First Who… Then What

1. First Who… Then What good TO great Chapter 3 Milos Kustudija – Matt Zaney – Dustin Pace

2. 3 Simple Truths • Good-to-Great leaders understood (initially) these 3 simple truths • Begin with ‘Who’ in mind rather than ‘What’ in order to better adapt to changing environment • If you have the right people lined up you can worry less about motivation/personnel mgmt • The right ppl don’t need to be tightly managed; they’re self motivated and stay true to the task at hand • If you have the wrong people involved it won’t matter whether you’ve got the right direction or not – your company will still fail. • Great vision without great people is ultimately irrelevant

3. 3 Simple Truths Contrast Example • Wells Fargo • 1970s CEO Cooley began building one of most talented mgmt teams in the industry • Instead of attempting to forecast and strategize future changes that he had no clue about, Cooley went after endless stream of talent • W Fargo hired outstanding people whenever/wherever they found them • Subsequently, at a time when industry down 59%, Fargo outperformed market three-to-one • Bank of America • “Weak Generals, Strong Lieutenants” • Claimed if you kept upper mgmt mildly weak senior mgmt not likely to feel threatened • Rather than having proactive engagements, BofA generals sat idly waiting on final decisions to come from above • After losing over $1 billion in the 1980s Bof A switched recruiting to more closely resemble Fargo

4. First Who. Then What • Main point of this chapter is not about assembling the right team • It is about finding all the right people to bring in, and then sorting all of the wrong people out • Second key point is degree of sheer rigor needed in people decisions in order to take a company from good to great • Once the ‘Who’ questions handled then look towards the ‘What’ questions – vision, strategy, tactics, org structure, technology etc

5. Not a “Genius with a Thousand Helpers” • This is a contrasting model to that employed by Good-to-Greats • This model employs that one true genius at the top of the hill, that one individual responsible for the company’s success. • This genius is basically the only true great asset – once they leave the company falls

6. Level 5 + Management Team A “Genius with a Thousand Helpers”

7. It’s Who You Pay – Not How You Pay Them • No specific evidence linking exec pay to process of going from good to great • Idea that higher exec compensation results in greater returns is false • Purpose of compensation should not be to get the right behaviors from the wrong people, but to initially attract the right people and later to keep them

8. Rigorous. Not Ruthless • Rigorous: constant application of exacting standards at all times and levels, especially in upper management • Ruthless: hacking and cutting, especially in difficult times, or simply firing people without thoughtful consideration • Good-to-Great companies sound like tough places to work – and they most certainly are. If you don’t have what it takes you probably won’t last long, but they’re not ruthless, just rigorous

9. How to be Rigorous • When in doubt, don’t hire – keep looking “You don’t compromise. We find another way to get through until we find the right people” – Alan Wurtzel, then CEO Circuit City • When you know you need to make a people change, ACT • Moment you feel need to tightly manage someone you’ve made hiring mistake – the best people don’t need to be managed, just simply guided, taught, and led • Put your best people on the biggest opportunities, NOT the biggest problems

10. First ‘Who’ Explored via Fannie Mae Scenario • David Maxwell, CEO Fannie Mae • Became CEO during darkest times, facing lots of pressure from board to produce immediate results • Maxwell held off from implementing/developing strategy until he had ALL the right people in place • Everyday Maxwell waited, Fannie Mae lost $1M, in addition to being up against $56B in underwater loans “I don’t know where we should take this company, but I do know that if I start with the right people, ask them the right questions and engage them in vigorous debate, we will find a way to make this company great.” – David Maxwell

11. First Who, Great Companies, and a Great Life • Is it possible to build a great company and also build a great life? • Yes – same principles applied in both scenarios • Start with great people, members of good-to-great teams tend to remain close friends for life • The experiences go beyond just mutual respect to lasting comradeship • Ultimately, adherence to the idea of First ‘Who’ might be the closest link between great companies and great lives “For no matter what we achieve, if we don’t spend vast majority of time with people we love and respect we cannot possibly have a great life. However, should we choose to spend majority of time with loved ones – people we really enjoy being along side of – then we’ll almost certainly always have a great life, regardless which way industry takes us”

12. Key Points • Exercise patience during start-up, specifically concerning staffing. The right people and you win, the wrong people and both you and the company lose. • Forget abut patience related to staffing post start-up, once you’re up and running the idea is to keep running. Never hesitate to cut slack and dump unworthy personnel. Doesn’t take long for one weed bush to overtake the entire flower garden • Good-to-Great management teams consist of people who debate vigorously in search of best answers, yet who unify behind decisions, regardless of political-legal interests