Good to Great: Chapter 6

A Culture of Discipline
By: Jake Alonzo
Charly Cone
Natalie Bohman
Meredithe Marshall
Michael Scott
Mikey Via
Virginie Charlotte Milhaud
A Culture of Discipline
 Few start-ups have great success because:
 Company responds to rapid growth in wrong way
 Company can “trip” over its own rapid growth.
 There is inherent lack of resources for new successful
companies because they cannot keep up with
 This quickly will push the firm to organize a more
hierarchical structure
 Employees: structured reporting relationships
Discipline for Success
 From an Entrepreneurial standpoint:
 Employees begin to hate the organizational structure
 Have added job responsibilities with unequal perceived
compensation
 The process of disciplining involves:
 Forming hierarchical relationships and initiating
bureaucratic rules to follow to avoid mayhem
 This is aimed at managing the “wrong people”
 Proves to drive away the “right people” on your
corporate “bus”
Main Ideas

 Build a culture of disciplined employees who fall

into the three circles
 Be consistent to hedgehog mind state
 Go over how a “stop doing list” helps firms get
rid of extraneous factors
 Freedom and responsibility framework
 Why executive managers should “rinse their
cottage cheese”
 The difference between culture of discipline and
tyrannical disciplinarian
Freedom (and Responsibility) in a
Framework
 Concept introduced through the example of the
Air Traffic System:
 Pilots operate through a very strict system
 But lot of freedom when it comes to crucial decisions
(whether to land, whether to abort etc.)
 Regardless of the stricture of the system, Pilots have
ultimate responsibility.
  

 Good to Great companies build a consistent

system with clear constraints, but they also give
people freedom and responsibilities within the
framework of that system.
Freedom (and Responsibility) in a
Framework
How to develop freedom and responsibility in a
Framework?
 Need people and managers who believe in the system
 Operate with great consistency
 Create a culture of discipline
 Install disciplined actions
  

When a company has a strong culture of discipline, then it

rarely needs to discipline people
A culture of discipline is not about punishing people, it is about
control
Freedom (and Responsibility) in a
Framework
Freedom at Google
 In the workplace
 Employees manage their time
 To emphasize creativity
 Tour inside Google Headquarters

Responsibility at Google
 Strong Code of Conduct

« Good-to-Great companies built a consistent system with clear constraints but they also
gave people freedom and responsibilities in the framework of that system. They Hired
self-disciplined people who didn’t need to be managed and then managed the system, not
the people. » Good to Great – J. Collins – P.125
Rinsing Your Cottage Cheese

 Analogy comes from an athlete named

Dave Scott.
 The Answer to the question of “good to
great” lies in the discipline to do what ever
it takes to become the best.
Rinsing Your Cottage Cheese

 Every company wants to be the best, but

most companies lack the discipline to figure
out what they need to do to become the
best. “they lack the discipline to rinse
their cottage cheese”
 Getting rid of it takes tenacity, not brilliance
Wells Fargo
 Froze executive salaries for 2 years
 Took away executive dining room, replaced it with
a college dorm food service
 Closed down the executive elevator, sold corporate
jets and removed live plants.
 He threw back reports that had fancy binders, with
the admonishment: “Would you spend your OWN
money this way? What does a binder add to
anyways”
Bank of America

 Executives at Bank of America didn’t have the

discipline to rinse their own cottage cheese.
 Northeast corner suite, large conference room,
oriental rugs, and floor-to-ceiling windows viewing
the Golden Gate to the Bay Bridge.
 Bank of America asked “why rinse our cottage
cheese when life is so good?”
A Culture, Not a Tyrant
 Discipline created by CEO vs. discipline as a
culture
 Why are Great companies more disciplined?
 “Whereas the good-to-great companies had level
5 leaders who built an enduring culture of
discipline, the unsustained comparisons had
Level 4 leaders who personally disciplined the
organization through sheer force.” Collins
Level 4 Culture
 Ray MacDonald-Burroughs
 Criticized everyone less smart than him
 “The MacDonald Vise”
 Retirement
 Stanley Gault- Rubbermaid
 “Sincere Tyrant”
 He was their number one control mechanism
 After his departure..
 Lee Iacocca- Chrysler
 “The Man. The Dictator. Lee.”
 Distractions (bottling his own wine, house in Italy, new found
fame, Maserati venture, Second book)
 Departure
What not to do?

 The level four executive show us the

culture we don’t want to have.
 Discipline by force and fear
 Discipline through hierarchy
 No culture after disciplinarian leaves
Level 5 Culture
 Google- Enduring culture
 Sergey Brin calm, quiet, not a tyrant
 No hierarchy, keeps creativity
 Discipline comes from having the right people
on the bus.
 Google’s office.
 Disciplined action, without disciplined
understanding of the results can not
produced sustained great results.
Pitney Bowes example

 Monopoly
 Government broke it up
 Had to give patents to the competition

 Severely hurt Pitney Bowes, profitability

drastically decreased
 Level five leader helped the situation
 Fred Allen and successor

 Started increasing marketability again

 High end copiers and fax machine market segment
Explanation
 Pitney Bowes
 Became a pioneer in the PMS (pioneer,
migration, and settler) map
 Through innovation (pioneer) and use of level 5
management entered into blue ocean market
 Ex. High end copiers and fax machines, internet
capable backroom machines
 Through all of these favorable variables turned the
eminent decline of the company around
 77% behind market in 1973 to 11x the market in 2000
 3 Circles
 Companies would fail due to not adhering to 3 circles
 What you can be best in the world at, driver of economic
engine, and what are you deeply passionate about
 Good to Great company mantra: “Anything that does
not fit with our hedgehog concept, we will not do… no
unrelated business or acquisitions and no unrelated
ventures”
 R.J. Reynolds:
 Stepped outside their circle
 Bought sea-land shipping company and Aminoil oil
company.
 2 billion dollar loss
Explanation

 The more the company stays within its 3

circles the more it will have attractive
opportunities for growth
 Google
 Stays within 3 circles very successfully
 Everything is tech based, and very closely related
 I.e. All of its various internet services
Nucor’s 3 Circles
Stop Doing List
 Jim Collins notes, “Those who built the
good to great companies , however, made
as much use of stop doing as to do list”.
 In addition, good to great companies focus
resources in few areas.
 Walgreens went from a food service business
to most convenient drugstore.
The purpose of a budget

 A budget should not be based on which

areas need the funding but which area
supports the hedgehog concept.
Summary of Chapter 6

 Good to great companies give employees freedom

and responsibility
 Disciplined is about getting people to buy into
system by engaging in thought than action
 Do not confuse culture of discipline with a Tyrant
 Budget only the areas that support the Hedgehog
Concept
 “Stop doing” list is just as important as “to do” list