1. Anna RendonAshley Hoptay Olivia ErwinPaige Stone Brandon LaviageChase Mueller Tanner Gilreath Tanner Gilreath Good To Great Chapter 3 First Who…Then What “There are going to be times when we can’t wait for somebody. Now, you’re either on the bus or off the bus.” - Ken Kesey

2. Transforming From Good to Great The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there. The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there. What did they do then? What did they do then? They FIRST got the right people on the bus and the wrong people off of the bus, and THEN they figured out where to drive it. They FIRST got the right people on the bus and the wrong people off of the bus, and THEN they figured out where to drive it.

3. What They Said “Look, I don’t really know where we should take this bus. But I know this much: If we get the right people on the bus, the right people in the right seats, and the wrong people off the bus, then we’ll figure out how to take it someplace great.” “Look, I don’t really know where we should take this bus. But I know this much: If we get the right people on the bus, the right people in the right seats, and the wrong people off the bus, then we’ll figure out how to take it someplace great.”

4. Three Simple Truths 1. Begin with the “Who” rather than the “What”. Helps you adapt to a changing world. 2. If you have the right people on the bus, the problem of how to motivate and manage people largely goes away. The right people are self-motivated to produce the best results. 3. Going in the right direction with the wrong people will never produce a great company. Great vision without great people is irrelevant.

5. Excerpts From Obama’s Inaugural Address This is the journey we continue today. We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions -- that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America. This is the journey we continue today. We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions -- that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America. For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act -- not only to create new jobs, but to lay a new foundation for growth. For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act -- not only to create new jobs, but to lay a new foundation for growth. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public's dollars will be held to account -- to spend wisely, reform bad habits, and do our business in the light of day -- because only then can we restore the vital trust between a people and their government. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public's dollars will be held to account -- to spend wisely, reform bad habits, and do our business in the light of day -- because only then can we restore the vital trust between a people and their government. Know that America is a friend of each nation and every man, woman and child who seeks a future of peace and dignity, and that we are ready to lead once more Know that America is a friend of each nation and every man, woman and child who seeks a future of peace and dignity, and that we are ready to lead once more

6. What Does this Show? Obama’s Inaugural Speech shows he is a level five leader in many ways: Obama’s Inaugural Speech shows he is a level five leader in many ways: –He doesn’t focus on himself; he focuses on everyone. –In this situation, he knows that in order to turn America around, he has to get everyone on the bus before he drives it in the right direction. Another example Another example –Picking the right cabinet. One of the first things Obama did was make his new Cabinet sign a new code of ethics – his way of making sure he has the right people on the bus –But he allowed someone on the bus who was a lobbyist in the area he is working?  William Lynn – Deputy Defense Secretary

7. Wells Fargo CEO Dick Cooley foresaw that the banking industry would eventually undergo change. CEO Dick Cooley foresaw that the banking industry would eventually undergo change. Instead of focusing on change, he focused on finding the right people. Instead of focusing on change, he focused on finding the right people. Focused on “injecting an endless stream of talent” directly into the veins of the company. Focused on “injecting an endless stream of talent” directly into the veins of the company. Hired outstanding people whenever and wherever they found them, often without any specific job in mind. Hired outstanding people whenever and wherever they found them, often without any specific job in mind.

8. Wells Fargo “That’s how you build the future,” Cooley said. “If I’m not smart enough to see the changes that are coming, they will. And they’ll be flexible enough to deal with them.” “That’s how you build the future,” Cooley said. “If I’m not smart enough to see the changes that are coming, they will. And they’ll be flexible enough to deal with them.”

9. Wells Fargo’s Success By getting the right people on the bus, Wells Fargo outperformed the market by over three times. By getting the right people on the bus, Wells Fargo outperformed the market by over three times. This occurred at a time when its sector of the banking industry fell 59% behind the general stock market This occurred at a time when its sector of the banking industry fell 59% behind the general stock market

10. Bank of America Bank of America took a different approach: “Weak generals, strong lieutenants” Bank of America took a different approach: “Weak generals, strong lieutenants” If you pick strong generals for key positions, their competitors will leave. But if you pick weak generals – placeholders, rather than highly capable executives – then the strong lieutenants are more likely to stick around. If you pick strong generals for key positions, their competitors will leave. But if you pick weak generals – placeholders, rather than highly capable executives – then the strong lieutenants are more likely to stick around.

