he got the right people in place when immense pressure required him to act or do something dramatic to seize the wheel and start driving.
His first action was to interview all the officers. His principle was this: ‘Only A players who can produce A+ results will be offered a seat, and if you weren’t up for it, you had better get off the bus, and get off now.’ Eventually, seats were filled with only the best, smartest, and hardest-working executives in the entire world of finance. And the same standard applied up and down the Fannie Mae ranks as managers at every level increased the caliber of their teams and put immense peer pressure upon each other. 6
Why have they worked on people first?
These Level 5 leaders understood that the ultimate throttle on growth for any great company is not markets, or technology, or competition, or products. It is one thing above all others: the ability to get and keep enough of the “right people.” 7
Their sheer determination, in line with this principle, even enabled to make a very difficult decision: Getting the wrong people off the bus. Why was this equally important?
I believe the reason is ‘discipline.’ Only the right people with the right character traits would build and fit into a rigorous culture that was essentially required for building a great company together. A strong leader in his/her own right who builds the best in his/her arena, yet who agree once the decision is made, can make a great company.
“You might be wondering, “What’s the difference between a Level 5 executive team member and just being a good soldier?” A level 5 executive team member does not blindly acquiesce to authority and is a strong leader in her own right, so driven and talented that she builds her arena into one of the very best in the world. Yet each team member must also have the ability to meld that strength into doing whatever it takes to make the company great.” – Rigorous, Not Ruthless, Chapter 3. First Who … Then What, GOOD TO GREAT (Jim Collins, 2001), p60
These are qualities definitely worth our attention!
Those quiet Level 5 leaders seemed to have strong convictions about themselves and the future of the company they will build together with the right people.
I believe they had a far-sighted vision that led to a lasting success for two reasons.
First, they had a belief that the right people at the right place create great companies. They had a belief that the right peoples with shared value and mission have synergy in itself. Therefore, for them, a leader’s role is put them in the driver’s seat not himself/herself.
Second, they had a belief that, in times of transition, the starting point was the ‘shared spirit of the disciplined people.’ By letting them engage and work together to find the answers, from there, the decision of where and how to go would be made. From there, the failing business would soar as a great company not just a good company.
“Wells Fargo and Fannie Mae both illustrate the idea that “who” questions come before “what” questions – before vision, before strategy, before tactics, before organizational structure, before technology. Dick Cooley(Wells Fargo) and David Maxwell(Fannie Mae) both exemplified a classic Level 5 style when they said, “I don’t know where we should take this company, but I do know that if I start with the right people, ask them the right questions, and engage them in vigorous debate, we will find a way to make this company great.” – Chapter 3. First Who … Then What, GOOD TO GREAT (Jim Collins, 2001), p45
Closing: Can We Become a Level 5 Leader? Or a Level 5 Person?
Now, it’s our turn to work on the insights we’ve gained. Are Level 5 leaders from Mars? Are level 5 executive team members born in such a way?
The answer is ‘of course not.’
As Collins mentioned, the Level 5 leaders were seemingly ordinary people quietly producing extraordinary results. The findings showed, these leaders took on their job either internally by promotion or by family lineage. These people were not larger-than-life figures but ordinary people who quietly yet ferociously worked for a larger purpose.
That’s certainly a motivating factor. Is it difficult to find them? Maybe you are one of them already? You know the answer and Jim Collins also shares the viewpoint:
“I believe – although I cannot prove – that potential Level 5 leaders are highly prevalent in our society. The problem is not, in my estimation, a dearth of potential in our society. They exist all around us, if we just know what to look for. And what is that? Look for situations where extraordinary results exist but where no individual steps forth to claim excess credit. You will likely find a potential Level 5 leader at work.” – Cultivating Level 5 Leadership, Chapter 2. Level 5 Leadership, GOOD TO GREAT (Jim Collins, 2001), p37
Can we cultivate Level 5 leadership?
“My hypothesis is that there are two categories of people: those who do not have the seed of Level 5 and those who do. … The second category of people – and I suspect the larger group – consists of those who have the potential to evolve to Level 5; the capability resides within them, perhaps buried or ignored, but there nonetheless. And under the right circumstances – self-reflection, conscious personal development, a mentor, a great teacher, loving parents, a significant life experience, a Level 5 boss, or any number of other factors – they begin to develop.” – Cultivating Level 5 Leadership, Chapter 2. Level 5 Leadership, GOOD TO GREAT (Jim Collins, 2001), p37
What’s evident from his statement is it’s a matter of ‘character traits’: compelling modesty yet fanatically driven to produce sustained results.
Below illustrations help us understand why character traits matter and how executive leaders valued them:
“One good-to-great executive said that his best hiring decisions often came from people with no industry or business experience. In one case, he hired a manager who’d been captured twice during the Second World War and escaped both times. “I thought that anyone who could do that shouldn’t have trouble with business.”” – It’s Who You Pay, Not How You Pay Them, Chapter 3. First Who … Then What, GOOD TO GREAT (Jim Collins, 2001), p52
“Nucor illustrates a key point. In determining “the right people,” the good-to-great companies placed greater weight on character attributes than on specific educational background, practical skills, specialized knowledge, or work experience. Not that specific knowledge or skills are unimportant, but they viewed these traits as more teachable (or at least learnable), whereas they believed dimensions like character, work ethic, basic intelligence, dedication to fulfilling commitments, and values are more ingrained.” – It’s Who You Pay, Not How You Pay Them, Chapter 3. First Who … Then What, GOOD TO GREAT (Jim Collins, 2001), p51
This insight is in fact shared by many great business leaders such as Ray Dalio and Jim Rogers for example. (On this, I will share in a separate article.)
It’s our turn to look into ourselves and to decide what quality to work on to become a better version of ourselves. For, our higher version is a starting point for every greatness: a great leader, a great business and a great life.
Jay
Quotes:
- Good to Great (p17)
- Ibid (p30)
- Ibid (p21)
- Ibid (p35)
- Ibid (p26)
- Ibid (p45)
- Ibid (p54)
Leading by Reading 