At our annual leadership summit last fall in Denver Renowned leadership expert Jim Collins spent three hours sharing his ideas for getting from good to great, for building companies to last and for avoiding corporate failure. Then attendees got an hour to ask Collins whatever they wanted. The following, edited for length and clarity, are some of those questions and answers.
What are the key traits of a Level 5 leader?
Collins has said these most sublime of leaders demonstrate “a powerful mixture of personal humility and indomitable will.” He told the conference their traits boil down to “values, will and skills.”
“If there’s a values mismatch, have no patience for that. You can’t change people’s core values in business. And if they have the values, do they have the will and skills? Is there a will to grow and evolve into a Level 5 leader, or just someone who’s great in the seat? If so, then you can be pretty patient that they’ll get the skills.”
What’s your elevator pitch for getting a CEO to embrace a Level 5 ethos?
Nothing else you do communicates more than who you put in key positions, Collins said: “If you have anyone who’s inherently destructive to a Level 5 ethos, you’ve got to change that.” As leaders build that executive team, they’re “cultivating it as a team. You can’t afford to spend the best, most creative years with people you don’t love, doing work you don’t love.”
How do you balance aspirations to Level 5 leadership with other things in life?
Maybe you don’t. Leaders who’ve built great companies basically into fall two buckets, explained Collins. “Bucket A is filled with those who, in addition to [their business success], seemed to have pretty significant other components of their life, maybe balance—dedication to family or other things that are important to them. In Bucket B, they didn’t have balance. Work defined their life, and at great consequence, as a result, to other parts of their life.
Which bucket had more of the executives who built great companies? “It was 50/50. The bad news is that about half of the Good to Great CEOs defined a great life as building their great company, and they didn’t have anything in any significant way outside of that, and even if they did, they paid great consequences as a result” of being single-mindedly dedicated to business. “The good news is that it was only about half of these leaders. What that says is that actually, the executives who didn’t have [balance] didn’t want it. And half had it because they wanted it.”
How do you identify the right people?
“I interview them last,” Collins said. Instead, first background yourself thoroughly on that candidate. “Because when you meet them, you’re either going to like them or not. Everything will be filtered through that. Some of the greatest hires don’t interview well. Interviews teach you one thing: how well someone interviews. But they don’t tell you that much more.”
How do you square the long-term horizons of Level 5 leadership with the short-term world of running a company for private equity?
“Your responsibility as a CEO is to be building [the company] in such a way that you’re building it for who will be the next suppliers of capital, not for those who have the privilege of investing in your flywheel now,” Collins said.
“If for every cycle of capital you’re building for the next owners, the next providers of capital, then that keeps you on the front end of the cycle of the flywheel. If you do that, anyone who’s going to transfer capital to another owner will be better served by that, because you’ll have created something of such great intrinsic value.”
Where does culture-building fit the flywheel concept?
One of Collins’ signature ideas from Good to Great is that corporate transformations “never happen in one fell swoop” but rather in a process that “resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.”
Building culture is “embedded throughout” this process, Collins told the conference. “No great company gets built that isn’t built on a deeply held set of core values. You must have that core purpose, or you can’t be a visionary company.”
How often should you reevaluate your company’s flywheel?
“Once you have it right, the first evaluation should be, ‘How are we executing?’” Collins said. If the answer is negative, “You have two options then: Your flywheel needs evolution, or it may be fine and you’re failing to execute. Second, always be evaluating, are there ways you should renew the flywheel you have rather than blowing it up? Flywheels last two to seven decades, because people renew and extend them over time.
“But third, your flywheel may not be forever. It’s a constant evaluation process. Kick the tires on your flywheel to make sure it’s still right for today.”