GOOD-TO-GREATCHAPTER 4

CONFRONT THE BRUTAL FACTS

Group 6

Brock Breedlove

Christina Higgins

Holt Martin

Matt Lohr

Jimmie Minchew

Emily Applebaum

Chris Nelson

Shelby Bentley

Introduction All Good-to-Great Companies find

the path to greatness by first confronting the brutal facts of their reality.

A&P vs Kroger1950s 1960s1973 and beyond

Decisions

Good decisions Kroger’s good decision Being good at making right decisions

Pitney Bowes versus Addressograph

Squiggly Things

Confront the brutal facts Confront problems Pitney’s confrontation style

“My job is to turn over rocks and look at the squiggly things,’ even if what you see can scare the hell out of you.” – Fred Purdue

Pitney Bowes Executive

The Danger of Charisma

Roy Ash= failure Winston Churchill= success Managing charisma

Enron

Over charismatic leaders Cult formation Belief that fraud is “okay”

A CLIMATE WHERE THE TRUTH IS HEARD

• “Facts are better than dreams.”

• Vision is important, but the truth is essential

• Having the right people on board

- Surround yourself with talent

• Creating a climate for success

- “Being heard!”

First Step for the Truth

Destination “I don’t know”Alan Wurtzel and Circuit City

Lead with questions, not answersGain understanding

Good to great transition

• Attracting Talent

• Keeping Employees Involved

• Build on Ideas, Not a Vision

Nuclear Corporation of America

Nucor: A Good-to-Great Company In 30 years, went from being in complete

shambles to being the 4th largest steel manufacturer in the world.

Engage in dialogue and debate, not coercion

Got the right people on the bus and followed this strategy

Socratic Method: Key to Nucor’s success

Engage in dialogue and debate, not coercion

All good-to-great companies have an inclination for intense dialogue. ○ “loud debate” “heated discussions” “healthy conflict”

Conduct Autopsies, Without Blame

Philip Morris acquired Seven-Up Company, only to sell it after 8 years at a lossDuring interviews with executives, rought up the

problem on their own and discussed it openly

Conduct Autopsies, Without Blame

In his book, I’m a Lucky Guy, Joe Cullman dedicates five page analyzing the mistake○ Doesn’t hold back the embarrassing truth

Joe blames himself and took full responsibility for its failure, instead of pointing fingers○ “I will take responsibility for this bad decision. But we will all

take responsibility for extracting the maximum learning from the tuition we’ve paid.”

Conduct Autopsies, Without Blame

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

With the right people on the bus, you should never need to assign blame but need only to search for understanding and learning

BUILD RED FLAG MECHANISMS

-Something to immediately halt activity if it is creating failure.

-Creates a climate where truth must be confronted

-With information available constantly, companies must remain flexible with their plans

Using Red Flags- an experiment Author gave students “red flags” to raise

when he was teaching one semester.

Students could raise their red flag and the classroom would stop for them they wanted to voice their opinion, share an experience, disagree with the professor, make a suggestion, or whatever.

What happened?

One student used her red flag and said “Professor Collins, I think you are doing a particularly ineffective job of running class today. You are leading too much with your questions and stifling our independent thinking. Let us think for ourselves.”

Saved time in class and confronted Collins with brutal facts.

Graniterock & Short Pay Bruce Woolpert from Graniterock company

gave Collins the idea for red flag mechanisms.

Bruce instituted “short pay” which gave customers the power to decide how much to pay for services rendered by Graniterock.

Customers evaluated their satisfaction and paid accordingly.

Gave immediate feedback on how company performed “Short pay acts as an early

warning system that forces us to adjust quickly, long before we cold lost that customer”

Power of Information

There is no evidence that good to great companies had better information, rather is was how they used the information available.

If you collect information that cannot be ignored a company can find truth and confront it head on.

Unwavering Faith Amid Brutal Facts

What good-to-great companies do when met with adversity:

Confront strong competition head on

Recognize the brutal facts that won’t disappear

Conscious of the necessary actions to rise to the top

Competitive Competition Scott Paper v. P&G

Conceded to P&G

Content with falling into a “B” category company

Management gave up

Kimberly-Clark v. P&G Viewed competition with P&G as an

asset

Saw an opportunity to make the company stronger

Stimulated competitive juices of all employees

Never feared P&G, but respected them

The “Hardiness Factor”

Not only survive but prevail as a great company

Never consider failure, but manage risks

Use setbacks to restructure the company’s business model to create something much stronger and valuable

Ben & Jerry’s ice cream Originally started out wanting to deliver bagels and

newspapers to people’s homes

Eventually realized a switch to selling ice cream would be much more profitable

Pillsbury owned Haagen-Dazs, wanted to force competition out of industry by attempting to make Haagen-Dazs the only ice cream available for distribution

Ben & Jerry’s resisted, eventually sold company for $325 million to Unilever.

The Stockdale Paradox

Refers to Jim StockdaleHighest ranking officer during Vietnam war

○ POW for 8 years○ Created set of code for POW’s to

communicate while captive○ 1st man in the navy to be awarded the Medal

of HonorHis attitude reflected those of great

companies○ Maintain faith and deal with life as POW

The Stockdale Paradox

“Retain faith that you will prevail in the in end, regardless of difficulties”

“Confront the most brutal facts of your reality, whatever they might be”

AND at the same time

What does this mean?

Its not the presence or absence of liberty, but how you deal with the inevitable difficulties of lifeEVERYONE is presented with troubling

situationsWhat can you make out of your situation?

How to be Great

Great leaders focus on the few things that would have the greatest impact

Great companies face adversity and competition just like every one else. The difference is great companies maintain unwavering faith in the endgame, and are committed to prevail despite the brutal facts

“Every good-to-great company faced diversity along the way to greatness…”

• Nucor – import competition• Pitney Bowes – losing monopoly• Wells Fargo – deregulation• Abbott Labs – massive product recall• Kroger – replace nearly 100 stores

What we’ve covered:

The idea that facts are better than dreams

A climate where the truth is heard Engage in dialogue and debate, not

coercion Conduct autopsies, without blame Build “red flag” mechanisms Unwavering facts amid the brutal truth The Stockdale Paradox