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Standing Your Ground In The Face Of Change

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Standing Your Ground In The Face Of Change

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NFC: How do we recruit and retain the qualified employees we need?
Collins: It goes back to one central question and that central question is, “How do you create an enduring and great company?”
A great company in terms of its outward characteristics has truly superior performance—it outperforms any stock index fund. Second, the company plays a role in having a big impact on the world. If the company disappeared, the world would truly have a hole in it. For example, if you took away Disney, you’d still have theme parks, but you wouldn’t have Disneyland. You could take away Boeing and there’d be jets, but the whole process would slow down by virtue of the leading-edge role they play. A great company is one that earns a substantial reputation amongst knowledgeable peers and knowledgeable people who observe organizations. And finally, longevity. A great company is able to do these things over a very long period of time.

Now, in the context of your question, there are really two aspects to the recruiting side that relate to what makes a great company. One of those being the fit of the people to the basic core values of the institution. The second part being the ability to contribute at an excellent level. You could share the same values, for example, but be lazy.You can’t give somebody a work ethic if they don’t have it. You can’t give somebody a genuine concern for the impact of their actions upon other people if they don’t have it.

There are certain things we have to take as given and if somebody doesn’t have those as a given, they don’t belong. For every company, those givens are different.

David Packard said the ultimate constraint on growth of the Hewlett-Packard is not technology. It’s none of the traditional views of what constrains growth—limited opportunity, limited technology or limited innovation. Those are all, in fact, in abundance if you run yourself well. The ultimate constrain on HP’s growth is its ability to find people who have a predisposition that fits with HP.

The other side of the coin is the learnable skills. If an individual has the basic character attributes that you’re looking for, all the rest can be learned. Where I find companies unnecessarily limiting themselves in recruitment is that they’ll focus on the wrong side of that coin. They’ll focus more on, “Does this person have the right educational background?”

NFC: If companies now are selecting on attitudinal characteristics, what would the new contract with an employee look like?
Collins: I happen to believe that jobs will be a thing of the past. An employment relationship will disappear as the primary organizing mechanism of companies.

Take Mary Kay. People will laugh, but you shouldn’t laugh at its performance, and you shouldn’t laugh at its remarkable ability to accomplish a whole series of objectives.

What’s utterly fascinating about Mary Kay is its members’ extraordinary loyalty. People who are Mary Kay people are very loyal Mary Kay people to the point where that’s the color of the car they drive. This is across nationalities. I mean this is in Russia, Europe, Australia and Asia. Almost all members of the Mary Kay organization don’t have jobs with the organization. They have an opportunity, a contractual opportunity, to do well within the organization, but they have no guarantees and they have no jobs. The people at Mary Kay know what the company is about. They fit. It’s an environment where if you perform well, you’ll do well. There’s this real sense of tight connection, but no jobs. And that is a fascinating potential model for the future.

NFC: One of the key findings of your research is, “It’s not what you make, it’s what you stand for.” How can a company stay true to itself, stay profitable and not reshape itself to give the market what it wants? How do you balance that with the whole push in the last 10 years toward customer satisfaction? You don’t mention customers in any of your key findings.
Collins: That’s true, this is one of the findings that quite surprised me. We did not find that total customer satisfaction or customer focus was a necessary condition as a core value for being a great company. In fact, you can find truly great companies where that has not been part of its core value set. Two clear examples of that are Hewlett-Packard and Sony. Sony has had somewhere between indifference and disdain for its customers. HP has been a little softer.
When I was a young HP product manager, I was on the crux of this issue. As a 25-year-old junior product manager, I was vested with the responsibility along with the lab manager of determining which operating system should go on our portable and personal computers. This, by the way, sheds some light on how HP works. That decision was delegated down. I was fresh out of graduate school and the lab manager couldn’t have been more than three years older than me. That really illustrates the degree of distributed decision making and responsibility at HP. It didn’t require the CEO to remind us to keep HP’s purpose in mind. The HP purpose that we’re here to make technical contributions was so strong that it existed in all discussions.
I argued forcefully that what people were demanding was a cheap IBM compatible computer. I lost the battle. I was right from the market standpoint, but I was wrong from an HP standpoint.

What they said was, “What we stand for, matters more. We will not introduce a compatible computer line until we can figure out how to do it in a way that is consistent with our purpose of making technical contributions.”

NFC: Didn’t that decision, in the 80s, look like a bad decision for awhile?
Collins: I thought it was a terrible decision. I went all the way to the top of the company and said we were idiots and that we’re making a stupid decision. And the group general manager of all personal and portable and desktop computers said to me, “You may be right, it isn’t the best market decision right now.”

And at the time, as a 25-year-old, I didn’t understand that. I walked away thinking that these people are nuts. Of course the great wisdom in the system, was the very long-term view. The position that it may take us longer to get where we’re going, but when we get there, we will be getting there in a way that is both market-successful and not diluting what we are as a company. We may not attain that success in 1984, or 1985, but now it’s 1998. All of those other companies that were so much more expedient, most of them aren’t major players. Where’s HP? A major player.

