From Not-So-Great to Worse: The Myth of Best Practice Methodologies
Army Command and General Staff College Fort Leavenworth United States
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The November 2008 issue of the Academy of Management Perspectives has two very interesting studies that challenge bestselling author Jim Collins assertions in his 2001 book Good to Great Why Some Companies Make the Leap ... and Others Dont. Both articlesFrom Good to Great to, by Bruce G. Resnick and Timothy L. Smunt, and Good to Great, or Just Good by Bruce Niendorf and Kristine Beckconclude that Collins arguments and suggested principled commonalities about great firms were unsupported. Resnick and Smunt conducted a financial analysis over subsequent periods on the 11 companies Collins identified as great. We found that only one of the 11 companies continues to exhibit superior stock market performance according to Collins measure, and that none do so when measured according to a metric based on modern portfolio theory. We conclude that Collins did not find 11 great companies as defined by the set of parameter she claimed are associated with greatness, or, at least, that greatness is not sustainable, the authors note. Niendorf and Beck came to a similar conclusion, noting, Good to Great provides no evidence that applying the five principles to other firms or time periods will lead to anything other than average results. By the way, Collinslist of 11 great companies includes Circuit City now bankrupt and Fannie Mae currently receiving bailout support from the U.S. Treasury Department.