THE LAW OF THE BENCH

You may have heard the expression, "It's not over until the fat lady sings," or Yogi Berra's famous comment, "It ain't over 'til it's over." Would you believe that sometimes it is over before it's over? You can learn to identify such times if you know the Law of the Bench. Let me give you an example. One Saturday in September of 2000, I went to a football game with some friends: Kevin Small, the president of INJOY; Chris Goede, who used to play professional ball; and Steve Miller, my wonderful son-in-law. We were looking forward to an exciting game between the Georgia Tech Yellow Jackets and the Florida State Seminoles, even though FSU was a very strong favorite. There's a pretty good rivalry between all Georgia and Florida college teams, so the teams can get pretty pumped up. And on that day, we weren't disappointed. The teams were battling, and the score was close. Tech was playing its heart out. The Law of the Bench is true in any field, not just sports. You may be able to do some wonderful things with just a handful of top people, but if you want your team to do well over the long haul, you've got to build your bench. A great team with no bench eventually collapses. In sports, it's easy to identify which people are the starters and which make up the bench. But how do you identify them in other fields? I want to suggest the following definitions: Starters are frontline people who directly add value to the organization or who directly influence its course. The Bench is made up of the people who add value to the organization indirectly or who support the starters who do.

Everyone recognizes the importance of a team's starters. They are the ones who are most often in the spotlight. As a result, they get most of the credit. And while both groups are important, if one group is liable to be neglected or overlooked, it's usually the people on the bench. In fact, the people most likely to discount or discredit the contribution of the

bench may be the starters. Some key players enjoy reminding the substitutes that they are "riding the pine." But any starter who minimizes the contribution of the bench is self-centered, underestimates what it takes for a team to be a success, and doesn't understand that great teams have great depth.

Every human being has value, and every player on a team adds value to the team in some way. Those truths alone should be enough to make team members care about the bench players. But there are also more specific reasons to honor and develop the players who may not be considered "starters." Here are several:

1. Today's Bench Players May Be Tomorrow's Stars

Rare are the people who begin their careers as stars. And those who do sometimes find that their success is like that of some child actors: After a brief flash in the pan, they are never able to recapture the attention they got early on. Most successful people go through an apprenticeship or period of seasoning. Look at quarterback Joe Montana, who was inducted into the NFL Hall of Fame in 2000. He spent two years on the bench as a backup before being named the San Francisco Forty-niners' starter. And as he was breaking records and leading his team to numerous Super Bowls, the person who sat on the bench as a backup to him was Steve Young, another great quarterback. Some talented team members are recognized early for their great potential and are groomed to succeed. Others labor in obscurity for years, learning, growing, and gaining experience. Then after a decade of hard work, they become "overnight successes." With the way people like to move from job to job today—and even from career to career—good leaders should always keep their eyes open for emerging talent. Never be in a hurry to pigeonhole someone on your team as a nonstarter. Given the right encouragement, training, and opportunities, nearly anyone who has the desire has the potential to emerge someday as an impact player.

2. The Success of a Supporting Player Can Multiply the Success of a Starter

When every team member fulfills the role that best suits his or her talents, gifts, and experience and excels in that role, then the team really hums. It's the achievement of the whole team that makes the starters flourish, and it's the achievement of the starters that makes the team flourish. The whole team really is greater than the sum of its parts. Or, as John Wooden put it, "The main ingredient of stardom is the rest of the team."

3. There Are More Bench Players Than Starters

If you look at the roster of any successful team, you will see that the starters are always outnumbered by the other players on the team. In professional basketball, twelve people are on the team but only five start. Major-league baseball teams start nine, but carry forty players. In pro football, twenty-two people start on offense and defense, but teams

are allowed to have fifty-three players. (College teams often have more than one hundred!) You find similar situations in every field. In the entertainment industry, the actors are often known, but the hundreds of crew members it takes to make a movie aren't. In ministry, everyone recognizes the people up front during a worship service, but it takes scores of people working behind the scenes to bring that service together. For any politician or corporate executive or big-name fashion designer that you know about, there are hundreds of people working quietly in the background to make their work possible. Nobody can neglect the majority of the team and hope to be successful.

