W h y s o m e c o m p a n I e s m a k e t h e
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| 78 Jim Collins across Cullman. He set the tone I will take responsibility for this bad decision. But we will all take responsibility for extracting the maximum learning from the tuition we've paid" 4. Build "red flag" mechanisms. We live in an information age, when those with more and better information supposedly have an advantage. If you look across the rise and fall of organizations, however, you will rarely find companies stumbling because they lacked information. Bethlehem Steel executives had known for years about the threat of mini-mill companies like Nucor. They paid little attention until they woke up one day to discover large chunks of market share taken Upjohn had plenty of information that indicated some of its forthcoming products would fail to deliver anticipated results or, worse, had potentially serious side effects. Yet it often ignored those problems. With Halcion, for example, an insider was quoted in Newsweek saying, "dismissing safety concerns about Halcion had become virtual company policy" In another case when Upjohn found itself under fire, it framed its problems as "adverse publicity" rather than confronting the truth of its own Executives at Bank of America had plenty of information about the realities of deregulation, yet they failed to confront the one big implication of those realities Ina deregulated world, banking would be a commodity, and the old perks and genteel traditions of banking would begone forever. Not until it had lost $1.8 billion did Bank of America fully accept this fact. In contrast, Carl Reichardt of Wells Fargo, called the ultimate realist by his predecessor, hit the brutal facts of deregulation Sorry, fellow bankers, but we can preserve the banker class no more. We've got to be businessmen with as much attention to costs and effectiveness as McDonald's. Good to Great 7 9 One particularly powerful way to accomplish this is through red flag mechanisms. Allow me to use a personal example to illustrate the idea. When teaching by the case method at Stanford Business School, I issued to each MBA student an 8.5" x 11" bright red sheet of paper, with the following instructions "This is your red flag for the quarter. If you raise your hand with your red flag, the classroom will stop for you. There are no restrictions on when and how to use your red flag the decision rests entirely in your hands. You can use it to voice an observation, share a personal experience, present an analysis, disagree with the professor, challenge a CEO guest, respond to a fellow student, ask a question, make a suggestion, or whatever. There will be no penalty whatsoever for any use of a red flag. Your red flag can be used only once during the quarter. Your red flag is nontransferable you cannot give or sell it to another student" With the red flag, I had no idea precisely what would happen each day in class. In one situation, a student used her red flag to state, "Professor Collins, I think you are doing a particularly ineffective job of running class today. You are leading too much with your questions and stifling our independent thinking. Let us think for ourselves" The red flag confronted me with the brutal fact that my own questioning style stood in the way of people's learning. A student survey at the end of the quarter would have given me that same information. But the red flag-real time, in front of everyone in the classroom-turned information about the shortcomings of the class into information that I absolutely could not ignore. I got the idea for red flag mechanisms from Bruce Woolpert, who instituted a particularly powerful device called short pay at his company Graniterock. Short pay gives the customer full discretionary power to decide whether and how much to pay on an invoice based upon his own subjective evaluation of how satisfied he feels with a product or service. Short pay is not a refund policy. The customer does not need to 80 Jim Collins return the product, nor does he need to call Graniterock for permission. He simply circles the offending item on the invoice, deducts it from the total, and sends a check for the balance. When I asked Woolpert his reasons for short pay, he said, "You can get a lot of information from customer surveys, but there are always ways of explaining away the data. With short pay, you absolutely have to pay attention to the data. You often don't know that a customer is upset until you lose that customer entirely. Short pay acts as an early warning system that forces us to adjust quickly, long before we would lose that customer" To be clear, we did not generally find red flag mechanisms as vivid and dramatic as short pay in the good-to-great companies. Nonetheless, I've decided to include this idea here, at the urging of research assistant Lane Hornung. Hornung, who helped me systematically research and collate mechanisms across companies fora different research project, makes the compelling argument that if you're a fully developed Level 5 leader, you might not need red flag mechanisms. But if you are not yet a Level 5 leader, or if you suffer the liability of charisma, red flag mechanisms give you a practical and useful tool for turning information into information that cannot be ignored and for creating a climate where the truth is heard Download 3.69 Mb. Share with your friends:
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