Summary and Comments on
Built to Last
by James C. Collins and Jerry I. Porras
Introduction: Not a Fad
Stephen Covey, in his seminal The Seven Habits of Highly Effective People, emphasizes the importance of living one’s life according to timeless principles, or what he calls “laws of the farm.” He counsels against searching for the quick fix. Professional (and personal) growth takes a daily commitment and many decisions. Built to Last make a unique and valuable contribution to current business literature by applying this view to the corporation. They write, “We set out to discover the timeless management principles that have consistently distinguished outstanding companies.” The authors conclude that the most successful companies eschew merely following the latest fad. And the authors argue that a company does not require one great idea or some charismatic CEO to be successful. Rather the most successful companies in the world operate according to powerful and effective principles that are reproducible by any ambitious company (or department) that will take the time to understand and rigorously apply them. Built to Last sets out those principles.
Ask the Experts
In August of 1989, Stanford University’s James C. Collins and Jerry I. Porras sent survey’s to 700 Fortune 500, and Inc. 500 and 100 company CEO’s[1]. These business leaders were heads of industrial and service companies, both private and public. Each executive was asked to name five or less companies that they saw to be “highly visionary.” After receiving 165 responses (23.5% of those queried), the authors selected the twenty companies most frequently listed. Then, with the desire to exclude any company that might still be the benefactor of one great idea or leader (more on this to come), they threw out any company that began after 1950. They ended up with 18 companies, with 1897 being the average founding date.
Realizing that these exceptional companies would have many characteristics in common with many other un-exceptional companies, the authors decided to select a group of comparison companies in order to determine the distinctive characteristics of the 18 visionary companies. Collins and Porras chose a sister comparison company for each visionary company, guided by the visionary company’s date of founding, its product and markets. In addition, the comparison company could not be what they call “a dog company,” but itself must be at least moderately successful.
These are the companies studied in Built to Last:
The Visionary Companies The Comparison Companies
3M Norton
American Express Wells Fargo
Boeing McDonnell Douglas
Citicorp Chase Manhattan
Ford GM
General Electric Westinghouse
Hewlett-Packard Texas Instruments
IBM Burroughs
Johnson & Johnson Bristol-Myers Squibb
Marriott Howard Johnson
Merck Pfizer
Motorola Zenith
Nordstrom Melville
Philip Morris RJR Nabisco
Procter & Gamble Colgate
Sony Kenwood
Wal-Mart Ames
Walt Disney Columbia
Indicative that the CEOs were accurate in evaluating the success of these 18 visionary companies is the fact that $1 invested in on January 1, 1926 would have yielded $6,356 at the end of 1990.[2] This is fifteen times the performance of the general market ($415). And the $955 that the comparison companies would have netted after a similar investment shows that they too have been moderately successful, also out performing the general market.
The authors then undertook a study unique in business literature: they studied each of these eighteen visionary companies and their sister comparison companies through their entire history. In this way, they sought to discover the timeless principles that determined the companies’ respective successes.[3]
Tell the Time or Build the Clock
One of the central ideas of Built to Last is that the leaders of the great visionary companies of the last one hundred years have focused on building the company rather than exclusively on building a product or presenting a service. The well-made product or the radically pro-customer service is seen as being serendipitous to the building of the company itself. The writers teach that if you focus on building a great company, then the excellence of service and product will naturally follow. Collins and Porras use a metaphor to illustrate this point. They draw the distinction between leaders who are able to merely “tell the time” or those which have the capacity to “build clocks.” Those who can quickly motivate those around them by dent of their large or charismatic personality are time-tellers. Or, leaders that achieve a fast success on the basis of a great idea tell time. But the leaders who put together and maintain companies that succeed over time are those who build clocks. The success of these companies transcend the occasional charismatic leader and the intermittent great idea.