4. A Bench Player Correctly Placed Will at Times Be More Valuable than a Starter

I think if you asked most people how they would classify administrative assistants as team members, they would tell you that they consider them to be bench players, since their primary role is support. I would agree with that—although in some cases administrative people do have direct influence on an organization. Take for example my assistant, Linda Eggers. Over the years, Linda has done just about everything at INJOY. She has been the company's bookkeeper. She used to run our conferences. She did marketing and product development. She is a very talented person. I think Linda is capable of doing just about anything. But she has chosen to take a supporting role as my assistant. And in that position, she makes a huge impact. Today my company has more than two hundred employees. I respect and value all of them. But if I lost everything tomorrow and could keep only five or six persons with whom to start over from scratch, Linda would be one of the persons I would fight to keep. Her value as a support person makes her a starter.

5. A Strong Bench Gives the Leader More Options

When a team has no bench, the only option its leader has is moving the starters around to maximize their effectiveness. If a starter can't perform, the team is out of luck. When a team has a weak bench, then the leader has a few options, but they are often not very good. But when a team has a great bench, the options are almost endless. That's why someone like Bobby Bowden, the coach at FSU, was able to wear down Georgia Tech. If one of his players got hurt, he had someone to replace him. If his opponent changed defenses, he had offensive players in reserve to overcome the challenge. No matter what kind of situation he faced, with a strong bench he had options that would give the team a chance to win.

6. The Bench Is Usually Called upon at Critical Times for the Team When an army is in trouble, what does it do? It calls up the reserves. That's the way it is in every area of life. The time you need the bench isn't when things are going well. It's when things aren't. When the starter gets hurt and the game is in jeopardy, a substitute steps in. That person's effectiveness often determines the team's success. If your team is experiencing a tough time, then you know the importance of having a good bench. But if you are experiencing a smooth period, then now is time to develop your backup players. Build the bench today for the crisis you will face tomorrow.

GIVE ME A LEVER LONG ENOUGH.. . AND SINGLE-HANDED I CAN MOVE THE WORLD

From a very early age, we are taught to break apart problems, to fragment the world. This apparently makes complex tasks and subjects more manageable, but we pay a hidden, enormous price. We can no longer see the consequences of our actions; we lose our intrinsic sense of connection to a larger whole. When we then try to "see the big picture," we try to reassemble the fragments in our minds, to list and organize all the pieces. But, as physicist David Bohm says, the task is futile—similar to trying to reassemble the fragments of a broken mirror to see a true reflection. Thus, after a while we give up trying to see the whole altogether.

The tools and ideas presented in this book are for destroying the illusion that the world is created of separate, unrelated forces. When we give up this illusion—we can then build "learning organizations," organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning how to learn together.

As Fortune magazine recently said, "Forget your tired old ideas about leadership. The most successful corporation of the 1990s will be something called a learning organization." "The ability to learn faster than your competitors," said Arie De Geus, head of planning for Royal Dutch/Shell, "may be the only sustainable competitive advantage." As the world becomes more interconnected and business becomes more complex and dynamic, work must become more "learningful." It is no longer sufficient to have one person learning for the organization, a Ford or a Sloan or a Watson. It's just not possible any longer to "figure it out" from the top, and have everyone else following the orders of the "grand strategist." The organizations that will truly excel in the future will be the organizations that discover how to tap people's commitment and capacity to learn at all levels in an organization.

