Good to Great: Chapter 2Level 5 LeadershipDana CookBryson Bell Tyler Buschman Philip Winfield Ian Walroven Jordan Jones Austin Bastin Stephanie Light

Level 5 Leader

“You can accomplish anything in life, provided that you don’t mind who gets the credit.”

--Harry S. Truman

•All Good to Great companies common thread was the “Level 5” Leader

Level 5 Leader

•Don’t need to be a larger-than-life leader to be successful

•The Level 5 leader goes further into explaining what an effective leader is and does.

Not What We Expected

• What is a Level 5 leader?▫ An individual who blends extreme personal humility with

intense professional will.▫ Humble Individuals that stay in the background, but do

whatever needs to be done in order to make the company great.

▫ Builds enduring greatness through a paradoxical blend of personal humility and professional will

▫ “Their ambition is first and foremost for the institution, not themselves”--Jim Collins

▫ Level 5 refers to the highest level in the hierarchy of executive capabilities Fully developed level 5 leaders embody all levels of the hierarchy

Level 5 Hierarchy

Level 5 Executive

Effective Leader

Competent Manager

Contributing Team Member

Highly Capable Individual

Not What We Expected

• Research for the Book▫ Collins instructed his research team to downplay the role of top

executives when conducting research Wanted to avoid the “credit the leader”/ “blame the leader”

mentality▫ Leadership and God analogy

“Leadership is the answer to everything” perspective is the modern equivalent of “God is the answer to everything” perspective of understanding the physical world in the Dark Ages.

▫ Level 5 leadership is an empirical finding not an ideological one▫ Research found that good-to-great executives were all cut from the

same cloth. “It didn’t matter whether the company was consumer or industrial, in crisis

or steady state, offered services or products. It didn’t matter when the transition took place or how big the company.”—Jim Collins

Level 5 Duality

• Humility + Will = Level 5 Leader

•Do not mistake modesty, shy nature, and awkward manner as signs of weakness

Coleman Mockler

• CEO of Gillette•Fought for his company and his passion•‘His placid persona hid an inner intensity,

a dedication to making anything he touched the best it could possible be – not just because of what he would get but because he simply couldn’t imagine doing it any other way’

• Level 5 leaders have ambition first and foremost for the success of the company, not for their own riches and glory.

• Level 5 leaders want to see the company become even more successful after they leave.

• “I want to look out from my porch at one of the great companies in the world someday and be able to say, ‘I used to work there.”

Ambition for the Company:Setting up Successors for Success

David Maxwell, CEO Fannie Mae

•Transformed Fannie Mae from losing $1 Million a day to earning $4 Million a day, beating the general stock market 3.8 to 1

•At retirement declined controversial $20 Million retirement package and only asked for $5.5 Million

Ambition for the Company: Setting up Successors for Success

•Leaders of comparison companies were more concerned with their own reputation and personal greatness than the success of the company

•In three-fourths of good to great comparison companies, executives either chose weak successors or set their successor up for failure.

Ambition for the Company: Setting up Successors for Success

CEO Stanley Gault

•Became synonymous with success in late 1980’s•Led Rubbermaid to 40 consecutive quarters of earnings growth•Hard driving, egocentric, tyrant•In an article about leading change, the word “I” appears 44 times and “we” only appears 16

Gault did not leave a company that would be great without him• 1st successor lasted only a year• Had many struggles with management and strategic voids that

eventually brought the company down

One of the best Level 4 leaders in the past 50 years but not a level 5 leader which is why Rubbermaid went from good to great for a brief moment and then very quickly went from great to irrelevant

Rubbermaid: Good to Great and Great to Irrelevant

A Compelling Modesty

• Good-to-Great leaders are not “I=centric”

• Quiet, Shy, Humble, and Mild-mannered

• Goal is to never become “Larger-than-life”

A Compelling Modesty

• Two-thirds of the comparison companies had a “gargantuan personal ego” that led to further mediocrity or the downfall of the company

• Scott Paper CEO, Al Dunlap

• Chrysler CEO, Lee Iacocca

Unwavering Resolve…to Do What Must Be Done

• Level 5 Leadership Characterizations The determination to do whatever needs to be

done to make the company great Need to see both sides of the coin

• Level 5 leaders are fanatically driven Infected with an incurable need to produce

sustained results•  Level 5 leaders display a workmanlike

diligence More plow horse than show horse

Unwavering Resolve…to Do What Must Be Done

• Inside vs. Outside Evidence does not support the idea that you need

an outside leader

High-profile outside change agent is negatively correlated with a sustained transformation

Ten out of eleven good-to-great CEOs came from inside the company. The comparison companies turned to outsiders with

six times greater frequency – yet they failed to produce sustained great results.

Unwavering Resolve…to Do What Must Be Done

• George Cain, CEO of Abbott Laboratories Inspired standards

Could not stand mediocrity in any form

Set out to destroy one of the key causes of Abbott’s mediocrity: nepotism

From transition date in 1974 to 2000, created shareholder returns that beat the market 4.5 to 1

Comparison to Upjohn (direct comparison company to Abbott) Upjohn then fell 89 percent behind Abbott

Unwavering Resolve…to Do What Must Be Done

• Charles R. “Cork” Walgreen Cork sensed that the team had reached a

watershed point of clarity and understanding Future lay within a different industry

Faced long-standing family tradition Switched from food service to convenient

drugstore

The Window and the Mirror

•Circuit City or GE

•Level 5 leaders vs. comparison leaders

•Bethlehem Steel to Nucor

•Luck

Cultivating Level 5 Leadership

•Do you have to be a level 5 leader to make your company great?

•Example:▫A woman who recently became a chief executive

knew she wasn’t a level 5 and wanted to know if she could still make her company great

▫Data pointed out that of 1,435 companies that appeared on the Fortune 500 in the initial candidate list, only 11 made the cut into their study

▫Of those 11, all 5 had level 5 leadership positions

The Two Sides of Level 5 Leadership

• Professional Will▫Creates superb results, a clear catalyst in the

transition from good to great▫Sets the standard of building an enduring great

company; will settle for nothing less

• Personal Humility▫Demonstrates a compelling modesty, shunning

public adulation; never boastful▫Channels ambition into the company, not the self;

sets up successors for even greater success in the next generation

The Two Categories of People

•Those who have the seed of a level 5 leader▫For these people, work will always be first

and foremost about what they get•Those who are not born to be level 5

leaders▫The larger group▫These are people that can evolve to be level

5 leaders

Chapter Summary

•A level 5 leader is a key component of what it takes to make a company change from good to great

•This chapter was about what level 5’s are and the rest of the book describes what they do

•We should look at the model level 5’s and aspire to be like them

•Whether or not we make it to level 5, it will always be worth the effort