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    CFM 2 Sem Unit 5

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    Good To Great (Unit 5) 207 LET ——— ET Unit 5 Good To Great a eee 5 GOOD IS THE ENEMY OF GRE Jim Collins and his team members worked on a project which indicates that why some companies were outstanding, but the companies depicted in the project were led by leaders who took the company's path to achieving heights. ‘These organisations were meant for various extraordinary things as their leaders chased success with dogged determination. Thus, Collins and his team member were tried to explore the reasons that is why the companies were good not great. Collins and his team select those companies that had achieved notable results in the last fifteen years. For example, Walgreens which is an average company over forty years had suddenly started climbing and beaten big companies such as Intel, General Electric and even NASDAQ. Collins analysed data from various companies such as ‘Abbott, Circuit City, Walgreens, Kroger and several other companies that gave other corporations a run for their money. ‘The leadership, strategies, technology and other details of the companies were examined. Moreover, the author and his team interviewed numerous people who held high position in some organisations and prepare a list of those people. Many variables including the remuneration of the CEO, mergers, innovation, the executives’ activities, etc. are the factors which isolate the great organisations from the incredible, However, three components such as disciplined activity, disciplined individuals and disciplined thoughts were most important in determining an organisations capability for achieving success. 5.1.1. Undaunted Curiosity Curiosity is the thing which motivates author to conduct such type of research. There is nothing more interesting than picking a question and then discovering the answer of this question. This research is conducted under the following phases: Scanned with CamScanner 208 MBA Second Semester (Contemporary Frameworks in Management) SPPU 5.1.2. _ Phase 1: The Search After finding a question author began to finding out the answer of this question by assembling a team of researchers. The first undertaking of team was to discover those organisations which demonstrated the good-to-great arrangement. Mr. Collin and his team began a six-month “death march of financial analysis” for the purpose of looking for those companies | which showed the various patterns such as, fifteen-year cumulative Stock returns to at or below the common stock market, a transition point and cumulative returns for at least three markets in the next fifteen years. Good-To-Great Cases Company Results from Transition Point to1S | T Year'toT Years Beyond Tranition Point* Year +15 Abbott 3.98 times the market 1974-1989 Circuit City 18.50 times the market 1982-1997 Fannie Mae 7.56 times the market 1984-1999 Gillette 7.39 times the market 1980-1995 Kimberly-Clark 3.42 times the market 1972-1987 Kroger 4.17 times the market 1973-1988 Nucor 5.16 times the market 1975-1990 Philip Morris 7.06 times the market 1964-1979 Pitney Bowes 7.16 times the market 1973-1988: Walgreens 7.34 times the market 1975-1990 Wells Fargo 3.99 times the market 1983-1998, “Ratio of cumulative stock Teturns relative to the general stock market, Source: Good to Great by Jim Collins 5.1.3. Phase 2: Comparedito What? This step is the most important phase of the entire x ‘esearch. In this step a set of comparison companies are selected and then it is compared with the good-to-great, companies. In this Tesearch, it is not important to know similarities between comparison companies and good-to-great companies whether; the most important thing is to know the differences between these companies Scanned with CamScanner Good To Great (Unit 5) 209 Author and his team selected two set of companies. The first is, “direct comparison companies”. These are the companies which were in the same industry because the good-to-great companies provide equal opportunities and resources at the time of transition. The second is “continuous comparisons". These are the set of companies that made short-lived innings of good to great, but failed to maintain the trajectory to for addressing the sustainability. This gave a set of twenty eight companies in which eleven companies are good-to-great companies, eleven direct comparison companies and six unsustained companies. The Entrire Study Set Good-to-Great Companies | Direct Comparisons Abbott | Upjohn Circuit City | Silo Fannie Mae | Great Western Gillette | Warner-Lambert Kimberly-Clark | Scott Paper Kroger | A&P. Nucor | Bethlehem Steel Philip Morris | R.J. Reynolds Pitney Bowes | Addressograph Walgreens | Eckerd Wells Fargo | Bank of America Unsustained Comparisons Burroughs Chrysler Harris Hasbro Rubbermaid Teledyne Source: Good to Great by Jim Collins t f | 5.1.4. Phase 3: Inside the Black Box In this phase, the author and his team turned their attention and conducted a deep analysis of every case. They collect almost fifty years articles of these twenty eight companies. They coded all these materials into classes such as, system, innovation, initiative, etc. Scanned with CamScanner 20 MBA Second Semester (Contemporary Frameworks in Management) sppy Then they interviewed the key employees of good-to reat companies. They also began a wide range of quantitative anq qualitative research on everything from acquisitions to executive compensation, from business strategy to corporate culture, from layoffs to leadership styles and from financial ratios to management businesses. They think about their research effort which is similar to looking inside a black box. Every step of the research was like installing another light bulb to throw light on the internal working of the good- to-great companies. Great Results Good Results Figure 5.1 Source: Good to Great by Jim Collins 5.1.5. Phase 4: Chaos to Concept The author have tried to present a basic method of introducing what was required to go from all the debates, analysis and examinations. The best answer which author can give was that, it was a iterative process of looping back and forth, developing ideas and testing them against data, modifying ideas, building a framework, making it load of evidence., watching it break under and rebuild it again. This process was repedted again and again until everything was aligned together. Author believed that, every individual have one of two strengths in his life. According to author, his ability is to take a lump of unstructured information, see patterns, and draw out the order to move from clutter to concept. Transformation is a process of build-up. It breakdown into three categories such as, disciplined thought, disciplined action and disciplined people. In these three stages, there are two key concepts which are explained below. Thus, wrapping around this entire structure is a concept we call it a8 flywheel, which captures the gesture of the whole process from 00d to great. Scanned with CamScanner Good To Great (Unit 5) 21 5.1.6. | Phase 4: Chaos to Concept ae Breakthrough! Buildup... Level First Who... Confront The Hedgehog Culture of Technology Leadership Then What Brutal Facts Concept Discipline Accelerators Diséiplined People “Disciplined Thought Disciplined Action Flywheel Figure 5.2 Source: Good to Great by Jim Collins Level 5 Leadership: The author was surprised and shocked to discover the type of leadership. This is required for turning a good company into a great one. Thus, in compare to the high-profile politicians with big personalities, who make headlines and become celebrities, the best leaders come to Mars. On the other hand, confident, calm, reserved, even shy are the qualities of those leaders who have contradictory mixes of personal humility and professional will. Face the Brutal Facts (Yet Never Lose Faith): Author learned that a former prisoner of war had more to teach us about path of greatness rather than most books on corporate strategy. Every good-to-great company adopted a Stockhel Paradox. Itexplains that people must maintain unwavering confidence that they will succeeded despite the difficulties prevail in the end and at the same time they are ready to face the cruelest facts of his current Teality, The Hedgehog Concept (Simplicity inside the Three Circles): To 80 from good to great one, has to cross the curse of competence. Just ‘ause something is the main occupation of the people and he have Scanned with CamScanner 212 MBA Second Semester (Contemporary Frameworks in Management) SPPU been doing it for years or maybe even decades, does not necessarily mean that he/she can be the best in the world at it. Thus, if people cannot be the best in the world in their core business, then their core business may not be the basis of a great company at all. A Culture of Discipline: All companies have a culture, some companies have discipline, but some companies have a culture of discipline. When companies have disciplined people, they do not need a hierarchy. When they have disciplined thought, they do not need bureaucracy. When they have taken disciplined action, they do not need extreme control. When the cultures of discipline are combined with an ethics of entrepreneurship, then company may get the magical alchemy of great performance. The Flywheel and the Doom Loop: ‘Those who launch dramatic change programs, revolutions and restructuring will certainly fail to make leap from good to great. No matter how dramatic the end result, the good-to-great transformations have never happened together. There was no single defining action, no grand event, no single killer innovation, no secluded lucky break, no miracle moments, On the contrary, the process rotates tirelessly, moving a huge heavy wheel in one direction, alternately building momentum to a point of success and beyond. From Good -to-Great to Built-to-Last- In an ironic twist, the author see good to great not as a continuation of built to last. Build to last means how people take a company with great results and turned it into a permanent company of reputed stature. To ensure that the ultimate change requires core values and to preserve the core / encourage progress there is a purpose beyond funds, Good to Sustained Good to Sustained Great —* Great + Great. —> Great Concepts Results. Concepts.—_Results Source: Good to Great by Jim Collins If people are already a student of built to last they set questions about the exact link between the two studies, as they consider the findings of good to great. Scanned with CamScanner Good To Great (Unit 5) ft 5.2, LEVEL 5 LEADERSHIP: LEADERS) WHO ARE HUMBLE BUT ARE DRIVEN To DO WHAT IS BEST FOR THE COMPANY During 1971, Darwin Smith became the CEO of Kimberly-Clark — a company that was at least 36 percent below the market rate for over twenty years. Smith, a mild-mannered man, was the in-house lawyer, and people subtly reminded him that he wasn’t even qualified to serve as the CEO, but he remained in his position and stunned everyone when the company that was struggling in the past was now racing ahead of everyone else. Sure, Smith seemed meek, but his style of handling the company was ~ in his words ~ eccentric. Not many books mention him, and many people don’t even know him, but he successfully ensured that Kimberly-Clark cumulated returns at least 4.1 times the market and surpassed other goliaths like General Electric, Hewlett-Packard, 3M, and Coca-Cola, What was Smith's secret? How did he manage to turn his company from good to great? Smith was a classic example of displaying Level 5 Leadership in a company. Collins asserts that a Level 5 leader is someone who blends Professional will with personal humility. What was remarkable was that all the companies that had achieved greatness had a CEO like Smith, They weren't famous — in fact, they preferred to be left alone but they pushed all their reserves into their companies and displayed a fesolve that was unmatched to anyone else. When the top level executives of a company display steely determination like Smith, it makes all the difference between mere “upervision and strategie decision-making. The CEOs of the “ompanies in the ‘great’ category never let their personal egos rule ‘heir decisions, Furthermore, they were least interested in financial Sains and put all their efforts into making the company a force to Teckon with, Compa exurinies that seek an enduring presence in the marketplace require a , Ten tdinary individuals to lead the way. These people, who business “atcher Jim Collins dubs leaders, represent a unique evel Scanned with CamScanner 214 MBA Second Semester (Contemporary Frameworks in Management) Sppy ; i : 4 combination of executive capabilities, something that allows them to ] ensure their organisations become the best at what they do. The concept of Level 5 leadership is unique because it is based on empirical evidence. Over a five-year period, Collins conducted research project io discover what distinguished so-called “good” companies from “great” ones. “Great” companies, he explained, were defined as those that made at least three extraordinary jumps in stock returns over a period of 15 years, independent of their industries. By comparing data from more than 1,435 organisations, he found that only 11 companies fit these criteria. One of the key reasons was leadership. In the end, Collins realized that each of the 11 notable companies had leaders with a specific combination of what he dubbed “extreme personal humility” and “intense professional will.” Level 5 Level $ Executive Builds enduring greatness through a paradoxical blend of personal humility and professional will. Level 4 Effective Leader Catalyses commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards. Level 3 Competent Manager Organises people and resources toward the effective and efficient pursuit of predetermined objectives. Level2 Contributing Team Member Contributes “individual capsbilities » to the achievement of group objectives and works effectively with others in a group setting. Level 1 Highly Capable Individual ~ _ Makes productive contributions through talent, knowledge, skills, and good work habits, Level 5 Hierarchy Figure 5.3 Source: Good to Great by Jim Collins Classification of Leaders Collins’s discovery was based discovered during his study. Level 1: The Highly Capable Individual | Highly capable individuals are regular workers who are talented: > knowledgeable, and skilled. They are effective in the workplace. on a hierarchy of capabilities and traits | | Scanned with CamScanner Good To Great (Unit 5) 215 Level 2: The Contributing Team Member Contributing team members are good at working with others and are notably proficient at helping their groups reach objectives. Level 3: The Competent Manager Competent managers can effectively oversee people and resources, helping to achieve predetermined goals. Level 4: The Effective Leader Effective leaders can steer their companies toward well-defined, compelling goals. They also keep their organisations functioning at high levels of performance. Level'5: The Executive Executives have the unique capability to develop a company’s greatness through what Collins identifies as “a paradoxical combination of personal humility plus professional will.” .5,2.1. What Else Makes a Company Great? Collins discovered that truly remarkable companies are defined by aspects other than leadership. However, it is the responsibility of Level 5 executives to understand these elements and master them effectively. First Who Level 5 leaders understand the importance of putting people first and strategy second. This means finding the right