December 4, 2017 Packard’s Law

In Jim Collins book “How the Mighty Fall,” we learn about Packard’s Law in Stage 2 of a company’s decline.  Several things stood out to me and I feel I need to use these specific thoughts when I evaluate myself and our leadership team.

Packard’s Law states that no company can consistently grow revenues faster than its ability to get enough of the right people to implement that growth and still become a great company. Though we have discussed Packard’s Law in our previous work, as we looked through the lens of decline we gained a more profound understanding: if a great company consistently grows revenues faster than its ability to get enough of the right people to implement that growth, it will not simply stagnate; it will fall.

Any exceptional enterprise depends first and foremost upon having self-managed and self-motivated people—the #1 ingredient for a culture of discipline. While you might think that such a culture would be characterized by rules, rigidity, and bureaucracy, I’m suggesting quite the opposite. If you have the right people, who accept responsibility, you don’t need to have a lot of senseless rules and mindless bureaucracy in the first place!

One notable distinction between wrong people and right people is that the former see themselves as having “jobs,” while the latter see themselves as having responsibilities. Every person in a key seat should be able to respond to the question “What do you do?” not with a job title, but with a statement of personal responsibility. “I’m the one person ultimately responsible for x and y. When I look to the left, to the right, in front, in back, there is no one ultimately responsible but me. And I accept that responsibility.”

While the specifics regarding who would be the right people for key seats vary across organizations, our research yields six generic characteristics:

  1. 1. THE RIGHT PEOPLE FIT WITH THE COMPANY’S CORE VALUES. Great companies build almost cult-like cultures, where those who do not share the institution’s values find themselves surrounded by antibodies and ejected like a virus. People often ask, “How do we get people to share our core values?” The answer: you don’t. You hire people who already have a predisposition to your core values, and hang on to them.
  2. 2. THE RIGHT PEOPLE DON’T NEED TO BE TIGHTLY MANAGED. The moment you feel the need to tightly manage someone, you might have made a hiring mistake. If you have the right people, you don’t need to spend a lot of time “motivating” or “managing” them. They’ll be productively neurotic, self-motivated and self-disciplined, compulsively driven to do the best they can because it’s simply part of their DNA.
  3. 3. THE RIGHT PEOPLE UNDERSTAND THAT THEY DO NOT HAVE “JOBS”; THEY HAVE RESPONSIBILITIES. They grasp the difference between their task list and their true responsibilities. The right people can complete the statement, “I am the one person ultimately responsible for . . .”
  4. 4. THE RIGHT PEOPLE FULFILL THEIR COMMITMENTS. In a culture of discipline, people view commitments as sacred—they do what they say, without complaint. Equally, this means that they take great care in saying what they will do, careful to never over commit or to promise what they cannot deliver.
  5. 5. THE RIGHT PEOPLE ARE PASSIONATE ABOUT THE COMPANY AND ITS WORK. Nothing great happens without passion, and the right people display remarkable intensity.
  6. 6. THE RIGHT PEOPLE DISPLAY “WINDOW AND MIRROR” MATURITY. When things go well, the right people point out the window, giving credit to factors other than themselves; they shine a light on other people who contributed to the success and take little credit themselves. Yet when things go awry, they do not blame circumstances or other people for setbacks and failures; they point in the mirror and say, “I’m responsible.”

“If I were to pick one marker above all others to use as a warning sign, it would be a declining proportion of key seats filled with the right people. Twenty-four hours a day, 365 days a year, you should be able to answer the following questions: What are the key seats in your organization? What percentage of those seats can you say with confidence are filled with the right people? What are your plans for increasing that percentage? What are your backup plans in the event that a right person leaves a key seat?” Jim Collins. “How the Mighty Fall.”

If you find people in key leadership positions within your organization that are not in alignment with these six standards you need to consider the path of your organization.  It is ok to make a mistake and go the wrong way, but are you going to be so committed to that wrong choice that you never correct your path?  Remember stage one is to voice hubris (pride) and make the best decisions for the organization first.  It becomes more difficult to correct stage one if you are breaking Packard’s Law.

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