The writers use this metaphor to shatter the myth that great companies require charismatic leaders or fantastic product ideas. Bill Hewlett and Dave Packard started a company with only the desire to do something in electronic engineering. Bill says, “We did anything that would bring in a nickel. We had a bowling foul-line indicator, a clock drive for a telescope, a thing to make a urinal flush automatically, and a shock machine to make people lose weight. Here we were, with about $500 in capital, trying whatever someone thought we might be able to do.”[4] After he started Sony, Masaru Ibuka joined in a meeting with his seven first employees to decide what to make! Their first product, a rice cooker, didn’t work. What Built to Last calls their “first significant product,” which was a tape recorder, failed on the market. 3M began with a corundum mine that was so unsuccessful that its stock dropped to what the authors call the “barroom exchange value” of “two shares for one shot of cheap whiskey.”[5] Their second president was not able to take a salary for his first eleven years! Imagine how profitable Procter & Gamble would be today if they still sold lamp oils, candles, and hog fat soap! Three of the visionary companies Collins and Porras selected started with a great idea, while eleven of the eighteen comparison companies started this way.[6] Ten of these comparison companies were initially more successful than their sister visionary companies. Collins and Porras conclude, “In short, we found a negative correlation between early entrepreneurial success and becoming a highly visionary company.”[7] They suggest that the reason for this inverse relationship is that the great idea distracts the leaders of the company from focusing on the company as what they call “the ultimate creation.”[8]
Do We Build A Product or a Company?
The authors present the creator of visionary company General Electric, Charles Coffin, as a clock builder. While not an inventor, he did establish the General Electric Research Lab, a fundamental component of GE that has richly rewarded the company with many good ideas. George Westinghouse, on the other hand, not only founded Westinghouse but fifty-nine other companies as well. He was a productive inventor. He correctly believed that Westinghouse’s AC electrical system would prevail over the General Electric’s DC system. The authors comment, “Westinghouse’s greatest creation was the AC power system; Coffins greatest creation was the General Electric Company.”[9] He focused more on the company itself and, as a result, GE has been the more successful company over time. Hewlett-Packard also shows this emphasis. In the mid-1950’s Bill Hewlett said, “[E]ngineering is one of our most important products.”[10] At HP, it is the process of creating a product and the organization of the company intrinsic to that process that is primary, not the product itself. Collins and Porras conclude, “[T]he continual stream of great products and services from highly visionary companies stems from them being outstanding organizations, not the other way around.”[11]
In Search of the Mythopoeic “Great Leader”
The authors challenge their readers to identify William McKnight. Most people even in the business world have never heard of him. And yet William McKnight was a top executive of Minnesota, Mining, and Manufacturing Company (better known as 3M) for fifty-two years![12] Ibuka of Sony was thought of as being introspective and reserved. Procter and Gamble are described as “stiff, prim, proper, and reserved -- even deadpan.”[13]Collins and Porras call Bill Allen “the most significant CEO in Boeing’s history.”[14] He’s been described as having a benign appearance. The word “restraint” is used to describe Merck’s George W. Merck. Contrary to conventional popular wisdom, the visionary companies aren’t populated at the top with tremendous charismatic visionary leaders over their histories. The evidence suggests that the organization is more critical to the success of the company rather than the presence of a large personality.
In concluding their discussion of the distinction between time telling and clock building, the writers suggest that rather than waiting for the big idea or the high-profile charismatic leader, aspiring visionary companies can rather focus on learning the principles that underlie the visionary companies’ success.
