vision

Q&A with Author and Professor Jerry Porras: Built to Last

Stanford University's Jerry Porras outlines leadership strategies for driving long-term success.

Article Summary: Organizations that identify an enduring purpose and make it an entrenched part of their cultures are likely to outperform companies that are chasing profits and fads. These companies require strong, visionary leaders. Jerry Porras, coauthor of Built to Last, says visionary leaders ingrain the essential qualities and capabilities needed to succeed into the organization’s culture. