Taking Your Company from Good to Great

Have you ever read Jim Collins’ book Good To Great? Collins and his team of 20 researchers devoted five years to studying hundreds of publicly held companies to determine what key factors caused the top firms to outperform the stock market’s average percentage growth by at least three times for a period of no less than 15 years. This performance result became their definition of a “good-to-great” company.

Collins concluded that six common factors caused just 11 companies to enjoy a sustained breakthrough in performance to become great. These same six factors should resonate in the kitchen and bath industry as we face the challenges and opportunities of doing business in this recession.

Factor 1: Level 5 Leadership. The research team was surprised to find that all 11 companies were actually led by rather ordinary, understated, modest, self-effacing people with a paradoxical mix of personal humility and professional will. The “Level 5 Leaders” were ambitious men, but ambitious first and foremost for their company, not for themselves. They were fanatically driven to produce sustained results. They displayed a workmanlike diligence…more plow horse than show horse.

Unlike “Level 4 Leaders” with tremendous egos, they set up their successors for even greater success in the next generation. Finally, they gave others credit when things went well and took responsibility when things went poorly.

Faced with the rigors of today’s challenging economy, it might be useful to ask yourself whether you truly possess some, or most, of the qualities found in these executives. Members in our group take a 15-minute online DISC Behavioral Test to learn more about their leadership potential; they receive a 20-page report within minutes that empowers them to make positive changes.

Factor 2: First Who, Then What. The good-to-great leaders began their company transformations by getting the right people on the bus, the wrong people off the bus, and then figured out where to drive it. Level 5 leaders recognized that having the right people on the bus, in the right seats, didn’t require motivating or managing them – the right people were self-starters.

Do you have the right people in place, or are you holding on to underperformers because you have too much time and money invested in them? Collins found that the “right” person has more to do with character traits, work ethic and innate abilities than with specific knowledge, background or skills.

Factor 3: Confront the Brutal Facts. All good-to-great companies began the process of finding the path to greatness by confronting the brutal facts of their current reality. Paramount to discovering the real truths about your company situation is having a culture wherein people have an opportunity to be heard. Creating this climate of truth-seeking, Collins found that Level 5 Leaders followed four practices: (1) led with questions, not answers; (2) engaged in debate, not coercion; (3) conducted autopsies without blame; and (4) built red-flag mechanisms to signal information that could not be ignored.

As you navigate this economic downturn, are you being truthful with yourself and your staff in facing the brutal facts of your reality? Have you made the necessary cuts in overhead to match the current reality of your revenue stream? Have you left enough money in your marketing budget to drive in leads while gaining market share as the competition has trimmed back its advertising? Do you have at least six months of fixed overhead expenses in a liquid portfolio that can be drawn upon as needed to finance operations? Do you have a three-month cash flow forecast in place so you can tell your vendors when they can expect payments?

Factor 4: Hedgehog Concept. According to Collins, going from good to great requires a deep understanding of three intersecting circles translated into a simple concept his team labeled the “Hedgehog Concept.” Circle one asks, what are you deeply passionate about? Circle two asks, what can you be best in the world at? Circle three asks, what drives your economic engine?

Collins found that good-to-great companies are like hedgehogs – simple, dowdy creatures – that knew “one big thing” and stuck to it, focusing only on the three circles and their intersection. Good-to-great companies used third parties – such as a board of directors – to finally arrive at their “Hedgehog Concept.” Once the Hedgehog Concept was established, and strictly followed, the good companies experienced the breakthrough to becoming
truly great.

Factor 5: Culture of Discipline. Once your fully developed Hedgehog Concept is in place, and you’ve achieved a major breakthrough in financial performance, sustained great results depend upon building a culture full of self-disciplined people who engage in disciplined thought and take disciplined action. Collins states that a culture of discipline involves a duality. It requires people who adhere to a consistent system; yet on the other hand, it gives people freedom and responsibility within the framework of that system.

As you seek your own financial breakthrough, and establish a culture of discipline for sustained results, do you have a comprehensive three-year budget to run your business and an operations manual to guide your staff in all aspects of your operation? How about a written strategic plan? As the owner, is there a third party that holds you accountable for actions to be taken regularly to ensure your business survival?

Factor 6: Technology Accelerators. Good-to-great companies avoid technology fads and bandwagons, yet they become pioneers in the application of carefully selected technologies, provided the technology fits within the Hedgehog Concept. Collins found that good-to-great companies used technology as an accelerator of momentum, not a creator. And how a company reacts to technological change is a good indicator of its inner drive for greatness versus mediocrity.

In spite of this recession, have you installed, or are you actively investigating, management software that will streamline operations, enhance productivity and positively impact your net profit? If not, this should be placed on your “to-do” list.

I see few kitchen and bath dealers who have embraced all six factors in their businesses. But all that means is a huge upside potential for greatness in the kitchen and bath industry. It starts with owners getting more informed on what it takes to be a Level 5 Leader, and more educated in the areas of finance, management and marketing. For the former, I invite dealers to contact me about taking the 15-Minute DISC Behavioral Test. For the latter, I encourage them to attend the seminar in Milwaukee on June 26, co-sponsored by KBDN and SEN, entitled: “Critical Managing, Marketing, & Selling Strategies in Today’s Economy.”