people for the organisation, getting rid of the wrong ones, and putting employees in the appropriate positions, all before addressing business tactics. Stockdale Paradox This element is named after Admiral James Stockdale, a POW during ‘ the Vietnam War who expressed a notably contradictory belief system. To survive, he told himself, “Life couldn’t be worse at the moment, and his life would someday be better than ever.” In business, this translates to accepting difficult realities of a business’s current fnmtion, while believing that the organisation will one day rise above em, Buildup-Breakthrough Flywheel Collins refers to the building of a great company as a metaphorical “flywheel.” Truly great organisations gradually build up momentum Until a “breakthrough” moment where overwhelming success clicks a Place. This element is defined by a company’s commitment toa Ow and steady build, Pa Scanned with CamScanner Leama 216 MBA Second Semester (Contemporary Frameworks in Managemeny sppy | The Hedgehog Concept : ; : Derived from an essay by the philosopher Isaiah Berlin, the “hedgehog concept” refers to a comparison between the abilities of a hedgehog and a fox. In the essay, foxes are characterized as knowing a little about a lot of subjects, while hedgehogs know a lot about a single thing. Collins believes businesses that act like hedgehogs are more likely to achieve greatness. Hedgehog behaviour means understanding three things: 1) What a company is capable of being best at 2) How its economics can work most effectively 3) What best makes its people passionate Focusing on these three factors, Collins explains, eliminates unnecessary and unprofitable efforts elsewhere. Technology Accelerators Great companies have a particular relationship with technology. On the one hand, they refrain from using technology simply because it’s trendy or cutting edge. However, they do make investments in technologies that help contribute to its mission. These decisions are made with a careful and discerning eye, x A Culture of Discipline Collins believes great companies exhibit remarkable discipline in three areas: people, thought and action. Disciplined people, he explains, eliminate the need for hierarchy, Disciplined thought removes bureaucracy. And disciplined action eliminates the need for excessive control. Together, all three result in extraordinary business performance. Gaining mastery and understanding in these areas isn’t quite cnough, however. Level 5 leaders must also be cautious of pitfalls, 5.2.2. Humility + Will Humility Never let your ego get in the way of your ambition for the company and concer for its success. Compelling modesty — always attributing Success to other factors other than themselves, Typical descriptions of interviews with the Level 5 leaders included: quiet, humble, modest, reserved, shy, gracious, mildC mannered, selfCeffacing, understated... Scanned with CamScanner Good To Great (Unit 5) will 217 Unwavering Resolve to do what must be done. A ferocious resolve and determination to produce results — fanatically driven Inspired standards — could not stand mediocrity Most of the goodDitoUgreat CEOs came from within the company three of them from family inheritance, and they weren’t afraid to make top level changes. George Cain, CEO of Abbott Laboratories, “Neither family ties nor length of tenure would have anything to do with whether you held a key position in the company. If you didn’t have the capacity to become the best executive in the industry in your span of responsibilities, then you would lose you paycheck.” $1 invested in Abbott in 1974 (transition point) would have been worth $271 in 1995. 5.2.3. Two Sides of Level 5 Leadership ) Summary: The Two Sides of Level 5 Leadership Professional Will Personal Humility “Creates superb results, a clear catalyst in the transition from good to great. Demonstrates a compelling modesty, shunning public adulation; never boastful. Demonstrates an unwavering resolve to do whatever must be done to produce the best long-term results, no matter how difficult. ‘Acts with quiet, calm determination; relies principally on inspired standards, not inspiring charisma, to motivate. Sets the standard of building an enduring great company; will settle for nothing less. Channels ambition into the company, not the self; sets up successors for even greater success in the next generation. Looks in the mirror, not out the window, to apportion responsibility for poor results, never blaming other people, external factors, or bad luck. Looks out the window, not in the mirror, to apportion credit for the success of the company-to other people, extemal factors, and good luck. Source: Good to Great by Jim Collins SHU Ah) a! One would think that companies with a great vision hire people and then direct them to go in a certain direction. However, thi : re because even the executives who hire case. In fact, the reverse is tru is not the Scanned with CamScanner 218 MBA Sccond Semester (Contemporary Frameworks in Man gement) SPPy Level 5 leaders often don’t know what they want to achieve. They just know that they need the right individuals to get in and the wrong people to simply get off. The right people are utmost important | because they come