Learning organizations are possible because, deep down, we are all learners. No one has to teach an infant to learn. In fact, no one has to teach infants anything. They are intrinsically inquisitive, masterful learners who learn to walk, speak, and pretty much run their households all on their own. Learning organizations are possible because not only is it our nature to learn but we love to learn. Most of us at one time or another have been part of a great "team," a group of people who functioned together in an extraordinary way— who trusted one another, who complemented each others' strengths and compensated for each others' limitations, who had common goals that were larger than individual goals, and who produced extraordinary results. I have met many people who have experienced this sort of profound teamwork—in sports, or in the performing arts, or in business. Many say that they have spent much of their life looking for that experience again. What they experienced was a learning organization The team that became great didn't start off great—it learned how to produce extraordinary results.

One could argue that the entire global business community is learning to learn together, becoming a learning community. Whereas once many industries were dominated by a single, undisputed leader —one IBM, one Kodak, one Procter & Gamble, one Xerox—today industries, especially in manufacturing, have dozens of excellent companies. American and European corporations are pulled forward by the example of the Japanese; the Japanese, in turn, are pulled by the Koreans and Europeans. Dramatic improvements take place in corporations in Italy, Australia, Singapore—and quickly become influential around the world.

There is also another, in some ways deeper, movement toward learning organizations, part of the evolution of industrial society. Material affluence for the majority has gradually shifted people's orientation toward work—from what Daniel Yankelovich called an "instrumental" view of work, where work was a means to an end, to a more "sacred" view, where people seek the "intrinsic" benefits of work.1 "Our grandfathers worked six days a week to earn what most of us now earn by Tuesday afternoon," says Bill O'Brien, CEO of Hanover Insurance. "The ferment in management will continue until we build organizations that are more consistent with man's higher aspirations beyond food, shelter and belonging." Moreover, many who share these values are now in leadership positions. I find a growing number of organizational leaders who, while still a minority, feel they are part of a profound evolution in the nature of work as a social institution. "Why can't we do good works at work?" asked Edward Simon, president of Herman Miller, recently.

"Business is the only institution that has a chance, as far as I can see, to fundamentally improve the injustice that exists in the world. But first, we will have to move through the barriers that are keeping us from being truly vision-led and capable of learning." Perhaps the most salient reason for building learning organizations is that we are only now starting to understand the capabilities such organizations must possess. For a long time, efforts to build learning organizations were like groping in the dark until the skills, areas of knowledge, and paths for development of such organizations became known. What fundamentally will distinguish learning organizations from traditional authoritarian "controlling organizations" will be the mastery of certain basic disciplines.

That is why the "disciplines of the learning organization" are vital.

DISCIPLINES OF THE LEARNING ORGANIZATION

On a cold, clear morning in December 1903, at Kitty Hawk, North Carolina, the fragile aircraft of Wilbur and Orville Wright proved that powered flight was possible. Thus was the airplane invented; but it would take more than thirty years before commercial aviation could serve the general public. Engineers say that a new idea has been "invented" when it is proven to work in the laboratory. The idea becomes an "innovation" only when it can be replicated reliably on a meaningful scale at practical costs. If the idea is sufficiently important, such as the telephone, the digital computer, or commercial aircraft, it is called a "basic innovation," and it creates a new industry or transforms an existing industry. In these terms, learning organizations have been invented, but they have not yet been innovated.

In engineering, when an idea moves from an invention to an innovation, diverse "component technologies" come together. Emerging from isolated developments in separate fields of research, these components gradually form an "ensemble of technologies that are critical to each others' success. Until this ensemble forms, the idea, though possible in the laboratory, does not achieve its potential in practice.2 The Wright Brothers proved that powered flight was possible, but the McDonnell Douglas DC-3, introduced in 1935, ushered in the era of commercial air travel. The DC-3 was the first plane that supported itself economically as well as aerodynamically.

During those intervening thirty years (a typical time period for incubating basic innovations), myriad experiments with commercial flight had failed. Like early experiments with learning organizations, the early planes were not reliable and cost effective on an appropriate scale.