NFC: I think of AQP as nonprofit. What we’re about, fundamentally, is participation. We are about people genuinely participating in their organizations and having a voice. And the market, by market I mean organizations, doesn’t really want that.
Collins: Often that’s true.

NFC: Or they want it at a very low level.
Collins: Right they want it without discomfort.

NFC: Without real change. I find us trying to make our message more palatable to the market. Participation is good because it will give you the business results you want. Yet, it’s hard to stay true to who you are in the face of the market demands.
Collins: That is always a challenge and a tension. I find that what the best companies do is that they never give up or compromise what they stand for. They get really smart about how to evolve their strategies and practices. Rather than seeing it as always that push and pull of giving up 10 percent of what we stand for to gain 10 percent access to the market. Rather looking at it as if we’re going to gain 50 percent access to the market and stay 100 percent committed to what we stand for.

The great genius is to figure out how to do that.

NFC: And to do that in a participatory environment.
Collins: Let me comment on the whole element of participation. Great companies live with great discomfort by design. Let me use a personal analogy that most people can relate to.

Those of us who have had the blessing of a really fruitful, long-term relationship with someone—a significant other, a spouse, a son or daughter, a parent—know that what really makes it work is the discomfort that comes from having to address the aspects of the relationship that need attention. That is uncomfortable. It is that very discomfort that produces the fruitful long-term result. And I look at great companies and I think that it is very similar. True participation is like the hard discussions in a marriage. They have to take place for the marriage to prosper. But they are difficult to have because they create discomfort.

NFC: Isn’t there a saying about “it’s in the struggle that you grow.?”
Collins: And of course what Nietzsche said, “That which does not kill you, makes you stronger.”

NFC: You’re findings don’t really show that great companies have a bias toward participative cultures. Is that true?
Collins: Great companies have such tightness around what they stand for and why they exist. And by virtue of hiring and retaining people who share the core values and purpose, you can then trust them over the whole range of operating perspectives and give them more freedom.

3M isn’t what I’d describe as a highly participative environment in the sense of they have a lot of participative types of meetings. But 3M is highly participative in the following sense. If the basic game is innovation, then a very large percentage of people are participating by their own initiative in doing things that create innovation. So it’s a little more cloudy than a straight definition of participation. But if we went back to the “Built to Last” study and systematically went across pair-by-pair, which companies had more participation than others, I am confident that you would find greater degrees of participation across visionary companies than the comparison companies.

I have been studying a remarkable group of companies with a remarkable group of executives who brought about significant amounts of change in those organizations. Every single one of them are fundamentally participative in their processes.

And what do they do? Their first step is not to figure out the direction of the company. The first step is to ask, “Who is going to be on my team?” And based upon who is on that team, I’m going to use that team as a decision-making body to determine where we should go. I don’t necessarily know where we should go. But I know that if I get the right people around me and we debate and argue and discuss the pros and cons, we may not come up with the perfect answer, but we’re going to come up with a very good answer. A very interesting part of their decision-making process is that it may take them a long time. Some of the more significant shifts in corporate history took over 10 years to decide what to do.

NFC: That’s encouraging in a time where speed is everything.
Collins: Right, and yet once they got clear and made the decision, their degree of commitment and their speed of implementation was off the charts.

NFC: In your book, you looked at the visionary companies. Have you added any to that list?
Collins: First of all, the companies in “Built to Last,” neither Jerry Porras (co-author) or I ever meant to view as the most visionary ever. There may even be some companies that deserve to be on this list more than others.

NFC: Wal-Mart?
Collins: Wal-Mart is always an open question. All of the companies in our study jumped business models at some point. They demonstrated a capacity to succeed not in one business strategy, but also in new business strategies. You have Disney going from cartoons to theme parks. Motorola going from TV to integrated circuits. And HP going from instruments to computers and General Electric Corp. going from big electrical systems to appliances. Wal-Mart is basically still in its original business model. And it’s a very open question as to how Wal-Mart will do when at some point that business model can no longer be the engine of growth.

NFC: Are there any books you’re reading that are influencing your work?
Collins: I tend not to read business texts. I find that most aren’t worth my time. I’ll share a couple of books that I think are really good studies in management, but from a totally different standpoint.

One is “For Cause and Comrades,” by James McPherson. It is a study from the actual letters and diary entries of Civil War soldiers, both North and South. It’s about their motivations and why they would re-enlist—what are the real motivations in such situations.
Another that I think is a great study in horrendously bad leadership is “Son of the Morning Star,” which is about Custer. Also I would recommend, if people haven’t read it, “Man’s Search for Meaning,” Victor Frankel. Those are the three of the best that I’ve read in the last year.

I want to leave you with one thought from a person I admire greatly. Jim Stockdale said the most important book of all to read is the “Book of Job.” In modern America we do a great disservice to our students because we train them for success. But the great challenges in life are not dealing with success, they are dealing with setback, crisis, difficulty, failure. And you have to come to terms with the fact that life is not fair.

Well, I bet this wasn’t your typical business interview.

NFC: Ah, who wants to be typical?