Good To Great to . . . not-so good

MATCH founder Michael Goldstein, now blogging on Starting an Ed School, looks at what happened over time to the companies praised in Jim Collins’ influential management book, Good to Great.  After analyzing 1,435 companies, Collins 11 that had gone from “good to great.”

Corporate transformations don’t rely on a “miracle moment,” Collins wrote.

Instead, a down-to-earth, pragmatic, committed-to-excellence process—a framework—kept each company, its leaders, and its people on track for the long haul. In each case, it was the triumph of the Flywheel Effect over the Doom Loop, the victory of steadfast discipline over the quick fix.

Doom Loopers “launch change programs with huge fanfare,” then change direction. “Disappointing results lead to reaction without understanding, which leads to a new direction—a new leader, a new program—which leads to no momentum, which leads to disappointing results. It’s a steady, downward spiral.”

Many people in the K-12 world use Collins’ “ideas for how a school might go from good to great,” writes Goldstein. “Or mediocre to good. Or crappy to mediocre.” Yet urban teachers know the Doom Loop all too well.

Doom Loop is why my teacher friends in some traditional large urban schools have indigestion when they hear about any sort of “reform.”

In their direct experience, all they’ve seen is Doom Loop. More precisely, Doom Loop masquerading with claims that this time it would be Flywheel. This time. Righto.

Only two of the 11 companies in Good to Great, published in 2001, are still Great when measured by stock prices, Nucor and Philip Morris, Goldstein discovered. Five have posted average performance. One, Gillette, was bought out. That leaves three that went from Great to Lousy:

Pitney Bowes is half its market cap of 2001.

Circuit City is defunct.

Fannie Mae (securities fraud, delisted by NYSE, contributed to gigantic financial meltdown)

So does that mean Collins was wrong — or that well-managed companies couldn’t keep it up over time?

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Comments

  1. Supersub says:

    As an ex-Circuit City employee, I can say that it became a Doom Looper in the years leading up to it’s demise.

  2. Without the equivalent of a corporate MRI machine to verify I’m only surmising but my guess is that the difference is always one person or a very small group of people who are the spark plug of the “good to great” transition.

    Moreover, that good to great transition occurs by upsetting cushy relationships that have grown up as a result of pleasing a boss rather then furthering the organization’s goals. Kissing the boss’ ass rather then contibuting to the corporate bottom line.

    That’s the tension in any hierarchical organization – the tension between the individual’s short-term, immediate, easily-forseeable gain at the expense of the organization or the individual’s long-term, deferred, less-obvious gain by supporting the organization’s goals.

    In the private sector if the short view predominates, as it would have in Circuit City and innumberable other companies, the orgainzation pays the ultimate price and ceases to exist. Those less inclined to get while the getting is good, who prefer to take the longer view, are inevitably at odds with those taking the short-term view.

    But human nature being what it is most people prefer the immediate gain to the longer term possibilty of greater gain and, sooner or later, they win. And the company disappears.

  3. Shannon Severance says:

    Most business writing is garbage. The genre of find super star companies, discover their secrets, and share is filled with books that don’t age well. Also, when the book is coming from the technique side and using successful companies to illustrate a point, will generally have formally successful companies for their illustration a few years later.

    Another take down of Good To Great http://bobsutton.typepad.com/my_weblog/2008/12/good-to-great-more-evidence-that-most-claims-of-magic-are-testimony-to-hubris.html

    As an inoculation against overblown business rhetoric, I recommend Phil Rozenweig’s The Halo Effect http://www.amazon.com/exec/obidos/ASIN/0743291255/ And Hard Facts, Dangerous Half-Truths And Total Nonsense by Bob Sutton and Jeffrey Pheffer.

    Other examples of businesses in business books not holding up over time:

    I remember the first edition of Peter Senge’s The Fifth Discipline, published in 1990, held up Digital Equipment Corporation up as a shining example. ” following the 1992 economic downturn, layoffs became regular events as the company continually downsized to try to stay afloat.” https://en.wikipedia.org/wiki/Digital_Equipment_Corporation Since purchased by Compaq which was purchased by Hewlett Packard.

    Tom Peter’s In Search of Excellence has luminaries such as IBM (when I first read this book IBM was on the rocks. it has recovered nicely since then), Amdahl (killed by IBM’s resurgent mainframe business), Boeing (a company that was able to lose money during a record year), Data General (taken over by EMC in 1999), Digital Equipement Corporation, Eastman Kodak, Kmart, Wang Labs (filed for bankruptcy 1992)

  4. Mark Roulo says:

    This: Well-managed companies couldn’t keep it up over time.

    Because things change and companies don’t always manage the change.

    In many senses *THE* classic business management book was “In Search of Excellence.” It essentially kicked off the genre.

    The book looked at a number of very well run companies and tried to come up with common factors that explained why they were so successful. You got eight chapters with ideas such as “stick to what you know” and “stay close to your customers so you know what they want.”

    Many of these companies managed to keep being excellent: Wal-Mart, McDonalds, Intel and some others.

    And some of these excellent companies crashed and burned:
        *) DEC, which didn’t manage the rise of PCs and workstations well.
        *) Data General (ditto)
        *) Amdahl
        *) Kodak
        *) Delta Airlines

    It is tough to stay on top for 20-30 years (and looking at the list it is especially tough in the tech field).

  5. Joanne, I thought your comment over at his site was dead on.

    And since schools have little control over their product or their client base, it’s hard to see what connections can be drawn between business and school.

  6. In education, the Doom Loop is seems to always be initiated by the purchase of a new curriculum some company claims is the end all be all of curriculum.

    • Supersub says:

      On the contrary, the Doom Loop is initiated when an administrator or politician takes control away from teachers…which often leads to a shiny new curriculum.