Profit is a Serendipity
What’s at the center of the fine running clocks studied by Collins and Porras? It’s a core ideology. It’s the values and beliefs that form the foundation of the company’s existence. It is, in fact, the company’s raison d’être. The authors found that seventeen of the eighteen companies that they studied were guided more by their ideology and less by the desire to “maximize shareholder wealth.” In 1960, David Packard was speaking with a group of his employees responsible for a management development program that HP was initiating. To them, he stated,
I want to discuss why a company exists in the first place. In other words, why are we here? I think many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company’s existence, we have to go deeper and find the real reasons for our being. As we investigate this, we inevitably come to the conclusion that a group of people get together and exist as an institution that we call a company so they are able to accomplish separately -- they make a contribution to society, a phrase which sounds trite but is fundamental....The real reason for our existence is that we provide something which is unique [that makes a contribution][15]
The core ideology acts as a map for the visionary company. For example, in the case of Hewlett-Packard, their core ideology guided them away from simply developing a personal computer only because it was vastly popular. Hewlett-Packard would only enter the market when it felt that it had something unique to contribute to the personal computer market technologically. That resolve represented a commitment to a core value.
In 1950 George Merck II, head of the pharmaceutical giant Merck & Company, said,
“We try to remember that medicine is for the patient. We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.”[16]
High rhetoric? Many years ago the parasitic worms which caused “river blindness” plagued over one million people in Third World countries by swarming through body tissues and eventually painfully blinding the eyes. Merck developed Mectizan hoping that some third party, perhaps some government agency, would purchase the drug. No one did. And so Merck, because of his core values, gave the drug to everyone who needed it. And using his own money, Merck became directly involved in the drug’s distribution.
“The Tyranny of the Or” versus “The Power of the And”
The authors periodically revisit the what they call the “both/and” nature of the visionary companies. Contradicting any presumption of inherent tension between strictly charting a company’s progress by the compass of a core ideology or guiding a company by the desire to make money, Built to Last highlights Merck’s decision to bring streptomycin to Japan. That drug stopped tuberculosis in Japan and the company made no money on this venture. Yet today, Merck is the biggest pharmaceutical company America has on the island.
In 1916 Henry Ford said,
“I don’t believe we should make such an awful profit on our cars. A reasonable profit is right, but not too much. I hold that it is better to sell a large number of cars at a reasonably small profit...I hold this because it enables a larger number of people to buy and enjoy the use of a car and because it gives a larger number of men employment at good wages. Those are the two aims I have in life.”[17]
Henry Ford really believed this. And because of his ideology, Ford made the automobile the ubiquitous icon of Americana. His ideology moved him to lower the price of the Model T by 58 percent between 1908 and 1916 (“because it enables a larger number of people to buy and enjoy the use of a car”). His ideology constrained him to double the standard industry rate of pay for his workers (“and because it gives a larger number of men employment at good wages”). In the short run, both of these decisions were unprofitable. Yet in the long run, they are two ways that Ford distinguished itself from the thirty plus car companies that existed at the dawn of the automobile industry.
What Changes and What Doesn’t: “Preserve the Core/Stimulate Progress”
One of the balancing acts that Built to Last explores in the visionary companies is that between preserving the ideological core of the business while simultaneously stimulating progress. The core preserved is the group of values that form the foundation of the company. Nothing is done that is inconsistent with that set of values. And yet the stimulation of progress requires constant flexibility and change. Even corporate culture is changeable, as long as that change does not violate a core value. For example, at 3M, “Respect for individual initiative” is a part of their core value group. Procedurally, one way that this value is translated in their corporate culture is for every technical employee to be given the chance to spend 15% of their work week on a project of their own choosing. This procedure could change; the value behind it must not. If the 15% procedure were discarded by reason of some business exigency, that would not threaten the company’s growth. If it were part of a management trend away from “Respect for Individual Initiative,” then the value core of the company would be threatened and its structural integrity. Its long-term profitability would be threatened, even if in the short run profits would increase or more money would be saved.
The authors emphasize that once a company’s core values are determined (whether it’s by a mission statement or a vision statement or whatever) then it is absolutely critical that management put into place tangible mechanisms which communicate and apply these values. They say, “This is the essence of clock building.”[18] Similarly, tangible mechanisms must also be instituted that stimulate progress.