before even the strategies, vision, structure and other plans are made. When a firm hires the right people, various problems plaguing the company are bound to dissipate automatically. Even if it seems like it takes a lot of effort to get the best executives out there, it’s all worth it at the end. It’s also possible that you aren’t sure about the people you want to hire, so it’s best to keep looking in such scenarios. There’s no hurry — remember you need the best. Some companies follow a model where the leader enlists several ‘helpers’ to make his vision come true, but unfortunately, such models are doomed to fail since the company falls apart as soon as the leader quits. i Additionally, great leaders encourage people to speak up. They want voices to be heard because it’s the best way to ensure that they arrive “at the tight decision, Yes, it invites a lot of debate, but such teams will also stand united with each other behind all their decisions. At the end of the day, what makes these leaders outstanding are their character traits and ability to perform rather than their background or knowledge in any specific skill. 5.3.1. Not a “Genius With a Thousand Helpers” In contrast to the good-to-great companies, which built deep and strong executive teams, many of the comparison companies followed a “genius with a thousand helpers” model. In this model, the company is a platform for the talents of an extraordinary individual, In these cases, the towering genius, the primary driving force in the company’s success, i simple reason that they don’t need One, and often don’t want one. Level 5 + Management Team A “Genius with a Thousand Helpers” Level 5 Leader Level 4 Leader | L L | First Who First What Scanned with CamScanner_ Good To Great (Unit 5) 219 Get the right people on the bus. | Seta vision for where to drive the Build a superior executive team. bus. Develop a road map for driving the bus. L t Then What Then Who Once you have the right people in | Enlist a crew of highly capable place, “helpers” figure out the best path to to make the vision happen. greatness. Source: Good to Great by Jim Collins The “genius with a thousand helpers” model is particularly prevalent in the unsustained comparison companies. ‘5.3.2. It’s Who You Pay, Not How You Pay Them ‘Author and his team expected that changes in incentive system, especially executive compensation would be related with making the jump from good-to-great. Along with the focus on executive compensation, stock packages and larger packages that have become common packages were also taken into consideration. Author thought that, the amount and structure of compensation should play an important role in moving from good-to-great. The expectations of the author and his team were wrong. Author found that there is no systematic pattern of linking compensation to the way from going towards good to good. The evidence does not simply support the idea that the specific structure of executive compensation serves as a key role in making a company great to good. It is a sign of “First who principle”. This principle is not about how organisation compensates their executive but it is about which executive is compensated firstly. When companies have good executives then they will do their best to build a great company. Their ethical code requires building excellence for the wellbeing of its own, and they are not much likely to replace it with a package of compensation that affects whether they breathe. The good-to-great companies comprehended a straightforward truth that perfect individuals will do the correct things and they will convey the best Cutcomes despite of their incentive system. bo Scanned with CamScanner- y 220 MBA ond Semester (Contemporary Frameworks in Management) SPP Indeed, compensation and incentive both are essential for the organisation but the reasons of their existence are different. The Purpose of a compensation system should not be to get the right behaviour from the wrong people, but it should be to get the right people in the right place of the organisation. Being ruthless means hacking and cutting, especially during difficult times, or firing at people without thinking. Being rigorous means consistently applying accurate standards at all times and at all levels, especially in top management. Thus, to be rude, not cruel, means that the best people don't have to worry about their positions and can focus solely on their work. On a contrary, to be rigorous in people decisions mean first being harsh in to management decisions. However, author may feel that, people may use “first who rigor" as an excuse to slash out people with them to improve performance. In this process, not only good people gets hurt for being too hardworking, but evidence suggests that such a strategy is the opposite Of producing consistently great results. Good-to-great companies never used it as a primary strategy. Six of the cleven good-to-great organisations are recorded zero cutbacks from ten years before the advancement date through 1998, and four others announced just a couple of cutbacks, On the other hand, author and his team found that the use of layoffs is five times higher in g00-t0-great companies than in comparison companies. Some