The DC-3, for the first time, brought together five critical component technologies that formed a successful ensemble. They were: the variable-pitch propeller, retractable landing gear, a type of lightweight molded body construction called "monocque," radial air-cooled engine, and wing flaps. To succeed, the DC-3 needed all five; four were not enough. One year earlier, the Boeing 247 was introduced with all of them except wing flaps. Lacking wing flaps, Boeing's engineers found that the plane was unstable on takeoff and landing and had to downsize the engine.

Today, I believe, five new "component technologies" are gradually converging to innovate learning organizations. Though developed separately, each will, I believe, prove critical to the others' success, just as occurs with any ensemble. Each provides a vital dimension in building organizations that can truly "learn," that can continually enhance their capacity to realize their highest aspirations:

Systems Thinking. A cloud masses, the sky darkens, leaves twist upward, and we know that it will rain. We also know that after the storm, the runoff will feed into groundwater miles away, and the sky will grow clear by tomorrow. All these events are distant in time and space, and yet they are all connected within the same pattern. Each has an influence on the rest, an influence that is usually hidden from view. You can only understand the system of a rainstorm by contemplating the whole, not any individual part of the pattern.

Business and other human endeavors are also systems. They, too, are bound by invisible fabrics of interrelated actions, which often take years to fully play out their effects on each other. Since we are part of that lacework ourselves, it's doubly hard to see the whole pattern of change. Instead, we tend to focus on snapshots of isolated parts of the system, and wonder why our deepest problems never seem to get solved. Systems thinking is a conceptual framework, a body of knowledge and tools that has been developed over the past fifty years, to make the full patterns clearer, and to help us see how to change them effectively. Though the tools are new, the underlying worldview is extremely intuitive; experiments with young children show that they learn systems thinking very quickly.

Personal Mastery. Mastery might suggest gaining dominance over people or things. But mastery can also mean a special level of proficiency. A master craftsman doesn't dominate pottery or weaving. People with a high level of personal mastery are able to consistently realize the results that matter most deeply to them— in effect, they approach their life as an artist would approach a work of art. They do that by becoming

committed to their own lifelong learning. Personal mastery is the discipline of continually clarifying and deepening our personal vision, of focusing our energies, of developing patience, and of seeing reality objectively. As such, it is an essential cornerstone of the learning organization—the learning organization's spiritual foundation. An organization's commitment to and capacity for learning can be no greater than that of its members. The roots of this discipline lie in both Eastern and Western spiritual traditions, and in secular traditions as well. But surprisingly few organizations encourage the growth of their people in this manner. This results in vast untapped resources: "People enter business as bright, well educated, high-energy people, full of energy and desire to make a difference," says Hanover's O'Brien. "By the time they are 30, a few are on the "fast track" and the rest 'put in their time' to do what matters to them on the weekend. They lose the commitment, the sense of mission, and the excitement with which they started their careers. We get damn little of their energy and almost none of their spirit." And surprisingly few adults work to rigorously develop their own personal mastery. When you ask most adults what they want from their lives, they often talk first about what they'd like to get rid of: "I'd like my mother-in-law to move out," they say, or "I'd like my back problems to clear up." The discipline of personal mastery, by contrast, starts with clarifying the things that really matter to us, of living our lives in the service of our highest aspirations. Here, I am most interested in the connections between personal learning and organizational learning, in the reciprocal commitments between individual and organization, and in the special spirit of an enterprise made up of learners.

Mental Models. "Mental models" are deeply ingrained assumptions, generalizations, or even pictures or images that influence how we understand the world and how we take action. Very often, we are not consciously aware of our mental models or the effects they have on our behavior. For example, we may notice that a co-worker dresses elegantly, and say to ourselves, "She's a country club person." About someone who dresses shabbily, we may feel, "He doesn't care about what others think." Mental models of what can or cannot be done in different management settings are no less deeply entrenched. Many insights into new markets or outmoded organizational practices fail to get put into practice because they conflict with powerful, tacit mental models.