Big Hairy Audacious Goals
One of the mechanisms that the writers discovered visionary companies use to stimulate growth is what they call BHAG’s or Big Hairy Audacious Goals. In 1952 Boeing’s engineers were developing a vision for the first big commercial jet airplane. Previous to this point, four-fifths of their business was from the United States Air Force. Commercial airlines were not interested in jets. And Boeing estimated that it would take about 25% of the company’s net worth just to develop a prototype. But because it fit with Boeing’s core ideology and because it would stimulate growth, Boeing decided to move forward with the development of what came to be known as the 707. Its comparison company, Douglas, did not bring a commercial jet aircraft to market for another six years, and still never achieved the sales of Boeing.
Not all of the visionary companies used BHAGs. But the companies that do find that they enable their employees to get a vision of the company’s core ideology incarnate. It’s touchable. It’s tangible. And it’s big! Walt Disney saw a BHAG when he visualized Disney World. In the beginning of the sixties, IBM spent more money to develop a new computer - the IBM 360 than the United States Government had spent on the Manhattan Project.[19] IBM took a huge gamble spending $5 billion on the 360; its success would cast most of their product lines into obsolescence.
Business as Religion
Consistent with its commitment to a strongly held core ideology, the visionary companies tend to have an almost cultlike atmosphere. The cultures are tight and inclusive. Not everyone will like it. There is a distinguishable period of indoctrination into the culture at the beginning of an employee’s career. Nordstrom's has this kind of atmosphere. They encourage employees to write stories about the heroic exploits of fellow employees. They hire those who are young and more malleable. They give more money, recognition, and prizes to those who perform in accordance with their tightly defined core values. Those who fall short receive marks in their folder and other penalties. They call themselves “Nordies.” These companies communicate that those who work there are part of the elite. They are the chosen. Thomas J. Watson, Jr. put together country clubs which IBM managed to encourage their employees to socialize among themselves. In their training program, IBMers sing songs from the Songs of the IBM like “Ever Onward” and “The Star-Spangled Banner.”[20] The 1985 edition of The 100 Best Companies to Work For reads, “You must be willing to give up some of your individual identity to survive [IBM].”[21] Every employee of Walt Disney must go through Disney University. No man has facial hair. They have their own nomenclature: on duty is “onstage;” a crowd is an “audience;” a job description is a “script;” and so forth. If any Walt Disney employee cursed in their founder’s presence, they were immediately terminated. Procter & Gamble expects their employees to spend free time mostly with other P&Gers, even go to the same churches! The company frowns on employees using luggage identification cards that indicate they work for P&G. One mustn’t talk about business in a public place.
It must be stressed here that many of the items mentioned above are cultural. These practices themselves don’t explain the success of these companies. What they do explain is the degree to which the company takes its core ideology seriously. The way it communicates or expresses that ideology varies from company to company; the level of commitment to their core values does not. And that is the key point. If a company’s management really believes its core ideology, there will be some tangible manifestations of that belief in the organization, culturally appropriate for the company’s workforce and its socio-cultural environment.
Ouch!! I’ve cut myself. I wish someone would invent a Band-Aid.
In 1920, Earle Dickson used surgical tape, gauze, and a covering which wouldn’t stick to skin to make something to cover his wife’s wounds. She seemed predisposed to cutting herself with knives in the kitchen. He mentioned it to the marketing people in Johnson and Johnson, where he worked, and after much experimentation, the Band-Aid was born. It became J&J’s most successful product category. In 1890 Fred Kilmer sent some Italian talc to a physician who said that his patients’ skin was being irritated by medicated plasters he had bought from Fred’s company. This became “Johnson’s Toilet and Baby Powder.” In 1937 J.Williard Marriott observed that people about to fly out of Washington, DC’s Hoover Airport would buy food and stuff it wherever they could. He pondered this and the next day he struck a deal with Eastern Air Transport to give them prepackaged lunches. Later he added American Airlines. Eventually Marriott spread to over one hundred airports. Tom Peters, one of the co-authors of In Search of Excellence, might call it “a bias for action.” James Collins and Jerry Porras call it “Try a lot of stuff and keep what works.” The writers present this step as another way to stimulate progress. They write, “...evolutionary progress usually begins with small incremental steps or mutations, often in the form of quickly seizing unexpected opportunities that eventually grow into major--and often unanticipated--strategic shifts.”[22]
One of the reasons that these changes are even possible is that the visionary companies tend to be atmospheres that facilitate what’s been called intrepreneurship. Intrepreneurship is the manifestation of innovation within an established business structure. Employees are given the chance to try out their ideas and to spend company time and resources while on their exploration. Tom Peters calls them “skunk works.”
“Seeing what works” presumes that much will not work. And so the visionary companies tend to have a greater tolerance for innovative failure. Many mistakes accompany the intrepreneur on the road to eventual success.
Collins and Porras make a necessary corrective to Peters and Waterman’s In Search of Excellence’s dictum “Stick to the Knitting.” They detail examples of where the visionary companies rather moved away from their knitting to new areas of innovation or even other markets. They say, rather, “Stick to the Core Values” which rings truer in light of the visionary companies’ success.
While the authors’ presenting evolution as a metaphor of a company seizing small incremental opportunities to improve is, in our opinion, somewhat tortured and drawn out through this chapter, nevertheless the progress of this type of change does reflect a habit of the visionary companies.
“Talent Stacked Like Cordwood”
Consistent with the visionary company’s deep, heartfelt commitment to its core ideology is its tendency to promote from within. One of the reasons for this commitment is that it tends toward preserving the core ideology. 3.5% of the 113 CEOs of the 18 visionary companies came from outside of the company. 22.1% of the comparison companies’ 140 CEOs came from outside of the respective company. The authors pointedly comment, “[A]cross seventeen hundred years of combined history in the visionary companies, we found only four individual cases of an outsider coming directly into the role of chief executive.”[23] Dun’s Review said of Procter & Gamble’s commitment to preserve its ideological core by consistently developing management talent for successions at every level of its hierarchy, “P&G’s program for developing managers is so thoroughgoing and consistent that the company has talent stacked like cordwood -- in every job and in every level.”[24] Reginald Jones of General Electric put together “A Road Map for CEO Succession” seven years before Jack Welch took the helm. He then spent 2 years trimming down the list of potential CEO’s from inside the company from 96 down to 6. Finally, Welch was chosen.[25]
Oftentimes the decision to go outside of the company for any key manager, or a CEO, can be motivated by a commendable desire to reinvigorate the company. Sometimes such a decision is a company’s leadership’s way of fishing for fresh energy, or perhaps even new ideas, in the new hire. Or, worse, the company is forced to go outside of itself to garner talent because it is not developing talent internally. Many times going outside of a company can be a desired short-cut that managers choose to jump-start an ailing organization. Instead of treating re-invigoration as a crap shoot dependent on who can be pulled off the street, these companies need to change their system - their organization - and not merely patch up their talent repertoire with the occasional hire. And if the new worker enters a system that is not already one that empowers its employees, she/he will have a more difficult time flourishing anyway.
Michael Hammer & James Champy, in their Reengineering the Corporation, write about the company where workers are not expected to innovate or think or do anything other than simply what they are told. They call it industrial feudalism.[26] We have observed a similar prejudice in today’s business environment: a prejudice against the hourly worker. If endemic to an organization, this prejudice weakens the company significantly. This attitude does not allow the synergy that can develop when a company realizes that all of its workers have something significant to contribute. And this contribution is much, much more than the occasional good idea dropped in the ubiquitous suggestion box. Visionary managers actively seek to engage the brains of those who report to them, not just respond with a condescending thanks when the hourly employee or front-line employee presents a fine idea. Oftentimes, the desire to go outside of one’s own company to hire talent reflects a subtle “professional” disdain for those already working within the company, those who are waiting to be given a chance to show just what they’re capable of.
The Unacceptable Status Quo
Built to Last presents another mechanism which the visionary companies employ to ensure constant growth: creating corporate discomfort. In other words, the visionary companies are never satisfied with what they have achieved so far, but are always stretching ahead to beat themselves. Procter & Gamble allow brands to compete against each other within the company. Motorola instituted a practice of stopping the production of developed products before they had finished their product life cycle to force the constant developing of new products. Boeing uses a mechanism that Collins and Porras call “the eyes of the enemy” in which managers act as if they were managers of competition companies planning how to beat Boeing in the marketplace.[27] Sam Walton encouraged his retailers to always attempt to beat the sales of the same day in the previous year.
The visionary companies also invested more of their profit back into the company while giving out lower shareholder cash dividends than the comparison companies.
They also invest more in their people’s training, spending a significant amount in training centers. Motorola sets a goal of forty hours of training per employee per year. Disney requires every one of its employees to go through Disney University. 3M, Procter & Gamble, General Electric, Marriott, IBM, and Motorola all have some form of training center.
A Constant Vigilance to Protect Core Values
The visionary companies have many, many instruments in place that reinforce the core ideology. Merck has videos, books, seminars, speeches, outside magazine articles, journals, and internal magazines and newsletters which continuously stress the company’s core values. Hewlett-Packard took its managers off-site in the 1950’s to write the company’s “constitution.” HP also has a healthy dose of apocryphal and true “Bill and Dave stories” which usually are anecdotes that illustrate HP core values. Nordstroms gives all of its salespeople business cards to emphasize their core value that there employees are important and that they are professionals.
At the same time, the writers suggest that those companies that wish to operate on a par with the visionary companies also need to exercise diligence to “correct misalignments” with core values.[28]
Now What?
The authors end their book with a helpful list of frequently asked questions.
The first question is “Where should we begin?”[29] And that is an excellent place for us to end our summary and comments. They give a number of answers to that query:
1 - Determine the company’s core ideology, which is comprised of two aspects:
a. What are the organization’s core values? There should be only five or six of these. And they must not be time contingent. It is not what is popular at the present time. It’s a value that’s upheld consistently no matter what.
b. Why does the company exist? The authors give a helpful question to determine this: “Suppose we could shut this company down with no adverse economic consequences to employees or owners. Why shouldn’t we do so? What would the world lose if the company ceased to exist? What would we lose if it ceased to exist?”[30]
2. Institute mechanisms in the company that preserve the core values. Is it a training center? How many hours a year should employees be in training? Does the company have a library where books that elucidate core values are available to all? What can be done to recognize employees, in a big and public way, that heroically apply core values in their service to customers, external and internal? Are those that best reflect the company’s core values the best compensated? Are the awards of the company in line with these values?
3. Institute mechanisms in the company that stimulate progress.
Do all employees have a forum for expressing ideas for stimulating business? for better serving the customer? What Big Hairy Audacious Goal would be appropriate? Is innovative failure allowed? Is failure encouraged?? Are intrepreneurial employees recognized with much fanfare and hoopla?
4. Correct misalignments with the company’s core values.
Is there a regular forum for employees to highlight company practices that are inconsistent with the company’s core ideology?[31] Is the exploration of misalignment a regular topic of managers’ meetings? Is healthy peer pressure encouraged for those whose attitude is inconsistent with the company’s core values?
The authors state that failure to take this step is a common mistake. Perhaps it is so common because it is easier to institute a new process or policy or procedure, but to change one that already exists is likely to threaten someone. Someone thought that it would be a good idea to put that misaligned process in place to begin with, and someone else has probably grown quite comfortable with it by now. Alignment is sometimes painful, but it is always necessary.
