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    Good to Great Social Sectors – Fits the Private Company?
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    Good to Great Social Sectors – Fits the Private Company?

    September 2011

    I just had the opportunity to read Jim Collins' monograph "Good to Great in the Social Sectors." In the monograph (a fancy word for a short read) Jim talked about how business thinking doesn't work in the social sector. The great thing about Jim Collins is that he uses empirical evidence (e.g. SEC filings, 990 Tax Return filings) to prove his points.

    The point that Jim Collins makes is that social sectors (e.g. not for profits) can't operate under the principles of his book "Good to Great" because you can't measure shareholder value in a not for profit – there are no shareholders and there is no profit motive. However, what he demonstrates is that organizations that focused on a single driving purpose – the not for profit equivalent of the hedgehog concept (for those familiar with the book) had much greater results as measured both growth in funding then other organizations. He uses the example of the Cleveland Orchestra – they set out to create a top three orchestra with non-traditional measures (e.g. invites to play elsewhere).

    I think the key learning that I took from the writing was that yes, based on the boards that I work on in the not for profit sector, all of this is true. However, I think the same concepts apply in the world of the privately held company. Here's what I mean:

    1. Define Great. In "Good to Great" greatness was measured by outperforming your competition on the stock market. In a private company, there is no stock market and you don't really know how your competitors are doing. Therefore, you can only measure against yourself – so what do you measure? Customer service? Market share? Just like in the social sector you have to define something other than pure economic profit – although that is still important.
    2. Level 5 Leadership – building consensus and a team. The thought here is that people need to be empowered. In the best run closely held business, the owner truly is more like a shareholder and there is a great team in place running the business.
    3. Get the Right People on the Bus – same principles – but in the Gen Y world where people aren't as motivated by money finding passion is extremely important.
    4. The Hedgehog Concept – same applies in both business and social sector.
    5. Turning the Flywheel – building the brand. Again – completely important in the private company in order to build sustainability beyond the 'owner' that acts as the primary sales person / spokesperson. The better the brand, the more value for the owner as the owner has a 'sellable' business.

    I'd love to see Jim Collins write a book for the closely held business community as I think there are enough similarities (but also differences) that it would make a fascinating read.

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