Good to Great and the Social Sectors: A Monograph to Accompany Good to Great

44 Pages·2005·5.65 MB·English

by  Jim Collins

WHY BUSINESS THINKING
ISNOTTHE ANSWER
GOODTOGREAT
ANO THE
SOCIAL SECTORS
AMonographtoAccompany
Good 10Greal
WhySomeCompanies
Makethe Leap . . .
andOthersDon't
JIM COLLINS
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0 2005byJimcoums.AllR1chtsReserved
NOTTOBEREPRODUCED
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ISBN·13:978-0-9773264-0-2
ISBN·lO,O-9773264-0-3
AUTHOR'S NOTE
During my first year on the Stanford faculty in 1988, 1sought out
Professor John Gardner for guidance on how I might become a better
teacher. Gardner, former Secretary of Health, Education and Welfare,
founderofCommon Cause,and authoroftheclassictextSelf-liel/ell'al,
stung mewithacommentthatchanged mylife.
"It occurs to me. Jim. that you spend too much time trying to be
interesting,"he said."Whydon'tyou invest moretime being interested."
I don't know if this monograph will prove interesting to everyone
who reads it,but I do know that it results from my growing interest in
the social sectors. My interest began for two reasons. First is the sur
prisingreachofourwork into thesocialsectors.I'm generallycategorized
asabusinessauthor.yeta third or moreofmyreaderscomefrom non
business. Second is the sheer joy of learning something new- in this
case, about the challenges facing social sector leaders- and puzzling
overquestions that arise from applying our work to circumstances quite
different from business.
Ioriginallyintended this text to be a newchapter in futureeditions
of Gaad to Great. But upon reflection, I concluded that it would be
inappropriate to force myreaders to buya secondcopyofthe bookjust
togetaccess to this piece-and so wedecided to create thisindependent
monograph.That said, while this monograph can certainlybe read asa
stand-alone piece,I'vewritten it to go hand-in-hand with the book,and
thegreatest valuewillaccrueto thosewho read the two together.
I do not consider myself an expert on the socialsectors, but in the
spirit of John Gardner, I am a student. Yet I've become a passionate
student. I'vecome to see thatit issimplynot good enough to focussolely
on having a great business sector. If we only have great companies, we
will merelyhavea prosperoussociety.notagreatone. Economic growth
and powerarcthe means,not thedefinition.ofagreat nation.
JimCollins
www.jimcollins.com
Boulder.Colorado
Jury24.2005

