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Good to Great, by Jim Collins

From The Objective Standard, Vol. 10, No. 2.

Good to Great Cover

Good to Great: Why Some Companies Make the Leap . . . and Others Don’t, by Jim Collins. New York: HarperCollins, 2001. 260 pp. $29.99 (hardcover).

Do you want to live a good life—or a great one? Do you want to run a good business—or a great one? “Good is the enemy of great,” writes Jim Collins in the opening line of Good to Great: Why Some Companies Make the Leap . . . and Others Don’t.

Collins asks, “Can a good company become a great company, and, if so, how?” (p. 3). Toward answering this question, Collins examines eleven companies that made the leap. Over the course of five years, Collins and his team perused thousands of articles, interviewed executives for hundreds of hours, analyzed stock performances, and more. From this chaotic trove of data, Collins and his team sifted out key principles and practices that move a company from good to great.

Collins makes clear that his aim was not to create the next fad, but to identify timeless principles:

While the practices of engineering continually evolve and change, the laws of physics remain relatively fixed. I like to think of our work as a search for timeless principles—the enduring physics of great organizations—that will remain true and relevant no matter how the world changes around us. (p. 15)

Collins’s standard for greatness is so high that not even General Electric made the cut; in fact, the companies he and his team examined dramatically outperformed GE. To make the final cut, a company had to have “extraordinary results, averaging cumulative stock returns 6.9 times the general market in the fifteen years following their transition point” (p. 3)—the transition point being when a company makes the leap from good to great.

Collins looks at less-than-great companies for comparison. The fundamental question of the study, he points out, is not

what did the good-to-great companies share in common? Rather, the crucial question is, What did the good-to-great companies share in common that distinguished them from the comparison companies? Think of it this way: Suppose you wanted to study what makes gold medal winners in the Olympic games. If you only studied the gold medal winners by themselves, you’d find that they all had coaches. But if you looked at the athletes that made the Olympic team, but never won a gold medal, you’d find that they also had coaches! The key question is, What systematically distinguishes gold medal winners from those who never won a medal? (pp. 7–8)

Collins devotes much of his discussion to the traits of a great leader, the type of person who can take a company from merely good, or even very good, to sustained greatness. One characteristic of great leaders is that they seek an objective understanding of pertinent facts when making decisions. In Collins’s terms, great leaders use a window to look objectively at the outside world and a mirror to look objectively at themselves. For example, great leaders give credit where it is due and take full responsibility for problems concerning their business or industry. They “look out the window to apportion credit outside themselves when things go well. . . . At the same time, they look in the mirror to apportion responsibility never blaming bad luck when things go poorly” (p. 35).

To concretize this point, Collins compares the CEOs of Nucor and Bethlehem Steel. . . .

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