For the past 30 years, I have worked with CEO’s, business owners and senior executive teams to help them design and grow great companies. During that time, I have learned a few things about the components that make up a great company.
In “Good to Great,” Jim Collins defined a great company in the following manner:
“The good-to-great examples that made the final cut into the study attained extraordinary results; averaging cumulative stock returns 6.9 times the general market in the fifteen years following their transition points. These are remarkable numbers, made all the more remarkable when you consider the fact that they came from companies that had previously been so utterly unremarkable.”
This is a fine definition for companies which are large enough for you and me to know about and be their customers; but what about small- to mid-size companies? For this market, I would add to Collins’ definition by saying that great small to mid-size companies are also defined by love, a term I do not use lightly.
In small to mid-size companies, the primary stakeholders love a great company. The owners love the company because of superior financial performance and because they see their firms as their life’s work. The CEO’s love the company because it enables them to make a difference in the world and leave a powerful and potent legacy. The vast majority of the customers love a great company because it provides superior service. And the employees love a great company, as demonstrated by the performance of the company and employee retention.
Components of Great Companies
Now that we have defined a great middle market company, what are the components that make up greatness? I believe they can be found in the acronym G.R.E.A.T.
- G: Generous and Growth. The dictionary defines generous as “liberal in giving or sharing; not petty or mean; magnanimous; abundant and ample”. These are apt descriptions of the culture of a great company. Great companies provide space for people to grow and develop. They accept human foibles and allow mistakes to be made. Great companies are not mean-spirited or punitive. They have rules, but only a few. They are willing to give and bend, and they come from a mindset of abundance while avoiding notions of scarcity.
Growth causes all the progress and wealth but it also causes all the problems and pain. Without growth, a company stagnates and becomes internally focused. Great companies use growth as the engine for their internal and external development
- R: Revenue and Reflection. Revenues are central to any business. The difference with great companies is they generate a lot more than their competition. Revenue can also mean (although not necessarily) that they generate profit. For many growing companies, profit can be elusive during the times when revenue must be put back into infrastructure and additional resources in order to grow. In great companies, revenue is understood by everyone, not just the top executives. All employees understand how revenue is generated and consumed. More important, each individual understands how he or she can increase and impact revenue.
Reflection is the planning piece. In great companies, long-term success is supported by some sort of disciplined planning process that engages the leadership group. The leadership group regularly assesses where the company is now and what future they want to design. Leadership also provides a disciplined and focused way for problems to be solved and the pain of growth to be lessened. Early on, great companies implement a formal annual process from which to plan and design their growth. This helps establish and is part of their long-term success.
- E: Entrepreneurial. Great companies engage in proactive and creative actions and activities. They focus on cutting costs and thinking about ways to improve efficiency. They create a culture where employees proactively make things happen rather than standing around waiting for orders. Great companies know their destiny is in the hands of their employees, and they get them actively engaged in creating a bright future.
- A: Attitude. While “entrepreneurial” and “generous” speak to this type of attitude, great companies also exhibit plenty of spunk, vim and vigor. They have attitude with a capital A. This may mean going the extra mile for the customer. It may mean being on time, no matter what. It may mean that top executives double up in hotels to cut costs and contribute to their profit. Whatever the context, great companies exhibit an attitude and view of the world that clearly sets them apart.
- T: Teamwork and Transformation. Great companies are not groups of individual agents with everyone doing their own thing. Instead, they are focused places where collaboration and involvement are the currency. Employees know that customers experience the company as a whole and that any negative experience from anywhere in the company can sour the relationship. It takes a whole company to make a customer wildly loyal.
Transformation means that the company touches its employees in meaningful ways. People see themselves differently as a result of their relationship with the company. Employees are better for having worked there, customers are better for having bought there, and owners are better for having generated a company that makes a difference. Great companies do more than just provide a service and generate a product. There is clearly a much bigger game that molds, impacts and transforms the lives that they touch.
How many of these components of greatness does your company possess? More important, what would your customers and employees say about your firm in relation to this standard?
- For companies of all sizes, greatness is difficult to obtain. And once there, it is easy to lose the distinction of “great”. However, the journey to greatness is more important than the destination. In my experience, aspiring to being a great company is where the true value lies.