Reading Good to Great by Jim Collins

This book was recommended to me over a year ago but I only now have found the time to get myself a copy and read it.

Good to Great claims to be a fact-based investigation into what factors made a previously average-performing company change into one that significantly outperformed both the market and its competitors. I have only read the first fifty pages of the book so far, so can’t claim to either agree or disagree with just how well the evidence supports the book’s claims, but I think there are a couple of points that are worth highlighting based upon what I have read so far.

Firstly, of the eleven companies that meet that author’s criteria for having transformed from “good” to “great”, Fannie Mae and Gillette are the only two I have heard of. This isn’t good news as we all know how well Fannie Mae turned out. Given the book was written in 2001 and Fannie Mae’s spectacular collapse happened in 2008, it’s easy to snipe with the benefit of hindsight, but it can’t help tempering my view of just how “great” these selected companies really are. Jim Collins’s approach appears to have been to measure greatness by the value of a company’s stock returns, and I agree that a data-based metric of some kind is needed to make this comparative study worthwhile, but it is worth bearing in mind that there is much, much more to how great a company is than its performance on the stock market.

Secondly, one of the conclusions drawn is that they found no correlation between executive renumeration and company performance. That’s including performance and target-related incentives which is one of my own bug-bears. I have always found it mildly insulting to be offered a target-related bonus. They always seem to be used as a way modifying behaviour and, I think, entirely miss the point. Yes, money is the reason why we turn up for work but it’s my own job satisfaction that is the single most important goal once I’m there. Bonuses don’t typically make the difference between an income you’re happy with and one you’re not (would 10-15% of your salary really make that much difference, given that you can’t budget for it?). A bonus attached to a specific goal really doesn’t make me want to achieve that goal any more than I did already and, if that goal is in conflict with my perception of job satisfaction (doing the right thing for the job at hand), then there is something wrong here already. Either my understanding of what doing a good job looks like is wrong, or the incentivised target is wrong. Just setting the incentive doesn’t fix this - if I thought achieving it was part of doing a good job, then I would be doing everything I could to make it happen out of a need for job satisfaction alone. I have thought for a long time now that if you can pay people well to do a good job, then that’s exactly what you should do. You can then reasonably expect people to do a good job for you based upon mutual respect. It’s this mutual respect that I think is eroded by performance-based bonuses.

Given this is from the first fifty pages alone, there’s evidently quite a lot to digest in this one book. I’ll undoubtedly write more as I get through the book.