Actually Rome wasn’t built in a day
One of the authors’ comments needs to be especially emphasized in the current business environment with its emphasis on the quick fix, the latest managerial fad, or the currently best-selling book on business. It also speaks to the shareholders who are looking for the best return on their investment this quarter. Collins and Porras write, “[T]he basic elements we found to distinguish the visionary companies usually appeared in the companies long before they became hugely successful premier institutions.”[32]
A Final Quibble
While enthusiastically embracing the core points of this book, we nevertheless select one area where Built to Last could have been improved. While discussing their method, the authors inform us,
“In particular, we sought to stimulate our thinking with ideas that had nothing, on the surface, to do with business and merged these with observations from our research. We therefore read extensively from nonbusiness disciplines: biology (especially evolutionary theory), genetics, psychology, social psychology, sociology, philosophy, political science, history, and cultural anthropology.”[33]
In a book so humanistically oriented, it is surprising that Collins and Porras did not tap into the rich vein of religious writings to supplement their findings. Other writers, such as Stephen Covey, have not hesitated to refer to some of the great writings of religion and apply them to business. The supreme value of the individual that the authors so eloquently accentuate in their themes is thoroughly consistent with a host of religious traditions. And in their section on the seemingly cultlike nature of the visionary companies, an imaginative discussion of the nature of religious commitment, and how that relates to business, could have brought the section a healthy perspective.
Conclusion
Built to Last gives many examples of companies that have focused more on building a fine organization rather than making a product, providing a service, or making a profit. Many of the most successful companies of the last one hundred years have operated with an almost religious fervor in their passionate commitment to a core ideology. They have a host of mechanisms in place that preserve this core. They also creatively seek to stimulate progress by using such mechanisms as Big Hairy Audacious Goals and constant incremental improvements. The companies that would succeed in the 21st Century need not come up with the one fantastic idea, or hire the charismatic and visionary CEO. The visionary companies of the next 100 years will succeed because they have patiently applied the “laws of the farm,” the timeless principles that have worked for the visionary companies of the last 100 years.
Stephen Shields
stephen@shieldsplace.org
Addendum - Application Questions
1 - Determine the company’s core ideology, which is comprised of two aspects:
a. What are the organization’s core values? There should be only five or six of these. And they must not be time contingent. It is not what is popular at the present time. It’s a value that’s upheld consistently no matter what.
b. Why does the company exist? The authors give a helpful question to determine this: “Suppose we could shut this company down with no adverse economic consequences to employees or owners. Why shouldn’t we do so? What would the world lose if the company ceased to exist? What would we lose if it ceased to exist?”[34]
2. Institute mechanisms in the company that preserve the core values. Is it a training center? How many hours a year should employees be in training? Does the company have a library where books that elucidate core values are available to all? What can be done to recognize employees, in a big and public way, that heroically apply core values in their service to customers, external and internal? Are those that best reflect the company’s core values the best compensated? Are the awards of the company in line with these values?
3. Institute mechanisms in the company that stimulate progress.
Do all employees have a forum for expressing ideas for stimulating business? for better serving the customer? What Big Hairy Audacious Goal would be appropriate? Is innovative failure allowed? Is failure encouraged?? Are intrepreneurial employees recognized with much fanfare and hoopla?
4. Correct misalignments with the company’s core values.
Is there a regular forum for employees to highlight company practices that are inconsistent with the company’s core ideology?[35] Is the exploration of misalignment a regular topic of managers’ meetings? Is healthy peer pressure encouraged for those whose attitude is inconsistent with the company’s core values?
The authors state that failure to take this step is a common mistake. Perhaps it is so common because it is easier to institute a new process or policy or procedure, but to change one that already exists is likely to threaten someone. Someone thought that it would be a good idea to put that misaligned process in place to begin with, and someone else has probably grown quite comfortable with it by now. Alignment is sometimes painful, but it is always necessary.
Copyright © 1999 by Stephen Shields
You can purchase this book here.
