Book Review: Good to Great by Jim Collins

Jim Collins succeeds in creating a “good-to-great” framework which organizations can make use of to transfigure from mediocrity to one with distinguished purpose. He banks on the human species’ innate alacrity for pursuing perfection and excellence. He postulates that meaningful work makes for a meaningful, and subsequently, a great life.

It is rather ironic that two of those that Collins identified as archetypal good-to-great companies are among those who have filed bankruptcy within the past year: Fannie Mae and Circuit City. Amidst the subprime mortgage crisis that unfolded in the US last year, Fannie Mae, along with Freddie Mac, went bankrupt which led it to file for federal conservatorship with the US Treasury Department in September 2008. Saving the two giant low-cost housing mortgage firms translated to $200 billion in taxpayers’ money (Alston and Bird LLP, 8 September 2008). A couple of months later, Circuit City followed suit by filing for bankruptcy protection (Vinnee Tong and Michael Felberbaum in Business Week, 10 November 2008). The Circuit City debacle was very close to home. I bought several of my home gadgets, including some components of my home theatre system, from Circuit City. Absolutely unimaginable that Circuit City is closing shop! I used to hang out in their outlets in St. Charles, Geneva and Schaumberg in Illinois.

The financial fiasco that befell these two companies, however, do not prove Collins’ framework to be fraught with inaccuracies. On the contrary, those two cases would even prove Collins’ hypothesis that a company is more effectively transformed from good to great by “insiders”. During the period that Collins conducted the research and study involving these companies up to 2001, Circuit City had all three CEO’s who were home-grown while Fannie Mae has 2 out of 4 CEO’s who were also insiders. After the legendary David Maxwell completed his tour-of-duty, Franklin Raines took the helm as CEO. Maxwell was an insider while Raines was an outsider. Before working at Fannie Mae, he served as the Budget Director of former President Bill Clinton and as a partner at Lazard Freres, a top notch financial advisory firm (Henry Blodget in Slate Magazine, 7 October 2004).

On the other hand, Circuit City’s demise took place during the stewardship of Philip Schoonover, who came in as CEO after Alan Wurtzel, who was among those interviewed by Collins, and Allan McCollough (Internet Retailer, 19 December 2005). Wurtzel and McCollough were insiders while Raines was an outsider. This is further proof that Collins is right.

It would be very fitting as another sequel to Collins’ book series to include an autopsy of Fannie Mae, Circuit City and similar companies that collapsed in spite of being among the lofty good-to-great models.


References:

Collins, Jim
Good to Great: Why Some Companies Make the Leap... and Others Don’t
Random House Business Books, 2001

Alston and Bird LLP
Fannie Mae and Freddie Mac Placed Under Conservatorship
Alston and Bird Financial Services and Product Advisory, 8 September 2008
Posted online at:
http://www.alston.com/files/docs/Fannie%20Freddie%20Rescue%20Plan.pdf

Tong, Vinnee and Felberbaum, Michael
Circuit City Files for Bankruptcy Protection
BusinessWeek, 10 November 2008
Posed online at:
http://www.businessweek.com/ap_working/financialnews/D94C5FGG0.htm?campaign_id=rss_daily

Blodget, Henry
Fannie Mae CEO Franklin Raines
Slate Magazine, 7 October 2004
http://www.slate.com/id/2107894

Internet Retailer
Philip Schoonover picked to succeed Circuit City’s CEO
Internet Retailer News Stories, 19 December 2005
Posted online at:
http://www.internetretailer.com/internet/marketing-conference/10212-philip-schoonover-picked-succeed-circuit-citys-ce.html

Kopecki, Dawn
Housing Recovery Has “Long Road”, Fannie Mae CEO Says
Bloomberg.com, 9 September 2009
Posted online at:
http://www.bloomberg.com/apps/news?pid=20601103&sid=a5VleA6P8q9I

Business Wire
Centerline Supports Federal Government’s Conservatorship of Fannie Mae and Freddie Mac
AllBusiness.com, 15 September 2008
Posted online at:
http://www.allbusiness.com/banking-finance/banking-lending-credit-services-mortgage/11558654-1.html

Ogg, Erica
Circuit City CEO Steps Down
CNet News, 22 September 2008
Posted online at:
http://news.cnet.com/8301-1001_3-10048062-92.html

Other online references:
http://www.fanniemae.com/
http://www.circuitcity.com/