11. BOA – Management Climate Weak generals would wait for direction from above. Weak generals would wait for direction from above. Sam Armacost, who inherited the weak generals model, said, “I came away quite distressed from my first couple of management meetings. Not only couldn’t I get conflict, I couldn’t even get comment. They were all waiting to see which way the wind blew.” Sam Armacost, who inherited the weak generals model, said, “I came away quite distressed from my first couple of management meetings. Not only couldn’t I get conflict, I couldn’t even get comment. They were all waiting to see which way the wind blew.”

12. Bank of America’s Success Lost $1 billion Lost $1 billion Ended up recruiting a gang of strong generals to turn the bank around. Ended up recruiting a gang of strong generals to turn the bank around.

13. Wells Fargo VS BOA In 1998, the cumulative value of $1 invested: In 1998, the cumulative value of $1 invested: –Wells Fargo = $74.47 –General Market = $19.86 –Bank of America = $15.60

14. Good to Great Distinctions 1. Get the right people on the bus and the wrong people off the bus before you figure out where to drive it. 2. The degree of sheer rigor needed in people decisions in order to take a company from good to great.

15. David Maxwell CEO of Fannie Mae during its darkest days CEO of Fannie Mae during its darkest days Held off on developing a strategy until he got the right people in place, while the company was losing $1 million every single business day with $56 billion of loans underwater. Held off on developing a strategy until he got the right people in place, while the company was losing $1 million every single business day with $56 billion of loans underwater. Focused on getting the right people on the Fannie Mae management team. Focused on getting the right people on the Fannie Mae management team.

16. Maxwell’s A Team Maxwell made it absolutely clear that there would only be seats for A players who were going to put forth A+ effort, and if you weren’t up for it, you better get off the bus, and get off now! Maxwell made it absolutely clear that there would only be seats for A players who were going to put forth A+ effort, and if you weren’t up for it, you better get off the bus, and get off now! –Example: think of our teams – we want only A players who will put forth an A+ effort. The alternative is getting fired. 14 of the 26 executives left the company 14 of the 26 executives left the company

17. Wells Fargo and Fannie Mae Lessons “Who” questions come before “what” questions – before vision, before strategy, before tactics, before organizational structure and before technology. “Who” questions come before “what” questions – before vision, before strategy, before tactics, before organizational structure and before technology. Exemplified a Level 5 style Exemplified a Level 5 style “I don’t know where we should take this company, but I do know that if I start with the right people, ask them the right questions, and engage them in vigorous debate, we will find a way to make this company great.” “I don’t know where we should take this company, but I do know that if I start with the right people, ask them the right questions, and engage them in vigorous debate, we will find a way to make this company great.”

18. “Genius With a Thousand Helpers”? In this model, the company is a platform for the talents of an extraordinary individual. In this model, the company is a platform for the talents of an extraordinary individual. –In these cases, the towering genius, the primary driving force in the company’s success, is a GREAT asset….. AS LONG AS THE GENIUS STICKS AROUND! Company’s who take this approach are usually successful UNTIL the “genius” of the company leaves. Company’s who take this approach are usually successful UNTIL the “genius” of the company leaves. Ex.: Steve Jobs Ex.: Steve Jobs

19. Level 5+ Management Team (Good To Great Companies) Level 5 Leader First Who Get the right people on the bus. Build a superior executive team. Then What Once you have the right people in place, figure out the path to greatness. A “Genius With A Thousand Helpers” (Comparison Companies) Level 4 Leader First What Then Who Set a vision for where to drive the bus. Develop a road map for driving the bus. Enlist a crew of highly capable “helpers” to make the vision happen.