Royal Dutch/Shell, one of the first large organizations to understand the advantages of accelerating organizational learning came to this realization when they discovered how pervasive was the influence of hidden mental models, especially those that become widely shared. Shell's extraordinary success in managing through the dramatic changes and unpredictability of the world oil business in the 1970s and 1980s came in large measure from learning how to surface and challenge manager's mental models. (In the

early 1970s Shell was the weakest of the big seven oil companies; by the late 1980s it was the strongest.) Arie de Geus, Shell's recently retired Coordinator of Group Planning, says that continuous adaptation and growth in a changing business environment depends on "institutional learning, which is the process whereby management teams change their shared mental models of the company, their markets, and their competitors. For this reason, we think of planning as learning and of corporate planning as institutional learning."

The discipline of working with mental models starts with turning the mirror inward; learning to unearth our internal pictures of the world, to bring them to the surface and hold them rigorously to scrutiny. It also includes the ability to carry on "learningful" conversations that balance inquiry and advocacy, where people expose their own thinking effectively and make that thinking open to the influence of others.

Culture oF Discipline

*Bureaucracy

George Rathmann, cofounder of biotech company Amgen, help grow the struggling company into an entrepreneurial enterprise worth $3.2 billion and 6,400 employees. An investment of $7,000 in 1983 would have been worth over $1 million. George understood that the purpose of bureaucracy is to compensate for incompetence and lack of discipline ‐ a problem that largely goes away if you have the right people on the bus in the first place. Most companies build in their bureaucratic rules to manage the small percentage of wrong people, which in turn drives away the right people, which then increases the wrong people on the bus, which then increases the need for more bureaucracy. Rathmann understood an alternative existed: avoid bureaucracy and hierarchy and instead create a culture of discipline.

Set your objectives for the year in concrete, you can change your plans but never change what you measure yourself against.

*Discipline Action within the Three Circles

1. Build a culture around the idea of freedom and responsibility, within a framework.

The good‐to‐great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system. They hired self‐disciplined people who didn’t need managed, and then managed the system, not the people.

2. Fill that culture with self‐disciplined people who are willing to go to extreme lengths to fulfill their responsibility.

People in good‐to‐great companies became somewhat extreme in the fulfillment of their responsibilities, bordering in some cases on fanaticism. They will do whatever it takes to turn potential into reality – “Raising Your Cottage Cheese”

3. Don’t confuse a culture of discipline with a tyrannical disciplinarian.

The good‐to‐great companies had level 5 leaders who built an enduring culture of discipline, the unstained comparisons had level 4 leaders who personally disciplined the organization through sheer force.

4. Adhere with great consistency to the Hedgehog Concept, exercising an almost religious focus on the intersection of the three circles. Equally important, create a ‘stop doing list’ and systematically unplug anything extraneous.

The good‐to‐great companies followed a simple mantra: “Anything that does not fit with our Hedgehog Concept, we will not do. We will not launch unrelated business. We will not make unrelated acquisitions. We will not do unrelated joint ventures. If it doesn’t fit, we don’t do it. Period.”

*Start a ‘Stop Doing’ List – it is more important than a ‘To Do’ List

CONFRONT THE BRUTAL FACTS

*Facts are better than dreams

When it came to making tough decisions the good‐to‐great companies infused the entire process with the brutal facts of reality. When your honest about your situation the solutions are generally self evident.

*Create a culture where people have an opportunity to be 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 de‐motivate people is to hold out false hope.

*4 Basic principles in creating the culture

1. Lead with questions not answers

Use questions for one and one reason, to gain understanding. Don’t question to manipulate or place blame

2. Engage in dialog and debate, not coercion

Create intense dialog, don’t use discussions as a sham process to people buy in to a predetermined decision.

3. Conduct autopsies, without blame

When you conduct autopsies without blame, you go a long way toward creating a climate where the truth is heard

4. Build red flag mechanisms

Turn information into information that can’t be ignored

*Unwavering Faith amid the Brutal Facts

Darwin Smith of Kimberly‐Clark stated on taking on Proctor & Gamble, “We will never give up. We will never capitulate. It might take a long time, but we will find a way to prevail.”