[1]From the jacket: AJames C. Collins operates a management education and consulting practice based in Palo Alto, California. He is the coauthor of Beyond Entrepreneurship and a recipient of the Distinguished Teaching Award at Stanford University Graduate School of Business, whose faculty he joined in 1988. Previously he held positions at McKinsey and Company and Hewlett Packard. James I. Porras is the Fred H. Merrill Professor of Organizational Behavior and Change at Stanford University Graduate School of Business. He is the author of Stream Analysis and the co-inventor of stream analysis computer software, used for organizational change diagnosis. He also directs Stanford=s Executive Program in Organization Change. Previously he held positions at General Electric and Lockheed.@
[2]Collins and Porras assume that you reinvested all the dividends. They also adjust for when the particular companies appeared on the Stock Exchange (see p. 4).
[3]In this study, Collins and Porras estimate they reviewed almost one hundred books and more than three thousand document involving over sixty thousand pages. The documentation for their six year project was encased in three shoulder-height file cabinets and four bookshelves. In addition, their financial data and analyses filled twenty megabytes (see p. 19).
[4]Hewlett-Packard Company Archives, AAn Interview with Bill Hewlett,@ 1987, quoted on p. 24.
[5]Our Story So Far (St.. Paul, MD: 2M Company, 1977),51; quoted on p. 26.
[6]Of the visionary companies, Johnson & Johnson, General Electric and Ford started with a great idea.@ Ames, Burroughs, Colgate, Kenwood, McDonnell Douglas, Norton, Pfizer, R.J. Reynolds, Texas Instruments, Westinghouse, and Zenith of the comparison companies started with a great idea;@ p. 27
[7]emphasis theirs; p. 28
[8]emphasis mine; p. 28
[9]p. 29
[10]@Hewlett-Packard Chairman Built Company by Design, Calculator by Chance,@ The MBA Executive, September, 1977, 6-7; quoted on p. 29.
[11]p. 31
[12]He was general manager from 1914 to 1929, 3M=s chief executive from 1929 to 1949, and its chairman from 1949 to 1966.
[13]p. 33
[14]p. 33
[15]David Packard, speech given to HP=s training group on 8 March 1960, Hewlett-Packard company archives; quoted on p. 56.
[16]George W. Merck, Speech at the Medical College of Virginia at Richmond, December 1, 1950; quoted on p. 48.
[17]Robert Lacey, Ford -- The Men and the Machine (New York: Ballantine Books, 1986), 179; quoted on p. 53, emphasis mine.
[18]p. 89
[19]The Manhattan Project developed the first nuclear bomb.
[20]This is an excellent example of the cultural relativity of specific practices which reflect a company=s core values. In our area, the nation=s capital, we feel that singing songs would be viewed as hokey by the typically urbane DC area workforce. Yet historically it could have been a very effective tool in certain parts of the country.
[21]Robert Levering, Milton Moskowitz, and Michael Katz, The 100 Best Companies to Work for in America (New York: New American Library, 1985),163-168; quoted on p. 125.
[22]p. 145
[23]emphasis theirs, p. 173
[24]Hugh D. Menzies, The Changing of the Guard,@ Fortune, 24 September 1979; quoted on p. 178.
[25]p. 172; Collins and Porras also note, A...runner up candidates went on to become president or CEO of such companies as GTE, Rubbermaid, Apollo Computer, and RCA. As an interesting aside, more GE alumni have become chief executives at American corporations than alumni of any other company.@ p. 172.
[26]Michael Hammer and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution, (New York: HarperCollins, 1993), pp. 95,96.
[27]p. 188.
[28]p. 215
[29]p. 219
[30]p. 220
[31]The question is not whether or not your company has ideological misalignments; the question is whether your company has mechanisms that correct the inevitable misalignment.
[32]Appendix 1, Research Issues,@ p. 235, emphasis theirs.
[33]p. 20
[34]p. 220
[35]The question is not whether or not your company has ideological misalignments; the question is whether your company has mechanisms that correct the inevitable misalignment.
|
