By Jim Collins
I recently reviewed Good to Great, a bestseller that attempts to define what distinguishes "good" companies from "great" companies based on the author's research. That book focused on Fortune 100 companies and drew several principles from them. However, the book didn't focus on public institutions, nonprofits, and not-for-profits (for which Collins uses the blanket term "social sectors"). In fact, some of the primary points of that book didn't apply well to the social sectors. Collins lists some of these (my paraphrase):
- Social sector organizations typically don't use business metrics, so it's harder to define "good" and "great"
- Social sector organizations typically use a more diffuse power structure, meaning that leaders don't have as many tools at their disposal for enforcing their vision
- Social sector organizations have a harder time easing out people who do not contribute well to the organization's mission
- Whereas Good to Great makes the company's "economic engine" a chief focus, social sector organizations are far less concerned with profit and more concerned with resources
- In social sector organizations, "turning the flywheel" has more to do with brand (p.3)
One useful distinction Collins draws is between executive and legislative leadership skill.
In executive leadership, the individual leader has enough concentrated power to simply make the right decisions. In legislative leadership, on the other hand, no individual leader -- not even the nominal chief executive -- has enough structural power to simply make the right decisions by himself or herself. Legislative leadership relies more upon persuasion, political currency, and shared interests to create the conditions for the right decisions to happen. (p.11)Collins stresses that the two kinds of leadership skill are not exclusive to a given sector, but legislative skill is more predominant in the social sectors. (It certainly is at my own university). And in the private sector, executive leaders don't have "the same concentration of pure executive power they once enjoyed" either, so leaders in both sectors must bear in mind that "true leadership only exists if people follow when they have the freedom not to" (p.13, his emphasis).
One consequence of more diffuse power structures in the social sectors is that it's harder to get rid of the underperformers. For that reason, Collins argues, "early assessment mechanisms turn out to be more important than hiring mechanisms" (p.15). He encourages us to hire "those who are productively neurotic, those who are self-motivated and self-disciplined, those who wake up every day, compulsively driven to do the best they can because it is simply part of their DNA" (p.15). (This is what a competitive tenure process is meant to achieve.)
Finally, Collins talks about the issue of economic engines. In Good to Great, he argued for the "hedgehog concept," the notion that great companies stayed within the intersection of three circles: what they are deeply passionate about, what they can be best in the world at, and what drives their economic engine. But in a social sector organization -- say, a church -- the focus isn't on profit but resources:
The third circle of the Hedgehog Concept shifts from being an economic engine to a resource engine. The critical question is not "How much money do we make?" but "How can we develop a sustainable resource engine to deliver superior performance relative to our mission?" (p.18)Collins identifies three components of such resource engines: time (how to get people to contribute their efforts for free or under market rates), money (how to sustain cash flow), and brand (cultivating "a deep well of emotional goodwill and mindshare of potential supporters") (p.18). To support his discussion, Collins describes four quadrants of the social sector, defined by two axes: (1) charitable donations & private grants; (2) business revenues (p.21).
Overall, this monograph does some valuable work in fleshing out the Good-to-Great framework for social sector organizations. It's a fast read, but only if you've read Good to Great already. And like Good to Great, it's written clearly and lucidly. My main objection was that it didn't list the participating organizations or discuss methodology in detail. Nevertheless, much of the advice rings true for those of us working in the social sectors.