comparison companies had an almost chronic addiction to layoffs and restructuring. It would be a mistake to think that the Way people ignite a transition from good —to-great is like swinging the ax at a large number of hardworking people. Endless reorganisation and mindless hacking Were never being a part of the good-to-great model, 5.3.3. Rigorous, Not Ruthless A good-to-great company is appears to be a difficult place to work and they are. When individuals do not have those qualities which is required in good-to-great they would not keep going long. Hence, they are not ruthless cultures but they are rigorous cultures. The differences between these types of culture are very important. Scanned with CamScanner Good To Great (Unit 5) 21 Being ruthless means hacking and cutting, especially during difficult times, or firing at people without thinking. Being rigorous means consistently applying accurate standards at all times and at all levels, especially in top management. ‘Thus, to be rude, not cruel, means that the best people don't have to worry about their positions and can focus solely on their work. On a contrary, to be rigorous in people decisions mean first being harsh in to management decisions. However, author may feel that, people may use "first who rigor” as an excuse to slash out people with them to improve performance. In this process, not only good people gets hurt for being too hardworking, but evidence suggests that such a strategy is the opposite of producing consistently great results. Good- to-great companies never used it as a primary strategy. Six of the eleven good-to-great organisations are recorded zero cutbacks from ten years before the advancement date through 1998, and four others announced just a couple of cutbacks. On the other hand, author and his team found that the use of layoffs is five times higher in goo-to-great companies than in comparison companies. Some comparison companies had an almost chronic addiction to layoffs and restructuring. It would be a mistake to think that the way people ignite a transition from good -to-great is like swinging the ax at a large number of hardworking people. Endless reorganisation and mindless hacking were never be a part of the good-to-great model. How to Be Rigorous 1) When in doubt, don’t hire. Keep looking: The biggest throttle ‘on growth for any great company is the ability to get and keep enough of the right people. 2) When you know that you need to make a people change, ACT: i) The best people don’t need to be managed. When you spend time/energy/attention thinking about how to improve a situation with the wrong person, you are taking away from focusing on making progress. ii) Hanging onto the wrong people demotivates the right ones. “Strong performers are intrinsically motivated by performance and when they see their efforts being impeded by carrying extra weight, they become. frustrated.” Scanned with CamScanner 222 iv) Questions when on the border! a) Would you hire this person again? b) If this person came to you an you feel terribly burdened 3) Put Your Best People on Your Biggest Opportunities (not on your biggest problems): This decision involves m j problems: path to goodness and building on opportunities greatness. 5.4. CONFRONT THE BRUTAL FACT: (YET NEVER LOSE FAITH) Another key element of some companies’ unique 2b transition from Good to Great is the willingn: Fy and assess i environme 's market, tends in consumer pref are constantly and the inability to keep apace with these changes omen results in company failure. Using the example of an extended comparative analysis of Kroger and A & P, Collins observes that Kroger recognized the mend towards modernization in the grocery industry and adjusted its business model accordingly, although doing so required a complete transformation of the company and its stores. A & P, on the other hand, resisted large scale change, and thus guaranteed its own demise, Companies that want to forge ahead successfully must be willing to identify and analyse several facts that could change the course of the company. Markets change constantly, and only the organisations that adapt swiftly will stand a chance. Ignoring the market will only puch the company towards failure since it’s impossible to make coherent decisions without being honest about the problem in the first place. 5.4.1. Facts are Better Than Dreams One of the key themes of the author’s research is that success results come in a form of series of good decisions, executed | diligently and accumulated on top of another. Of course, good-to- good companies did not have a perfect track record, But overall, Scanned with CamScanner Good To Great (Unit 5) 23 they made many more good decisions than bad companies and many good decisions than comparable companies. More important, they were remarkably on target. For example, Kroger's decision to throw all its resources into the task of converting its entire system into a superstore concept. This, obviously, raises a question. Is it accurate to say that author is simply examining a lot of organisations that simply takes good decisions on the basis of karma? Or was there something unmistakable about their procedure that significantly improved the probability of being correct? The appropriate response, it turns out, is that there was something very unmistakable about their procedure. Good-to-great companies exhibited two distinct forms of disciplined thought. The first is that he influenced the entire process with the brutal facts of reality. The second is that he developed a simple, yet deeply practical, frame of reference for all decisions. People cannot make a series of good decisions without facing completely brutal facts, Good-to-great companies acted according to this principle, and comparison companies did not acted accordingly. 