*The Stockdale Paradox

“You must never lose faith that you will prevail in the end‐which you can never afford to lose‐with the disciple to confront the most brutal facts of your current reality, whatever they me be.” Admiral Jim Stockdale, prisoner of war 1965 – 1973, tortured over 20 times.

Retain faith that you will prevail in the end, regardless of the difficulties. And at the same time, confront the most brutal facts of your current reality, whatever they might be.

THE HEDGEHOG CONCEPT

The Hedgehog Concept 

The good to great companies are more like hedgehogs – simple, dowdy creatures that know “one big thing” and stick to it. Consistency

*The Hedgehog concept

Is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles:

1. What you can be the best at in the world, and what you can’t?

“They stick with what they understand and let their abilities, not their egos, determine what they attempt.” Warren Buffet about his $290 million investment in Wells Fargo

The hedgehog concept is not a goal, strategy, or intention; it is an understanding.

2. What drives your economic engine?

How to most effectively generate sustained and robust cash flow and profitability

3. What are you deeply passionate about?

Not to stimulate passion but to discover what makes you passionate

You want to find the intersection of what you can be best at, what drives your economic engine, and what you are passionate about. Don’t just settle for what you are good at; focusing solely on what you can potentially do better than any other organization is the only path to greatness.

Economic Insight – “If you could pick one and only one ratio –profit per x (or, in the social sector, cash flow per x) – to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine?”

Understanding Passion – Don’t try to inspire passion about what you are doing, do things that we can get passionate about.

*Circuit City’s Hedgehog Concept

To become the best at implementing the “4‐S” model (service, selection, savings, satisfaction) applied to big ticket consumer sales. Its distinction lay not in the “4‐S” model per se – but in the consistent, superior execution of the model. The cumulative value of $1 invested in Circuit City in 1972 would have been worth $311.64 in 1992! 

THE FLYWHEEL AND THE DOOM LOOP

*Flywheel Image

Imagine that your task is to rotate a massive 30 foot, 5000 pound disk. You push with great effort, you get the flywheel to inch forward and after a few hours you get the flywheel to complete one turn. You keep pushing, and the flywheel begins to move a bit faster, with continued great effort, you move it around a second time. You keep pushing in a consistent direction. Then three turns…four….five… the flywheel builds up speed…six turns…seven….eight…it builds momentum… 20…30…50…a hundred. Then at some point – breakthrough! The momentum of the whole thing works in your favor.

*Buildup and Breakthrough

The good‐to‐great companies came about by a cumulative process – step by step, similar to spinning the flywheel above. There was no single defining action, no one killer innovation, and no solitary lucky break. One Fannie Mae representative on the ‘magic moment’:

“There was no one magical event, no one turning point. It was a combination of things. More of an evolution, though the end results were dramatic.” The cumulative value of a $1 invested in Fannie Mae in 1984 would be worth $64.17 in 2000.

*The Flywheel Effect

Think of a circular model that continues to wrap around highlighted by four themes:

1. Accumulation of visible results

2. People line up, energized by results

3. Flywheel builds momentum

4. Steps forward, consistent with Hedgehog Concept

*The Doom Loop

Rather than accumulating momentum – turn by turn of the flywheel – the comparison companies tried to skip buildup and jump immediately to breakthrough. Then, with disappointing results, they’d lurch back and forth, failing to maintain a consistent direction.

Doom Loop Model:

1. No buildup; no accumulated momentum

2. Disappointing results

3. Reaction, without understanding

4. New direction, program leader, event, fad, or acquisition

TECHNOLOGY ACCELERATORS

*Technology and the Hedgehog Concept

Technology‐induced change is nothing new. The real question is not, what is the role of technology? Rather, the real question is, how do good‐to‐great organizations think differently about technology?