GOOD TO GREAT
AND THE SOCIAL SECTORS
Why Business Thinking Is Not the Answer
We must reject the idea- well-intentioned, but dead wrong-that the
primary path to greatness in the social sectors is to become "more
like a business."Most businesses-like most of anything else in life
fall somewhere between mediocre and good. Few are great. When
)'OUcompare greatcompanies with good ones, manywidelypracticed
business norms turn out to correlate with mediocrity. not greatness.
So. then. why would we want to import the practices of mediocrity
into thesocialsectors?
I shared this perspective with a gathering of business CEOs, and
offended nearly everyone in the room. A hand shot up from David
Weekley, one of the more thoughtful CEOs- a man who built a very
successfulcomp,lOyandwho now spendsnearly halfhistime working
with the socialsectors."Do you have evidence to supportyourpoint?"
he demanded. "In my work with nonprofits, I find that they're in
desperate need of greaterdiscipline-disciplinedplanning,disciplined
people,disciplined governance,disciplioed allocation ofresources."
"What makes you think that's a businessconcept?" I replied."Most
businesses also have a desperate need for greaterdiscipline. Mediocre
companies rarely display the relentless culture of discipline-disci
plined people who engage in disciplined thought and who take
disciplinedaction- thatwefind intrulygreatcompanies.Acultureof
disciplineisnotaprincipleofbusiness;itisaprincipleof greatness."
Later, at dinner, we continued our debate,and I asked Weekley:"If
you had taken a different path in life and become,say,a church leader,
2 JIMCOLLINS
a university president, a nonprofit leader, a hospital CEO, or a school
superintendent. would you have been any less disciplined in your
approach? Would you have been less likely to practice enlightened
leadership,nr put lessenergyinto getting the rightpeopleon the bus,or
been lessdemandingofresults?"Weekleyconsidered the question for a
longmoment."No, Isuspectnot:'
That's whenitdawnedonme:weneed anew language.Thecritical
distinction isnotbetween businessand social, butbetweengreat
andgood.Weneedtorejectthenaiveimpositionofthe"language
ofbusiness"onthesocialsectors, andinstead jointlyembracea
languageofgreatness.
That's what our work isabout: building a framework ofgreatness,
articulating timelessprinciples that explain whysome become great and
others do not. \Vederived these principles from a rigorous matched
pairresearch method,comparing companies that became greatwith
companies that did not.Our work is not fundamentallyabout business;
itisaboutwhatseparatesgreatfromgood.
THE GOOD-TO-GREAT MATCHED-PAIR RESEARCH METHOD
InflectionPoint Whalprinciplesexplainthe
difference?
Good.notGreat
.................................. .............. .................................
Good,notGreat ComparisonCases
Matched-PairSelection
(Comparablecasesatthemomentof
inflection)
GOODTOGREATANDTHESOCIALSECTORS 3
Socialsectorleaders haveembraced this distinction-the principles
of greatness, as distinct from the practices ofbusiness-with remark
able case. If a nonbusiness reader is just as likely to email me as a
business reader, thcn somewhere between 30%and 50% of those who
have read Good to Great come from nonbusiness. We've received
thousands of calls, letters, emails and invitations from education.
hcalthcare, churches, the arts, social services, cause-driven nonprofits,
police,governmentagencies,andeven militaryunits.
Twomessagesleap out,First, the good-to-great principlesdo indeed
apply to thesocialsectors,perhapsevenbetter than weexpected.Second,
particular questionscrop up repeatedlyfrom socialsector leaders facing
realities theyperceive to bequitedifferent from thebusinesssector.I've
synthesizedthesequestionsinto five issues thatform the frameworkof
thispiece:
I - Defining"Great"-CalibratingSuccesswithout BusinessMetrics
2- Level5 Leadership-GettingThingsDonewithina Diffuse
PowerStructure
3- FirstWho- Gettingthe Right Peopleon the Iluswithin
SocialSectorConstraints
4-TheHedgehogConcept- Rethinkingthe EconomicEngine
without aProfitMotive
5-Turningthe Flywheel- IluildingMomentum byIluilding
the Brand
I've based thispiece on criticalfeedback,structured interviews, and
laboratoryworkwith more than 100socialsector leaders.WhileIhope
to eventuallysee the results ofmatched-pairresearch that uses non
business entities as the data set, such research studies- clone right
require up toadecade tocomplete. In the meantime, Ifeelaresponsi
bility to respond to the questions raised by those who seek to applythe
good-to-great principles today, and I offer this monograph as a small
interimstep.
4 JIMCOLLINS
ISSUEONE, DEFINING"GREAT"- CALIBRATINGSUCCESS WITHOUT
BUSINESSMETRICS
In 1995,officersat the NewYorkCity Police Department (NYPD)found
an anonymous note posted on the bulletin board."'Vc'rc not report
takers," thenoteproclaimed."We'rethepolice.'" Thenotetestifiedto the
psychological shift when then PoliceCommissioner William ). Bratton
inverted the focus from inputs to outputs. Priorto Bratton,the NYPD
assessed itself primarily on input variables- such as arrests made. re
ports taken. cases closed, budgets met-rather than on the output
variable of reducing crime. Bratton set audacious output goals,
such as attaining double-digit annual declines in felony crime rates,
and implemented a catalytic mechanism called Compstat (short for
"computercomparisonstatistics").
A 1996 Time article describes a police captain sweating ata podium
inthecommandcenter.Hestandsbeforeanoverheadmapwith abunch
of.red dots.showing asignificant increase in robberies in his precinct.
InaSocratic grilling session reminiscent of Professor Kingfield in The
PuperChase,thequestionscome relentlessly."Whatisthepattern here?"
"Whatarcyou going to do to take these guys out!'? According to CIG
Illsight magazine, 75%ofcommanders found themselves ejected from
theirpositions for failing to reduce crime in their precincts."If, week
after week at the Compstat meetings, we found precinct commanders
not performing to the standards," explained Bratton,"we had to find
someone elsetodo thejob.'"
This distinction between inputs and outputs is fundamental, yet
frequentlymissed. I recentlyopened the pagesofa business magazine
that rated charities based in parton the percentage ofbudgetspenton
management,overhead and fundraising.It'sa well-intentioned idea,but
reflects profound confusion between inputs and outputs.Think about it
thisway:Ifyou rankcollegiateathleticdepartmentsbased on coaching
salaries, you'd find that Stanford University has a higher coachingcost
structure as a percentage oftotal expenses than some other Division
Ischools.ShouldwethereforerankStanfordas"lessgreat"?Followingthe
logicofthe businessmagazine,that'swhat we might conclude- and our
GOODTOGREATANDTHESOCIALSECTORS 5
conclusion would be absurd. Stanford won the NationalAssociation of
CollegiaIeDirectorsofAthleticsCupforbestoverallperformancefor lO
consecutive years,beating out allother majorschools,while delivering
athlete graduation rates above 80%.4To say. "Stanford is a less great
program because it has a higher salary structure than some other
schools"would miss the main point that SIanford Athleticsdelivered
exceptional performance,defined by the bottom-line outputsofathletic
and academic achievement.
Theconfusion betweeninputs and outputs stems from oneof the
primarydifferencesbetween business and thesocialsectors. In
business,moneyisbothan input (aresourceforachievinggreatness)
andanoutput (ameasureofgreatness). In thesocial sectors, money
isonlyan input,and not ameasureof greatness.
Agreat organization is one that delivers superior performance and
makes ~1 distinctiveimpact over a long period of time. For a business.
financialreturnsarca perfectlylegitimate measureof performance.For
a social sector organization, however, performance must be assessed
relative to mission, not financial returns.In thesocialsectors,the critical
question is not"How much money do we make per dollar of invested
capital?" bUI"How effectivelydo we deliver on our mission and make
adistinctiveimpact,relativetoourresources?"
Now, you might be thinking, "OK, but collegiate sports programs
and police departments have one giant advantage: you Ci1l1 measure
win records and crime rates.What if your outputs are inherentlynot
measurable?" The basic idea is still the same: separate inputs from
outputs, and hold yourself accountable for progress in outputs, Cl'ell
ifthoseoutputsriefy measurement.
When Tom Morris became executive director of The Cleveland
Orchestra in 1987, the orchestra faced deficits exceeding 10%,a small
and stagnant endowment, and a struggling local economy. Prior to
taking the position,Morrisasked two key board members, "What do
rOll want me to do if I come here?" Their answer: make an already
great orchestraevengreater,definedbyartisticexcellence.