Best hedge against uncertainty is people, management guru says

Companies should forget about reaching a post-pandemic sense of normalcy and brace for a string of black swan events that risk sinking those who are ill-prepared, said Jim Collins, author of the best-selling management book Good to Great.

By installing the right people in the right jobs, high-calibre leaders with a solid focus on their company's underlying strengths can drive their businesses through any crisis to ultimately reach their full potential, Collins said.

"There will be no new normal, in my view. There will only be a continuous series of the not-normal episodes, big surprises that rock our world yet again," Collins told the Road Map to Greatness virtual event hosted by The Growth Faculty.

"Your ultimate hedge against uncertainty … is to have the right people who can, as a group, adapt to whatever surprises come down the road."

Collins, a former Stanford Graduate School of Business faculty member, has sold millions of copies of management books, including Built to Last and How the Mighty Fall, which analyse the defining factors behind "iconic" companies.

His latest book, "BE 2.0", sketches a road map for entrepreneurs that centres on using disciplined people, thoughts, and actions to build outstanding businesses that have a unique and long-lasting impact. Luck alone cannot make a company great. But companies that employ "productive paranoia" to learn from their mistakes and confront future risks can swiftly take advantage of opportunities that good luck affords, Collins said.

"About 50% of great leadership is what you do with the unexpected. Bad luck can kill you; that's why you have productive paranoia," said Collins, who tells companies to confront "brutal facts" head-on.

"When, not if, bad luck hits you, you're able to endure it, stay at the table, getting the best return."

Next-level leadership

More than ever, it is essential to find exceptional "Level 5" leaders who can drive companies to greatness, Collins said, noting that leaders with enormous egos do not qualify.

Successful leaders such as Anne Mulcahy, the former CEO at Xerox, and former Washington Post owner Katharine Graham had very different personality traits but shared an indomitable will, humility, and the ability to put themselves at their companies' service, he explained.

While some people are born with charismatic, exceptional leadership abilities, others are capable of developing their skills to reach "Level 5", said Collins, who has spent 30 years honing his concepts.

He told the audience about the time a "humbled" Steve Jobs joined him to lead a Stanford lecture in the 1980s after he was ousted from Apple Inc., the company he co-founded and eventually helped set on the path to corporate greatness.

"There was a Steve Jobs 1.0 and a Steve Jobs 2.0," Collins said. "And Steve Jobs 1.0 could not have done the '97 to 2011 phase that made Apple into the company that we all know today. In order to do that, he had to evolve and grow into a Level 5 for Apple. He was always a strong, charismatic personality. … What he was laying down was a foundation so that Apple can be a great company long beyond his presence."

Bus drivers

Getting the right people "on the bus" and "in the right seats" is one of the most important elements for companies that aspire to greatness, Collins said. But as companies and operating environments evolve, leaders need to invest in key staff or shift them if they fail to outperform, he said.

"Be rigorous, not ruthless … If you hired the wrong person, that's your fault; if you put someone in the wrong seat, that's your fault," he said.

As the pandemic starts to ease, companies should be analysing the lessons they have learned from the latest crisis and integrating them into the core, long-term premise that underlies their operations, he said.

Besides outperforming financially, successful companies should also have a comprehensive, ambitious, forward-looking strategy to help them make the leap from good to great.

For Collins, this is the "Flywheel" that builds momentum as companies seek growth opportunities and ultimately take major punts that could massively change their outcomes.

Amazon CEO Jeff Bezos used the flywheel concept after the dot-com crash to help strategise how to increase customer-based offerings and revenues to bring on third-party sellers and expand distribution, Collins said.

For the author, there is no lightning bolt that creates visionary companies but instead a structured, disciplined methodology that builds solid businesses that can survive even the most devastating crises to reach greatness.

"In the end, there's never a single decision," he said. "It's a series of supremely good decisions, supremely well executed over a long period."

— Sophie Hares is a freelance writer based in Mexico. To comment on this article or to suggest an idea for another article, contact Neil Amato, an FM magazine senior editor, at Neil.Amato@aicpa-cima.com.