Posted by: A.R. Cherian | October 22, 2009

Good to Great, or Just Good?

A November 2008 piece in the Academy of Management Perspectives called “Good to Great, or Just Good” by Bruce Niendorf and Kristine Beck critically examined the claims and evidence behind the 2001 management best-seller “Good to Great” (GTG) by Jim Collins.

In the best-seller, Collins and his team identify 11 firms that have made the leap to “greatness.” They are:

  • Abbott Laboratories
  • Circuit City
  • Fannie Mae
  • Gillette
  • Kimberly-Clark
  • Kroger
  • Nucor
  • Philip Morris (now Altria)
  • Pitney Bowes
  • Walgreens
  • Wells Fargo

The five principles of greatness common to these 11 firms as identified by Collins are:

  • Level Five Leadership
    • Leaders focus on the firm rather than themselves
  • First Who, Then What
    • “Get the right people on the bus before you decide where to drive it”
  • Confront the Brutal Facts
    • Cannot make good decisions without knowing the facts
  • Hedgehog Concept
    • Know one thing rather than trying to know many things
  • Build Your Company’s Vision
    • Preserve core values but be willing to change operating practices and
      business strategies

The authors state that Collins made two fatal flaws when conducting his research: data-mining and causality.

1) Data Mining: The authors argue you can always always find 5 common traits in handpicked companies such as the 11 that collins handpicked. It’s a classic example of data-mining. Their claim is that Collins provides no evidence that they are anything other than random patterns.

2) Causality: The authors claim that Collins never provided any evidence of the causation he claimed:

Established Company or Startup + Good to Great Concepts = Sustained great results

We can only safely conclude that these firms had these principles in common in the time period Collins and his team observed them. We cannot conclude as Collins did that the five concepts will lead to “sustained greatness.”

Overall, the authors state that Collins has not found any “timeless, universal answers that can be applied to any organization.”

The authors’ own statistical analysis found no “greatness” in the 11 firms based on return to investors over a 10 year period following the sample period used in GTG. They even trace the results back further over a 20 year period and still find no conclusive evidence that these companies can be considered great. They have performed no better or worse than other companies in the 2006 Fortune 500 listing. In fact, after the time of this article, two of the companies in the list, Circuit City and Fannie Mae, are no longer operating in their original forms due to bankruptcy and government takeover respectively – hardly hallmarks of greatness.

This is a great connection to my previous post about evidence-based management. The authors state there is no empirical evidence for Collin’s claim that adopting the GTG concepts leads to “sustained great results.” There is no evidence that the 5 principles can be generalized to other firms or to other time periods.

Going back to Jeffrey Pfeffer and Bob Sutton’s article from my previous post and their talk of blindly accepting business advice, half-baked truths, and concepts with no empirical data, I can see how easily many managers may have fallen for these “timeless concepts.” I most likely would have as well, but I am learning in my courses to take a more critical look at the evidence offered by consultants and management “gurus.”

Are the 5 principles in Collins’ book great principles to have in any organization? No doubt. But as the authors conclude, the way Collins designed his research, there is no way we can claim that they lead to greatness. This is the type of great research and critical examination we need more of and the type which managers should read more of.

Bottom line:

Beware of grandiose claims of “timeless concepts” and “universal answers that can be applied to any organization.” Demand evidence and critically examine it.

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Responses

  1. […] 5 leadership In his book, Good to Great (whose problems have been previously discussed here), Jim Collins describes a Level 5 […]


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