Good to Great Chapter 2: Level 5 Leadership

Good to GreatChapter 2: Level 5 Leadership Jason Bullard Grant Gerhardt Patrick Kirkland Laura Moore Jeffri Vaughn

Key Points of Chapter 2 • What is Level 5 leadership? • What are the Characteristics of Level 5 leaders?

LEVEL 5 HIERACHY

Darwin E. Smith former CEO of Kimberly Clark • CEO for 20 years • His Story (pg. 17-21 C book) • Level 5 refers to the highest level in the hierarchy of executive capabilities in “Good to Great’s” research • Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company

Level 5 Leaders… • Build an enduring greatness into their companies through a blend of personal humility and professional will • Are not larger than life saviors • Are self-effacing individuals who have the resolve to do whatever it takes to make their company great

Level 5 leaders have ambition but their ambition is first and foremost for the institution Ex. Juan T. Trippe, Founder: Pan American World Airways Pioneered commercial flights to Hawaii, China the far east, and around the Pacific Rim in the 1920s and 30s with Pan Am’s flying boats Took great risks in the late 50s and again in the 70s when he partnered with Boeing to launch the 707 and 747 jetliners

Good to Great companies had one thing in common… They all had or have Level 5 leadership! • Pan American with Juan T. Trippe • Kimberly Clark with Darwin E. Smith

A Compelling Modesty • Good-to-great leaders did not talk about themselves • Talked about the company and the contributions of other executives • Most are very modest and humble • Most extraordinary executives are not widely known

A Compelling Modesty • Was not just false modesty • Quiet • Humble • Modest • Reserved • Shy • Gracious • Mild-mannered • Self-effacing • Understated

A Compelling Modesty Good-to-great leaders never wanted to become larger-than-life heroes Ordinary people quietly producing extra-ordinary results Presence of a gargantuan personal ego contributed to the demise or continued mediocrity of the company

A Compelling Modesty • Scott Paper CEO – Al Dunlap • Told anyone who would listen about his success • Personally accrued $100 million for 603 days of work • $165,000 per day • By slashing the workforce, cutting R&D budget in half, and putting the company on growth steroids in preparation for sale • Sold off Scott Paper and pocketed the quick millions • Wrote a book about himself • “Rambo in Pinstripes”

A Compelling Modesty • William McComb – CEO of Liz Claiborne • According to The Wall Street Journal, McComb flies commercially, almost always in coach • Many CEO’s of major companies travel on corporate jets

Unwavering Resolve…to Do What Must Be Done Level 5 leadership is not just about humility and modesty Ferocious resolve Determination to do whatever needs to be done to make the company great Call them “Level 5 leaders” so that they do not sound weak by being described as “selfless executives” or “servant leaders”

Unwavering Resolve…to Do What Must Be Done Level 5 leaders are fanatically driven Incurable need to produce results Will even drop a business, sell the mills, or fire family, if that is what it takes to make the company great

Unwavering Resolve…to Do What Must Be Done Evidence does not support the idea that you need an outside leader to come in and shake up the place to go from good to great Going for a high-profile outside change agent is negatively correlated with a sustained transformation from good to great

Unwavering Resolve…to Do What Must Be Done Ten out of 11 good-to-great CEOs came from inside the company, three of them by family inheritance The comparison companies turned to outsiders with six times greater frequency, yet they failed to produce sustained great results

Walgreens • Large part of the company had been in food-service for many years • CEO “Cork” Walgreen • Felt that company should switch to convenient drugstores • chose to eliminate food-service operations despite the company’s close ties with food-service

Circuit City • Plow horse vs. show horse • Investment in Circuit City six times better than General Electric • Level 5 CEO Alan Wurtzel attributed number one factor for Circuit City’s success to luck

Windows and Mirrors • Several Level 5 leaders attribute success to luck • Level 5 leaders look out the window at others to attribute success, and look in the mirror at themselves to attribute failure • Comparison company leaders look out the window at others to attribute failure, and look in the mirror at themselves to attribute success

Professional will Unwavering resolve to do what it takes to produce the best long-term results Looks in the mirror to attribute failure Settles for nothing less than the best Personal Humility Modest, never boastful, shuns public adulation Quiet, calm determinism Relies on inspired standards, not inspiring charisma Channels ambition to company, not to self Looks out the window to attribute success Level 5 Leadership

Becoming a Level 5 Leader • Some Level 5 leaders experience a significant turning point in their lives, while others have a relatively normal life • It is possible that potential Level 5 leaders are common; it is only a matter of finding them • Some people will never be able to tame their egos and therefore will never reach Level 5 • Work will always be about what they get (fame, fortune, power) rather than what they build, create, and contribute

What Makes a Level 5 Leader? Humility Modesty Willful Humble Fearless

Not Always About the Money A level 5 leader isn’t concerned about money only. This leader is much more concerned with the overall success of the company in the present as well as in the future when they are gone. They will do everything they can to make sure the company will succeed later by appointing a successor with their same characteristics.

When it is About the Money When it is about the money you’re probably talking about a Level 4 Leader. This is somebody who is not concerned with the future of the company after they’re gone, but who just wants to get paid. They are all about the “I” and not about the “We.” This leader will not “set their successor up for success.” In fact, they will most likely choose a person who isn’t ready, or doesn’t have any idea what it takes to be a leader of that magnitude.

Leaders Level 5 Level 4 Stanley Gault (CEO Rubbermaid) Bob Nardelli (CEO The Home Depot) Abraham Lincoln (former President) Colman Mockler (CEO Gillette) David Maxwell (CEO Fannie Mae) Frank Blake (CEO The Home Depot)

Personal Experience Level 4-Bob Nardelli Was getting large sums of money though stock was dropping Company flourished, but was concerned about his money, and not the future of the co Company and Nardelli agreed on resignation Level 5-Frank Blake Blake is already more involved with associates than Nardelli ever was Sincere and concerned with the success of the company and the benefits it brings to the community

Takeaways Level 5 Leaders are humble, fearless, and willful They are concerned with the company, its employees, and the benefits the company brings to the community in the present and future

Citations http://money.cnn.com/2007/01/03/news/companies/home_depot/index.htm http://money.cnn.com/2006/05/25/news/companies/home_depot/index.htm

Good to Great Chapter 2: Level 5 Leadership