Chapter 2: Level 5 Leadership

1. Chapter 2: Level 5 Leadership Alex Beverly Emily Dale Everett Gibson Andrew Keeling Charity Moore Kolt Pedersen Hayley Rush CarliSlingerland

2. Introduction “You can accomplish anything in life, provided that you do not mind who gets the credit.” -Harry S. Truman • Level 5 Leader: An individual who blends extreme personal humility with intense professional will.

3. Darwin E. Smith • 1971, became chief executive of Kimberly-Clark, a stodgy old paper company. • People were afraid that he lacked some of the qualifications for the position. • In the 20 years Smith was CEO, he turned Kimberly-Clark to a stunning transformation. • Very few people knew anything about Darwin. • When asked about his leadership style, he would only reply, “Eccentric”. • People thought he was shy. • Smith was diagnosed with nose and throat cancer. • Smith made very risky business moves, but eventually came out on top.

4. Level 5 Hierarchy

5. Not What We Expected • Level 5 leaders • Channel their egos away from themselves • Goal of building a great company • Incredibly ambitious • First for the institution • Then for themselves • Highest level in the executive capabilities identified in Collins’ research • Embody all five levels of the pyramid

6. Downplay the Executives • What distinguishes good-to-great companies? • Downplay the role of top executives • Avoid “credit the leader” and “blame the leader” • “Leadership is the answer to everything” – “God is the answer to everything” • We gained understanding about how the universe works • We need to do the same with leadership and what makes the differences

7. The Data Wins • “Ignore the executives” • Consistency among great executives • Cut from the same cloth • Level 5 Leadership • “Level 5 is an empirical finding, not an ideological one”

8. Humility + Will = Level 5 Level 5 leaders are self-effacing individuals who display a fierce resolve to do whatever needed to make the company great They channel their ego needs away from themselves and into the larger goal of building a great company. Their ambition is first and foremost for the institution, not themselves. Lever 5 leaders are a study in duality: modest and willful, humble and fearless. Ex: Abraham Lincoln

9. Gillette • Colman Mockler, CEO from 1975 to 1991 • During tenure, faced down 3 potential attacks threatening takeover • Mockler chose to fight for the future greatness of Gillette rather than selling out and pocketing a large sum. • In the end, Mockler proved right, and his decisions took Gillette from good to great!

10. Setting Up Successors For Success • David Maxwell CEO of Fannie Mae in 1981 • Losing $1 million every business day • Turned business around to start making $4 million every day • Beat stock market 3.8 to 1 • Retired after 9 years while still at the top • Company continued to have success after his departure

11. Setting up Successors for Success • Key trait of Level 5 leaders: • Ambition first and foremost for the company and concern for its success rather than one’s own riches and personal renown. • Key trait of the comparison leaders: • Concerned more with there own reputation for personal greatness and often failed to set the company up for success in the next generation.

12. Setting up Successors for Success • Leaders of Comparison Companies: • Set successors up for failure • Chose weak successors

13. Rubbermaid Example • Stanley Gault • Hard-driving egocentric • When interviewed talked more about I than we • Rubbermaid had 40 consecutive quarters of earnings growth under his leadership

14. Rubbermaid Example • When Gault left, he left behind a company that would not be great, without him. • This shows that Gault was an excellent level 4 leader but not a level 5 leader. • Level 5 leaders, with ambition first and foremost for the company, would leave behind a company that would continue to be successful.

15. Good to great leaders didn’t talk about themselves • When questioned about their own contributions the leaders would either be very modest or deflect the success on other people. • The good to great leaders had a humble attitude toward their own success but felt appreciative of those executives around them.

16. Good to Great leaders never wanted to become larger than life • These leaders exhibited qualities such as honest, reserved and mild-mannered. • Leaders that showed an egocentric leadership style often showed a quick leap in sales and return to a decline after. • Chrysler: - Chrysler is a great example of a leader who wanted to focus the company’s success on themselves as the reason. Although this particular leader did produce results of 2.9 times the market, he felt his greatness was the reasoning behind the increase. As his personal stock soared, Chrysler stock declined to 31% behind the market halfway through his tenure.

17. Unwavering Resolve… to Do What Must Be Done • “Level 5 leadership is not just about humility and modesty. It is equally about ferocious resolve, and almost stoic determination to do whatever needs to be done to make the company great”. -Good to Great (p.30)

18. Abbott Laboratories • George Cain becomes CEO in 1974. • Came from within the company • Didn’t have an inspiring personality • Hated mediocrity • Company had lived off cash cow for years. • Did away with nepotism. • If you weren’t the best, you were gone

19. Walgreen’s • Charles R. “Cork” Walgreen III takes over in 1975. • Determined to leave food-service in 5 years. • Saw that drugstores were the future • Problems were emotionally driven.

20. Be the Plow Horse • “The show horse and the plow horse --- he was more of a show horse, whereas I was more of a plow horse.” -Alan Wurtzel, Former CEO (Circuit City)

21. The Window and the Mirror • Luck • Alan Wurtzel- Circuit City • Jack Welch- GE • Sam Walton- Walmart • The number one factor for success was Luck

22. The Window and the Mirror • The emphasis on luck turns out to be good management • Level 5 leaders look out the window to apportion credit to others • Level 5 leaders never credit themselves, if none to credit, luck is responsible • Level 5 leaders look in the mirror to apportion responsibility

23. The Window and the Mirror • Comparison Leaders do the exact opposite • The window and the mirror do not reflect objective reality • It seems that great leaders manage by the window and mirror approach

24. Can you become a Level 5 leader? • Two categories of people • Those who do not possess the seed of Level 5 (egotistic); • And those who do possess the seed (seeks development) • The answer is yes for those who fall in the second category. • Every “great” company had a Level 5 leader, yet no data supports a credible list of qualities to achieve Level 5 leadership. • Practicing good-to-great disciplines could lead to Level 5 leadership

25. Summary • Level 5 leadership in pivotal transition • Level 5 leaders are ambitious for the company first. • Level 5 leaders set-up successors for success. • Level 5 leaders are modest, self-effacing, and understated. • Level 5 leaders seek to sustain results. • Level 5 leaders are workmen. • Level 5 leaders share recognition and attribute success to other factors. • Trend is to select “celebrity” leaders instead of Level 5 leaders. • People can evolve into Level 5 leaders.