20. Good to Not So Great Companies- classic scenarios Eckerd Corporation, led by Jack Eckerd expanded the Eckerd Empire with over 1000 stores across the southeastern U.S. In the late 1970’s, Eckerd’s revenues equaled Walgreens. But when Jack Eckerd left to pursue his passion for politics, Eckerd Corp. took a toll for the worse as the company began a long decline and eventually taken over by J.C. Penny. Eckerd Corporation, led by Jack Eckerd expanded the Eckerd Empire with over 1000 stores across the southeastern U.S. In the late 1970’s, Eckerd’s revenues equaled Walgreens. But when Jack Eckerd left to pursue his passion for politics, Eckerd Corp. took a toll for the worse as the company began a long decline and eventually taken over by J.C. Penny. Henry Singleton, owner of Teldyne had proclaimed a small enterprise to number 293 in the Fortune 500 list in only 6 YEARS! The company dominated the marketplace from exotic metals to insurance. Once Singleton stepped away, soon the company crumbled. Henry Singleton, owner of Teldyne had proclaimed a small enterprise to number 293 in the Fortune 500 list in only 6 YEARS! The company dominated the marketplace from exotic metals to insurance. Once Singleton stepped away, soon the company crumbled. Each of these cases failed utterly at the task of building a great company. Each of these cases failed utterly at the task of building a great company.

21. It’s Who You Pay, Not How You Pay Them Top Executives, Managers and Employees Top Executives, Managers and Employees  Compensation –Stock Options –Huge Incentives (Jets, Vacations, company cars, etc) Examples: Big 3 Auto Makers, Lehman Brothers, Merrill Lynch Examples: Big 3 Auto Makers, Lehman Brothers, Merrill Lynch Do these things really increase performance and create great results? Do these things really increase performance and create great results? –NO!

22. Data Inputs Collected weeks of data from proxy statements Collected weeks of data from proxy statements –Preformed 112 separate analyses looking at patterns and correlations  Qualifications: Cash vs. Stock, LT vs. ST Incentives, Salary vs. Bonus, etc.. –Outcome: No significant patterns related to executive compensation, and no systematic differences on compensation packages

23. Main Point Good to Great Good to Great –Received slightly less total cash compensation 10 years after the transition than others in mediocre companies  Not that these people will work for free –But do better work with less incentives because they want what's best for the company –The right people will do the right things and deliver the best results they are capable of regardless of the incentive system

24. Nucor Example Built on the idea that you can teach farmers to make steel but you cant teach a farmer work ethic, to people who don’t have it in the first place Built on the idea that you can teach farmers to make steel but you cant teach a farmer work ethic, to people who don’t have it in the first place –Plants: Crawfordsville, Indiana; Norfolk, Nebraska; Plymouth, Utah They generated as high as 50% turnover in the first year, followed by very low turnover as the right people settled in They generated as high as 50% turnover in the first year, followed by very low turnover as the right people settled in

25. Nucor Environment Workers Workers –Teams of 20 to 40 people  Team Bonus mechanism with over 50% tied directly to the productivity of the team –Highest paid steel workers in the world –Arrived to work 30 minutes early and ready to go when the shift bell rang –The system did not aim to turn lazy people into hard workers, but to create an environment where hardworking people to thrive and lazy ones to fail

26. Rigorous, Not Ruthless Good to great companies are not ruthless cultures they are rigorous Good to great companies are not ruthless cultures they are rigorous –Ruthless – Hacking and Cutting or Wantonly firing people without any thoughtful consideration –Rigorous – Consistently applying exacting standards at all times and all levels The best people need not to worry about their positions and can concentrate fully on their work The best people need not to worry about their positions and can concentrate fully on their work

27. Wells Fargo Example Acquired Crocker Bank in 1986 Acquired Crocker Bank in 1986  Consolidation –Removed 1600 managers and top executives –However some Crocker managers took positions in Wells Fargo because they were better qualified then the ones originally in that spot “The only way to deliver to the people who are achieving is not to burden them with the people who are not achieving.” “The only way to deliver to the people who are achieving is not to burden them with the people who are not achieving.”

28. Wells Example Cont Ruthless Ruthless –To let the workers stay employed and waste precious time when other job opportunities might arise Rigorous Rigorous –To deal with it up front and let people move on with their lives

29. How to Be Rigorous 3 Practical disciplines for being rigorous rather than ruthless 1. When in doubt, don’t hire…keep looking. 2. When you know you need to make a people change, act. 3. Put your best people on your biggest opportunities, not your biggest problems.

