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Jim Collins on leadership

Release Date

10 December 2013

Jim Collins, renowned strategy expert and author of Good to Great, Great by Choice and Built to Last, engaged a rapt audience at the Australian Business Congress in Sydney recently with his views on how businesses can not only survive, but thrive, in times of uncertainty.

Collins has studied businesses over 25 years. His most recent book, based on nine years of research, is Great by Choice: Uncertainty, Chaos, and Luck — Why Some Thrive Despite Them All, coauthored with Morten Hansen.
 
His presentation was focused around 12 Questions that business leaders can use to take their organisation ‘from good to great’. Some of the most interesting insights were gleaned from questions from the floor:

Leaders: born or raised?
  
In Collins’ view, there are processes by which people can learn to be good leaders and processes by which good leaders can become great — most importantly, they learn. From all his research, and that of others, he considers that the signature of exceptional leaders is that they have the capacity to grow. It is much more likely that someone can become a leader, maybe even a great one, than that they can’t.
  
Examples of well-known individuals who learned to be leaders included General Dwight D Eisenhower. In 1936, he was a Major ‘carrying Douglas Macarthur’s bags’ and eight years later was supreme military commander, showing tremendous leadership growth. Yet early in his career, he did not really show this potential (for example, he did not graduate top of his class) but he ‘just kept at it’. Another example is Katharine Graham who was thrust into the role of Publisher (CEO) of The Washington Post upon her husband’s sudden death — she had to learn to become a leader very quickly. She took advice from mentors such as Warren Buffet and went on to become, in Collins’ view, one of the greatest business leaders of the second half of last century.

What is the best process to grow leaders?
 
‘People grow into leaders when they are given very clear responsibilities,’ says Collins. The acronym he uses is ‘OPUR’ — the One Person Ultimately Responsible — the idea of being the OPUR, even if others are helping or he or she does not have all the power, is that this is the crucible where the person has to step up and say: ‘How do I lead?’ They are thrown in to the situation and they have to grow.
 
In today’s culture you cannot just tell people what to do and expect they are going to follow. He is enthused by JamMacGregor Burns’ definition of leadership: ‘Leadership only exists if people follow when they have the freedom to not follow.’ Otherwise, it is power. If you put people in OPUR positions, and if, as is usually the case, they do not have all the power, this means they have to figure out how to get people together to actually accomplish something. He is absolutely convinced that the single best catalyst for leadership is being the OPUR.

What are the behaviours that he would expect to see in a successful organisational culture?
  
Collins referenced Lou Gerstner’s memoir of his time at IBM (Who Says Elephants Can’t Dance?) in which Gerstner says: ‘I came into this turn-around thinking culture was part of the game. I left thinking that culture is the game.’
  
Culture is absolutely central, but all companies have it, so culture on its own is not what makes a company great. The question is: How are the cultures of great companies different?
  
What Collins has learned is:
1.Great companies are different in how consistent they are in living their values. There are very many different core values a company can have — what his research shows is that it is not the type of values that matters but the fact that the company has them and that these values are deeply, passionately and authentically held. Great companies build their processes and systems around their values and everything reinforces them. They are also consistent in reinforcing them.
2.A great place to work is difficult — it is not a great place for everybody, but it is great for those who flourish in that particular environment. Some great people are not going to flourish because it is not going to suit them.

What have great companies done to ‘get the right people on the bus’?
  
Collins recommends reading Claudio Fernández-Aráoz’s book: Great People Decisions.

His own team’s research found that when companies were in their average or even subaverage stage of performance, the tenure of employees resembled a normal curve (ie a few at either end and most were mainly in the middle). But as companies shifted to much higher levels of performance, the curve changed to a double curve — a big hump around the one-year mark and a big hump at around 20 years. The middle dropped away.
 
In his view, this shows that the best leaders are better at correcting their mistakes quickly (the less-than-one-year group) and then perpetuating their decisions for a very long time (the 20-year group).
  
Who develops the values that define the culture and when is that done?
 
In Collins’ view, this depends on where in the journey the company is at:
1.Typically, the founders of entrepreneurial companies just live their values and then five or 10 or so years on they write them down.
2.Then there are companies that have had some success but at some point they need to discover or even rediscover their values (eg IBM when it got into trouble in a completely new business environment had to go and rediscover its values). To assist with developing key values, he suggests using a tool on his website which essentially asks business leaders to think about being in the situation where the company is going to have to relocate to Mars and who are the 10 people in the company who it would take with them who reflect its core values? Then, get these people together and ask them what are their own personal values that they bring to work. This process helps to discover/rediscover the company’s core values.
3.Companies that have never had any values — mediocre companies — need to develop them before they go out of business. In these companies, he recommends getting 5–7 key people together to map out what kind of company they want to build. Then make hiring decisions based on this map.

Is it incremental change or transformational change that brings about success?

This question related to one of Collins’ key points, which is that great organisations keep 80 per cent of their processes unchanged and change only around 20 per cent. In answering it, he gave the example of the US Constitution: the founders realised that the Constitution could not be changed regularly because it would lead to instability, yet it could not be left unchanged because it would then be a dead document. So they decided that the core Constitution would be able to be amended.

Similarly, companies should have core processes but they should be able to be amended. For example, Intel had a core set of operational principles, one of which referred to making ‘memory chips’. They changed this one line to ‘micro processors’. Was this incremental or transformational change? Actually it was both — just one change but it made a huge difference over all. So companies need to pick the right 20 per cent to change. In this way, they will achieve both continuity and transformation.
 
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About the Author

Alison Williams

Alison has over 25 years' experience in the areas of human resources, industrial relations and employment law. This has been in a mix of hands-on and publishing roles, with the last 10 years spent here at WorkplaceInfo. She has a Masters Degree in Employment Relations.
Her role at WorkplaceInfo is to keep it up to date — whether it’s the information on the site or developing new features to make the site more interesting and easy to use.

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