5.4.2. A Climate where the Truth is Heard # Don't focus on motivating people through the vision, get the right people on the bus and share with them the finding of the company. The best way to deCimotivate people is to hold out false hope. How do you create a climate where the truth is heard? We offer four basic practices: 1) Lead with Questions not with Answers: The leaders of Good to Great companies start by assuming they don’t know what is required. They ask questions until a picture of reality and its implications emerges. The continued use of probing questions slowly brings the reality to the surface. This is the opposite of superstar leaders who assume they have all the answers and just need to make their team execute. These leaders are likely to make bad decisions because they don’t have a true understanding of the facts. 2) Engage in Dialog and Debate, not Coercion: Engage in a debate, have heated discussions, even agree to disagree, but great leaders never coerce people. Scanned with CamScanner ’ 24 MBA Second Semester (Contemporary Frameworks in Mani t) SPRL 3) Conduct Autopsies without Blame and Use Them to Learn: Things can and will go wrong. Even great companies make mistakes. Great companies don’t try to hide these mistakes, Rather, they try to learn from them. Trying to blame someone for the mistake doesn’t even enter into the conscious thoughts of Good to Great leaders. 4 Build Red Flag Mechanisms: Great companies pay attention to what's really important and ignore everything else. They build red flag mechanisms. These turn raw data into information that cannot be ignored. The benefits of confronting the brutal facts include: i) The organisation becomes more resilient. ii) People become excited about the chance to take on a challenge that seems impossible. iii) Tt can create duality. One the one hand people accept the brutal facts. On the other, they maintain the faith that the company will ultimately be successful. Even if it takes many years. iv) It dampens charismatic leaders, The brutal reality is more important than how a leader thinks the market should behave. v) Leaders will be fact led rather than personality led. vi) Tt keeps motivation high. The* reality is that pretending the realities of the marketplace don’t exist will sap everyone's motivation. They'll just be going through the motions. In summary. confronting the brutal facts means its fine to have an ambitious destination in mind, as long as you continually adapt your plan every day as new brutal facts emerge. 5.4.3. The Stockdale Paradox The concept is named after James Stockdale, who was a US Navy Vice-Admiral. In paradox we often find some of the greatest bits of wisdom. The difficulty in understanding a paradox comes from the fact that when it's heard as a maxim in some kind of verbal form, it is contradictory and not intuitively grasped. This said, paradoxes are best understood through experience. The Stockdale Paradox is one such Concept that, at first glance, takes Some linguistic mental jumping jacks to fully grasp, Scanned with CamScanner Good To Great (Unit 5) 225 Stockdale was a prisoner of war for over seven years during which time he was tortured many times. ‘When asked how he handled the uncertainty of his outcome he said essentially that he never doubted that he would,survive. Not only that, he never doubted that he would turn the experience into one of the defining experiences of his life. One which he wouldn’t trade for anything. When asked which kind of, people didn’t survive, Stockdale said it was the optimists. The ones: who, for ‘example, believed they’d be.out by Christmas. Christmas then came .and went. And so did the following Christmas. And several more. And eventually, they gave up and died demoralized and of a.broken heart. So,-as.you can see.the ‘Stockdale.Paradox is a philosophy of duality. It involves having :the ‘discipline-to confront-the:brutal-facts about your it at the same time, it involves never losing faith that you will-prevail in:the end. : - Business,.and of course life, will inevitably throw lots of difficulties at us-Butsit is how we haridlé these difficulties that-will have the biggest impact on the, course of our lives.and our business. ‘The Stockdale Paradox Retainfaiththat youwill | Conifont the most | prevail in the end, . brutal facts of your regardless of the AND at the same time | current reality, whatever difficulties. they might be. Applying the Stockdale Paradox to Daily Life i ‘We all want things ‘to workout :for“oursélves. We want to: be successful, happy, and have-achieved ‘something: no matter how trivial

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