Good to Great and the Social Sectors, by Jim Collins (HarperCollins, 2005, 42 pp., $11.95).

In my first years as a seminary trustee, I sometimes muttered to myself, "Why don't we run our seminary more like a business? Why not let economic realities govern our success or failure each year?" It was an understandable question coming from someone like me with a business background.

I thought that Jim Collins, author of Good to Great, would agree with me. Collins, a former faculty member of Stanford's Graduate School of Business, identified key concepts and practices separating mediocre companies from the best of the best. He instantly became the darling of the corporate world, conducting seminars around the country.

Indeed, in his short follow-up volume, Good to Great and the Social Sectors, Collins doesn't separate organizations based on profit or nonprofit. He refutes as simplistic the notion that nonprofits should be run more like businesses. Instead he asserts that similar disciplined practices will raise businesses and nonprofits alike from mediocrity to greatness.

The "Good to Great" formula

What brings success to companies — or nonprofits? Collins writes that it comes by working through four essential stages:

  • Cultivating disciplined people.
  • Engaging in disciplined thought.
  • Taking disciplined action.
  • Making the leap to greatness endure over time.

Stage 1. Cultivate disciplined people
Selecting disciplined people who combine personal humility and professional will is the first step to what Collins calls "getting the right people on the bus." He emphasizes that it is essential not to allow people to stay "on the bus" (on boards or in management positions) if they do not have the right traits.

Stage 2. Engage in disciplined thought
Great leaders of companies and nonprofits must face the brutal facts about their business. Paradoxically, they must also have faith that they will survive and thrive. After the facts are unearthed, great leaders map out the answers to three pivotal questions:

  • What am I deeply passionate about?
  • What can I be the best in the world at?
  • What best drives my economic or resource engine?

The answers create what Collins calls the "hedgehog concept."

Stage 3. Take disciplined action
The third stage requires doggedly sticking to the "hedgehog" elements developed earlier. Collins describes the process as analogous to a heavy flywheel that initially moves at an agonizingly slow pace. But over time, with relentless, disciplined pushing of the device in one direction, a breakthrough occurs, momentum builds, and the flywheel spins.

Stage 4. Build greatness to last
The longevity of great organizations is related to the successful transfer of power to exceptional leaders over time. These leaders characteristically rely less on charismatic personalities and more on strategies to stimulate organizational progress. In Collins' view, great organizations last because their core values remain constant, yet they relentlessly assess themselves to ensure their adaptation to the changing world.

A Collins glossary

In Good to Great and Good to Great and the Social Sectors, Jim Collins employs some particularly memorable vocabulary.

  • Flywheel effect: Power and success that builds slowly at first and then with increasing momentum over time. The flywheel effect is only achieved with single-minded devotion to the "hedgehog concept." See Good to Great, page 174.
  • Hedgehog concept: A strategy for success based on the intersection of three circles: (1) what a company or organization can become best in the world at, (2) what drives the company or organization's economic engine, and (3) what the company or organization's leaders are deeply passionate about. See Good to Great, page 95.
  • Level 5 leader: The rare extraordinary executive who transforms a good company or organization into a great one through personal humility and professional will. The other levels are (1) highly capable individual, (2) contributing team member, (3) competent manager, and (4) effective leader. See Good to Great, page 20.

What issues in the "Good to Great" model differ for nonprofits?

Although Collins created the "Good to Great" framework for corporations, he later used it with more than 100 nonprofits. In doing so, he found that he needed to adapt the model to the different circumstances of nonprofits.

  • "Great" had to be calibrated without using business metrics.
  • Excellent leaders had to be cultivated within the diffuse power structures of nonprofits.
  • The right people had to be recruited and the wrong people let go within the particular constraints of the nonprofit world.
  • The "hedgehog concept" had to be rethought without a profit motive.
  • And a new concept of the "flywheel" had to be developed.

Good to Great and the Social Sectors enumerates the principles that emerged from Collins' work with nonprofit organizations. Some of the differences between the business sector and the nonprofit (or "social") sector are outlined below.

1. Measuring greatness

The business sector

The nonprofit sector

Uses money as input (means) and output

Uses money as input only

Financial returns measure greatness

Financial returns not a measure of greatness

Asks, "How much did we make?"

Asks "How well do we deliver on the mission?" "Do we make a distinct impact with our resources?" "What's the qualitative evidence that we are a success?"


