Posted by: bevmeldrum | May 28, 2008

Going From Good To Great – The Third Sector

Photo by Andrey ProkhorovA while ago now I did a series of posts based on Jim Collin’s book ‘Good to Great: Why Some Companies Make the Leap … and Others Don’t’. We have found that book so helpful at The Tool Factory that I wanted to share the great stuff that was in it.

Alongside of the main book Collin’s has also published a booklet on how the research they carried out can be translated for what he calls the Social Sector.

He beings this monograph with the comment that:

“We must reject the idea – well-intentioned, but dead wrong – that the primary path to greatness in the social sectors is to become “more like a business.”

Why? Because few businesses are great. We shouldn’t want to become like business we should want to become great third sector organisations.

And so, what do we measure – well it isn’t money. Unlike a business we cannot measure our success by the amount of money we generate like a business can. For businesses, as Collins explains:

“…money is both an input (a resource for achieving greatness) and an output (a measure of greatness). In the social sectors, money is only an input, and not a measure of greatness.

He suggests that our outputs as Third Sector organisations must still be measured – that is how we know we are becoming great. But of course many of those outputs seen to defy measurement.

He goes against a lot of the dialogue on social impact measurement suggesting that not every measurement needs to be turned into something quantifiable. He suggests that where are dealing with qualitative evidence we see our role as that of a lawyer assembling all types of evident in order to make a convincing case.

Collins talks through all of the key concepts from Good to Great in relation to the Third Sector. As we have found over the last couple of weeks of blog posts nearly are just as relevant for us in the Third Sector as for a business.

The key difference comes when we look at the Hedgehog Concept. The first two circles – what we are deeply passionate about and what we can be the best in the world at – we have no problem translating to our specific context. However, the third circle in the Hedgehog Concept cannot be about what drives our economic engine, as Collins puts it.

Instead Collins suggests we think in terms of our ‘resource engine’ – what we need in order to achieve our social goals.

A final quote from Collins:

“Those who have the discipline to attract and channel resources directed solely at their Hedgehog Concept, and to reject resources that drive them away from the center of their three circles, will be of greater service to the world.

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Responses

  1. I think this is an interesting book and I hadn’t thought about applying it to the Third Sector. The post reminded me of a recent conversation I had with someone about what does “success” mean for a social enterprise? Is it growing and expanding or can it mean stabilizing and still fulfilling the mission? I am not sure what the answer is but most of the business literature explicitly regards expansion and growth as the key success factors.

  2. I read the update to ‘Good to Great’ recently and found it stimulating. Some caution, however, is necessary. One of the ‘Great’ companies featured in Jim Collins original book is Fannie Mae (that has just gone bust in the US, and is likely to be a significant contributor to the current global financial problems).

    Overall, I find the management thinking in Good to Great very useful conceptual tools – particularly the sober assessment of ‘visionaries’ and ‘cult leaders’. At the same time, I dislike the elitism that appears in his work. Getting the ‘right’ people on the boat is all well and good, but Collins is adamant that companies / organisations should get the ‘wrong’ people off the boat. This, inevitably, will stimulate an intolerant culture and create social exclusion.

    There is absolutely nothing in either of his books that challenges senior managers right to determine what is ‘right’, although there is a nod towards inclusive think tanks than include non-managers to obtain a more diverse set of views. Using Mondragon again, they achieve similar ‘greatness’ without eliminating the ‘wrong’ people (conflict is managed, not eliminated or suppressed). Some academic literature links successful diversity management to more sustained success (see Kotter & Heskett, 1992, Corporate Cultures), although the range of outcomes with a heterogeneous workforce is much more variable.

    So, the lack of critical reflection on the long term impact of selective top-down executive power that concern me in Jim Collins work. Perhaps the failure of Fannie Mae is also the failure of Jim Collins. Such a ‘great’ company should not have been so vulnerable.

    Most ‘business literature’ assumes that growth and expansion equates with success. The ‘must be doing something right’ argument. However, all the banking collapses this week show that too much growth, and too much expansion (i.e. centralisation of resources, control, power…) creates massive instability.

    The response has been more consolidations, mergers and centralisation (which surely means the next collapse will be even larger and more horrific in its consequences). We learnt, this week, for example that the US Federal Reserve was almost out of money. As I write, the stock markets are in turnmoil again because they don’t believe the US can fulfil its rescue package.

    Isn’t social enterprise partly about questioning these assumptions in business? Perhaps slow, steady, sustainable enterprises that proactively spin off new enterprises when they grow beyond a certain size are ‘better’ for a society. Perhaps organising these in loose federations rather than tightly knit corporations is ‘better’ too.

    Choose your success indicators and measures with the utmost care.

    Best wishes
    Rory


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