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Passion, People and Principles

What Does it Take to be Truly Great?

post # 19 — February 19, 2006 — a Strategy post

Jim Collins’ book Good to Great is now (deservedly) one of the all-time best-selling business books and I think it is essential reading. Collins has just published a follow-up booklet Good to Great in the Social Sector, about governments and non-profits, and reading it has forced me to reflect on the great and not-so-great professional businesses I have seen. (Charlie Ellis, the founder of Greenwich Associates, the financial sector research firm and now at Yale, is writing a book on this topic.)

There are relatively few generally-accepted, consensus nominees for truly great (not just good) professional firms. When I ask people to suggest candidates for this title (other than their own firm) I tend to receive lots of nominations for the usual cast of characters (McKinsey, Goldman Sachs, etc) but rarely detect broad agreement.

People I talk to seem to associate true distinctiveness to particular periods of different firm’s history, i.e. certain eras. There is widespread consensus that Ogilvy & Mather was great in the David Ogilvy years, as was the Leo Burnett agency when the man himself was at the helm. However, without implying any lack of respect for subsequent leaders, the consensus of outsiders doesn’t seem to be that they have been truly distinctive since.

The same might be said of McKinsey. Insiders may know differently, but the outside perspective is that true greatness coincided with the Marvin Bower years. (I’m sure the insiders find this very annoying, if they care at all what outside observers think!) Similar things are said about Goldman Sachs: the glory years, according to the outside perspective were either those when Sidney Weinberg was crafting and sustaining the culture, or when John Weinberg and John Whitehead were transforming the firm. Many observers are watching closely to see if, having gone public, Goldman can sustain the characteristics that made it so admired.

The Great Man or Woman theory of professional firm excellence (if there is any validity to it) could go as follows. True excellence only comes if you find the courage to resist temptations and stay true to your strategies, business vision and principles of operation. If one person with strong convictions can be allowed to lead, consistency in implementing the strategies, vision and principles can be achieved and the firm can become distinctive.

However, the theory might argue, as hard as this first level of individual courage is to achieve (and it is truly hard) it is a yet more monumental achievement to institutionalize a courageous culture that will adhere to strategies, vision and principles through thick and thin. Can guardianship of these things be successfully entrusted to succeeding generations if the next generation does not have a singular leader who enshrines the culture? Can it be achieved by designing processes that are self-sustaining and which correct for deviations when temptations lure individuals or the firm off the chosen path?

I must rush to observe that all this may be nonsense. After all, the focus on specific individuals as creators and sustainers of famous professional firm cultures may just be a misconception created by our desire to find heroes. Firms like McKinsey, Goldman and Ogilvy have all done very well indeed in the years since their original charismatic leaders achieved their fame or notoriety, and the outsiders’ perspective (including my own) may be biased towards wanting to find individuals to celebrate. Jim Collins’ conclusion, in the Good to Great book, is that the great firms have leaders who are ambitious for the firm but who are NOT personally ambitious or in need of the glory.

Since professional firms do not disclose the kind of information that is available on the publicly-held corporations that Jim Collins studied, it’s very hard to be scientific about all this. Even the definition of (or characteristics of) truly distinctive, great firms is hard to provide. For what it’s worth, here are some of my (far-from-final) thoughts.

First, I don’t think you can create a sustainable, ongoing great firm unless there is a broadly-held sense of stewardship, with each partner or senior officer feeling that they do not own the firm in perpetuity, but hold it in trust to be passed on in better shape to the next generation. Anything other than this culture will fail to build an institution that can live on.

Second, most of the candidates I hear about to be identified as great firms are “class acts” – they are classy people driven by principles. They are honorable, noble, idealists who you would trust with your kids or your aged grandparents. Left unobserved, they’ll do the right thing. I don’t think you can build a lasting institution with anything less.

Third, I suspect that there may be more truly great firms among the small-to-midsize firms, but we observers always get tempted to discuss the mega-firms. This may be limiting our definition of what it means to be great – does being truly distinctive mean you have to be big? There may be a lot to learn by changing the focus of our lens.

Finally, I wonder whether a firm has to be at the high-price leading edge of its profession to be deemed to be great? In its prime, and for decades, McDonalds was considered in business circles to be a great firm, but obviously was never high-cuisine or high-price. Is there an equivalent in the professions? Can’t you serve the middle market and be great? Or are we in the professions too snooty to concede this?

If you want to join in the discussion, comment here or send me an email. Points to ponder – who do you think are the truly distinctive professional firms? Who has sustained this distinctiveness through generations of leadership? If you have candidates, how did they pull off this challenging accomplishment?


Michal Sobczyk said:

Of course GE can be a good candidate. That’s one of the greatest companies ever I suppose.

posted on February 19, 2006

David (Maister) said:

Michael, that’s a very interesting nomination. What a lot of people forget is that GE is not only a manufactring company, but has huge professional service operations in its financial and other service divisions. Has anyone ever compared the approach GE takes to managing its service businesses versus its manufacturing businesses? Are there special differences because something is a service?

The same question could be asked about IBM, whose consulting services are now the majority portion of the business (and are very admired.)

We went through a period of saying service businesses are diffreent and need their own theory of management, and then along came people like Tom Peters who said, explicitly, that the professional service firm model was the right model for the future of all industry. (The Economist did a great special section on this a cople of weeks ago.) Of couse, while this was happening, many professional businesses lke law firms and accounting firms were becoming more “corporate.”

Maybe someone should really study companies like GE and IBM to see whether there is a convergence of manufacturing and service approachesd to management and a corresponding comnvergence of coprorate and professional sercvice firm approaches.

Can anyone out there living through all this comment on or of the record?

posted on February 19, 2006

Jerry Bogart said:

Can you help me out on this question with your answer: In the field of busines, can a person be a truly great leader without being a good manager? Can a person be a truly great manager without being a good leader? I’d appreciate your response to this question. Thanks & Lord Bless. Jerry

posted on May 23, 2006

David (Maister) said:

Jerry, There is lots of confusion and no cllear answer about what being a amanger is and what being a leader is. So, it is hard to give a clear answer that everyone will agree with. here’s my answer.

Managers say “Let me help you succeed”

Leaders say: “Follow me”

I think they are two very different approaches to accomplishing the same goal – getting other people energized and raising their game. So, since they are different approaches, it is possible to be great at one without being great at another. A great manager may be very self-effacing, letting the spotlight fall on the “players”. This will not always be described as leadership, but the team can still win.

posted on May 23, 2006

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posted on March 25, 2007