2. Getting things done

The business sector

The nonprofit sector

Uses mostly executive leadership

Uses mostly legislative leadership

CEO employs concentrated power to make the right decisions

CEO employs persuasion, political currency, and shared interests


3. Getting the right people

The business sector

The nonprofit sector

Can pay for talented employees

Cannot pay high salaries; unpaid board

The right people share corporate vision and passion

Sometimes hard to get the wrong people "off the bus"; careful selection is essential

The right people volunteer to add meaning to their lives and because of their belief in the mission


4. Making the economic engine work

The business sector

The nonprofit sector

Single component to measure success: Profit

Multiple components to measure success:
Human capital--Do we have enough time?
Financial capital--Can we pay the bills and break even?
Brand capital--Are we known as the best in our field?


5. Turning the flywheel and building momentum

The business sector

The nonprofit sector

Success breeds success. With discipline, the slow turning of the flywheel yields financial success over time.

Success builds on brand reputation. Success comes when you deliver tangible results and people grow committed to your mission.

Trustees weigh in

Do the trustees of theological schools believe that Collins' business framework can work for seminaries? Do they agree about the five issues that Collins says distinguish nonprofits from businesses? To find out, I interviewed two seminary trustees who serve both on corporate and nonprofit boards.

Elizabeth Hance just completed seven years on the board of New Brunswick Theological Seminary. She is the chief executive of Magyar Bank, which, like the seminary, is in New Brunswick, New Jersey.

Kevin Manz has served on the board and has been co-chair of the development committee at the Pacific School of Religion in Berkeley, California. An attorney, Manz served on a Californiabased financial services corporate board for several years.

Jim Collins identified five issues that he believes distinguish corporate from nonprofit organizations. The first is metrics. In your experience, do corporate and seminary boards differ in the way they calibrate success?

Elizabeth Hance: Yes, I think they do. In seminaries, as in any not-for-profit, the very real financial benchmarks such as ROI [return on investment] don't apply. But seminaries can — and should — develop other metrics like enrollment statistics over time, grant funding, student GPA. These are important ways to measure how the seminary is doing. Kevin Manz: They both have to meet the mission. But when I look at a seminary to discern its success, I look at the following in addition to statistical metrics: What is the personal ministry of the various faculty members? Is the student population diverse? Regarding diversity, I look at specific areas to measure success including the presence of foreign students, and the representation of various theologies and ethnic groups.

Collins suggests that the power structure of the corporate world is different from the power structure in the nonprofit world. Do you agree?

Elizabeth Hance: Yes. In nonprofit boards, the structure is more diffused. Committees frequently resolve issues with emphasis on process. The president tends to have lots of influence. In my early meetings at the seminary, I remember learning about the collegial process they used, which is really leadership by influence. By contrast, the for-profit sector really focuses on outcome. Decisions are arrived at quickly and can be accomplished with a smaller sphere of leaders - like department heads.

Kevin Manz: I think the power structure can be different. But I think it differs mostly by degree. In the corporate setting, the power is often based on position. For example, a bank loan officer has a great deal of power over both the loan process and outcome. In the social sector, there must be shared power.

Is "getting the right people on the bus" done differently in corporate and nonprofit board settings?

Elizabeth Hance: The major question for both types of boards is "What is the value that this person brings to the table?" My seminary board is very intentional. The board nominates people based on the current needs of the strategic plan.

Kevin Manz: In my experience, the power base of the board, including the CEO, board chair, and key committee chairs, does the selection process in the corporate setting. They drive it and control the action plan. In the seminary, we have an intentional, internal nominating group process that looks at the specific talent that we need to help us execute our action plan. For example, we are currently doing a physical plant audit, so we selected a new board member who is a builder of churches to help us accomplish that goal.

Do both sectors work equally at building the brand?

Elizabeth Hance: In nonprofits, it is tough to garner the resources to do the branding. But it's important. Our seminary has a significant niche. What we do well is teach our students urban ministry, and we try to promote that specialty. In contrast, the decision to create a niche [in the business world] is, I believe, easier. One year after selecting the objective to create a niche in mobile banking, it was accomplished. That's a faster turnaround than I would expect in most nonprofits.

Kevin Manz: Branding is probably more important in a seminary. It is major. A seminary's reputation is its brand. And, of course, corporate boards have other important metrics besides brand to measure success - like the economic indicators.

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