The good‐to‐great companies slowly adapted the technology to fit their Hedgehog Concept. Gillete – Pioneered application of sophisticated manufacturing technology for making billions of high‐tolerance products at low cost with fantastic consistency. They protect manufacturing technology secrets with same fanaticism that Coca‐Cola protects its formula. The cumulative value of $1 invested in Gillete in 1976 was worth $95.68 in 1996.

*Technology as an Accelerator, Not a Creator, of Momentum

When used right technology becomes an accelerator of momentum, not a creator of it. The goo‐to‐great companies never began their transition with pioneering technology, for the simple reason that you cannot make good use of technology until you know which technologies are relevant. And which are those? Those – and only those – that link directly to the three intersecting circles of the Hedgehog Concept.

The relationship to technology is no different from the relationship to any other category of decisions. Technology alone cannot create sustained great results.

*Technology Trap

Mediocrity results first and foremost form management failure, not technology failure. Evidence from the study does not support the idea that technological change plays the principal role in the decline of once‐great companies. Technology is never the primary cause of either greatness or decline.

*Technology and the Fear of Being Left Behind Great companies respond with thoughtfulness and creativity, driven by a compulsion to turn unrealized potential into results; mediocre companies react and lurch about, motivated by fear of being left behind. No technology can make you level 5. No technology can turn the wrong people into the right people. No technology can create a culture of discipline.

FIRST WHO .... THEN WHAT

“There are going to be times when we can’t wait for somebody. Now, you’re either on the bus or off the bus.” – Ken Kesey

*Transformation

Get the right people on the bus, the wrong people off, and then figure out where to drive it.

Must begin with “who” rather than “what” – Reason, if people are on the bus because of ‘where’ then what happens when the bus changes direction?

The right people on the bus eliminate the need to motivate and manage.

Get the wrong people off the bus – great vision without great people is irrelevant.

In the 1970’s CEO Dick Cooley ( Wells Fargo), instead of mapping out a strategy for the deregulation changes he hired outstanding people whenever and wherever they found them, often without any specific job in mind. $1 invested in Wells in 1973 was worth $74.47 in 1998.

*Not a “Genius with a Thousand Helpers”

The comparison companies were more concerned with getting one individual as the primary driving force for the company’s success. The genius at top rarely built strong management teams – they didn’t want one. All they wanted was good soldiers, but when the genius left the soldiers couldn’t make decisions on their own.

*Difference in Philosophy

Good‐to‐Great Companies

Level 5 + Management Team

First Who – build a superior executive team

Then What – figure out the best path to greatness

Comparison Companies

A Genius with a Thousand Helpers

Level 4 Leader

First What – set a vision for where to drive the bus

Then Who – enlist a crew of highly capable helpers

*It is who you pay, not how you pay them

The study found no systematic pattern linking executive compensation to the process of going from good to great. The use of stock options, high salaries, bonus incentives, or long term compensation weren’t a factor in making the transition.

The most important factor was getting the right people on the bus. Nucor stated the most important asset is the right people, and placed greater weight on charter attributes than on specific educational backgrounds, practical skills, specialized knowledge, or work experience. Nucor returned 5.16 times the market from 1975 to1990.

*Rigorous, Not Ruthless

If you don’t have what it takes, you probably won’t last long. To be rigorous means to apply exacting standards at all levels. During most acquisitions the good‐to‐great companies would terminate large portions on the old firm’s employees, only keeping the best. When Wells Fargo acquired Crocker it terminated 1600 employees. There mind set was, “If they aren’t going to make it on the bus in the long term, why let them suffer in the short term.” They thought it was more ruthless to let someone linger around who they would have to fire in the end.

*How to be Rigorous

Practical Discipline

1. When in doubt don’t hire, keep looking.

2. When you know you need to make a people change, ACT.

3. Put your best people on your biggest opportunities, not your biggest problems.