30. When in doubt, don’t hire… keep looking For growth, companies should not focus on: For growth, companies should not focus on: –The markets –Technology –Competition Instead, they should concentrate on finding and keeping enough of the right people. Instead, they should concentrate on finding and keeping enough of the right people.

31. Packard’s Law “No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a great company.” “No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a great company.”

32. Circuit City- Always Looking for Great People Focused one getting the right people from top to bottom. Focused one getting the right people from top to bottom. Alan Wurtzel’s (CEO) goal was to build the best, most professional management team in the industry. Alan Wurtzel’s (CEO) goal was to build the best, most professional management team in the industry. Delivery drivers wore uniforms, were clean shaving, and had to be professional. Delivery drivers wore uniforms, were clean shaving, and had to be professional.

33. Practical Discipline #2 When you know you need to make a people change, act. When you know you need to make a people change, act. –The best people don’t need to be managed, but instead guided and taught

34. What Happens With The Wrong People When you let the wrong people stay around, the right people always need to be compensating for the inadequacies of the wrong people When you let the wrong people stay around, the right people always need to be compensating for the inadequacies of the wrong people They are constantly on your mind and are a constant drain on your energy They are constantly on your mind and are a constant drain on your energy

35. Why Do People Wait Mainly cause it can be an inconvenience to get rid of them, they constantly come up with excuses on why they should wait Mainly cause it can be an inconvenience to get rid of them, they constantly come up with excuses on why they should wait –But meanwhile it constantly affects the right people

36. Churn? Turnover within a period of time Turnover within a period of time The good-to-great did not churn more, they just churned better, meaning that people either stayed for a long period of time or they left quickly The good-to-great did not churn more, they just churned better, meaning that people either stayed for a long period of time or they left quickly

37. A+ Selections The good-to-great companies didn’t have the theory of “try a lot of people and see who works”. They took their time and would find the perfect person for the position The good-to-great companies didn’t have the theory of “try a lot of people and see who works”. They took their time and would find the perfect person for the position When Colman Mockler became CEO of Gillette, he spent 55% of his time in his first 2 years changing or moving 38 of the top 50 people of his management team When Colman Mockler became CEO of Gillette, he spent 55% of his time in his first 2 years changing or moving 38 of the top 50 people of his management team

38. When Is It Time? 2 key questions can help: 2 key questions can help: –1.) If you are trying to place someone somewhere, ask your self, “Would you hire them again?” –2.) If the person came to you and told you that he/she was leaving would, “Would you feel disappointed or relieved?”

39. Practical Discipline #3 Put your best people on your biggest opportunities, not your biggest problems. Put your best people on your biggest opportunities, not your biggest problems. There is an important corollary to this discipline: When you decide to sell off your problems, don’t sell off you best people. This is one of those little secrets of change. If you create a place where the best people always have a seat on the bus, they’re more likely to support changes in direction. One of the crucial elements in taking a company from good to great is somewhat paradoxical. You need executives, on the one hand, who argue and debate – sometimes violently – in pursuit of the best answers, yet, on the other hand, who unify fully behind a decision, regardless of parochial interests. The good to great companies made a habit of putting their best people on their best opportunities, not their biggest problems.

40. Good to great management teams consist of people who debate together vigorously in search of the best answers, yet who unify behind decisions, regardless of parochial interests. Good to great management teams consist of people who debate together vigorously in search of the best answers, yet who unify behind decisions, regardless of parochial interests. The old adage “People are your most important asset” is wrong. People are not your most important asset. The right people are. The old adage “People are your most important asset” is wrong. People are not your most important asset. The right people are. The “right person” has more to do with character traits and innate capabilities than with specific knowledge, background, or skills. The “right person” has more to do with character traits and innate capabilities than with specific knowledge, background, or skills. First Who, Great Companies, and A Great Life

41. Conclusion: Main Points Find the right people for the job Find the right people for the job Focus on who is running the company, not what is running it Focus on who is running the company, not what is running it Find level 5 leaders Find level 5 leaders Tie compensation into performance Tie compensation into performance 3 Disciplines 3 Disciplines –When in doubt, don’t hire…..keep looking –When you know you need to make a people change –Put your best people on your biggest opportunities, not your biggest problems