Good Questions, Great Answers

Now we can no longer live in that fantasy land. We've got to take a hard look at all the things we're doing and put them all to the three-circle test. Any things that fail the test we have to stop doing -- today.

I see lots of companies that found themselves with lots of capital. So they wandered into all kinds of acquisitions or new ventures or new directions, simply because they could. But they didn't necessarily fit within the three circles. Today, the task is for them to prune away. Those who clarify their three circles will come out of this just fine. Those that don't deserve to die.

CEOs today find themselves with little time to prove their worth. What advice would you give to a CEO on the hot seat?

If I were a CEO on the hot seat taking over a company that I wanted to move from good to great, here's what I'd do. I'd take that good-to-great stock chart, and I'd put it in front of my directors. I'd say, "We're on the left side of this curve. We want to be on the right side of the curve. Right? If that's what we all want, we know what it's going to take to get it. You can't keep lurching from CEO to CEO. If you do that, you'll find yourself in the Doom Loop -- and then we'll end up as one of the comparison companies, not one of the great companies."

I don't think all directors are stupid. Most of them are intelligent, but they're operating out of ignorance rather than a lack of good intent. We need to hit them over the head with the empirical results. Our job is to beat the market in a sustainable way over time. We need to think about the stock price over a five-year period. And we need to begin to do all the things it will take to get that flywheel turning.

Finally, if I'm the CEO, I want the board to give me the following assurance: However long or short my tenure as CEO may be, whoever you pick as my successor needs to pick up that flywheel in midturn and to keep pushing in a consistent direction. I may only get the flywheel turning at 16 RPMs. But my successor has to take it to 100 RPMs. His successor has to take it to 500 RPMs, and his successor to 1,000 RPMs. It's not about me as CEO -- it's about a commitment to a consistent program. We're not going to do a Doom Loop.

The CEOs who took their companies from good to great were largely anonymous -- a far cry from the celebrity CEOs we read about. Is that an accident? Or is it cause and effect?

I believe it's more a matter of cause and effect than an accident. There is something directly related between the absence of celebrity and the presence of good-to-great results. Why? First, when you have a celebrity, the company turns into "the one genius with 1,000 helpers." It creates a sense that the whole thing is really about the CEO. And that leads to all sorts of problems -- if the person goes away or if the person turns out not to be a genius after all.

At a deeper level, we found that for leaders to make something great, their ambition has to be for the greatness of the work and the company rather than for themselves. That doesn't mean that they don't have an ego. It doesn't mean that they don't have any self-needs. It means that at decision point after decision point -- at the critical junctures when Choice A would favor their ego and Choice B would favor the company and its work -- time and again those leaders pick Choice B. Celebrity CEOs, at those same decision points, are more likely to favor self and ego over company and work.

Like the anonymous CEOs, most of the companies that made the transformation from good to great are unheralded. What does that tell us?

The truth is, most people are not working in the most glamorous things in the world. They are doing real work -- which means that most of the time they're doing a heck of a lot of drudgery with only few points of excitement. Some people are putting out baked bread. Some are building retail stores. The real work of the economy gets done by people who make cars, who sell real estate, who run grocery stores and banks. So one of the great findings of this study is that you can be in a great company and be doing it in steel, in drugstores, in grocery stores. It's simply not the case that if you're not in Silicon Valley, you're not cool. It doesn't matter where you are. So no one has the right to whine about their company, their industry, or the kind of business they're in -- ever again.

Were the 11 companies that made the transformation benefited by their anonymity?

One of the great advantages that these companies had was, nobody cared! Kroger started its transition; Nucor started its transition; nobody was expecting much. They could underpromise and overdeliver. In fact, if I were taking over a company and trying to make it go from good to great, I would tell my vice president of communications that his job was to make the whole world think that we constantly were on the edge of doom.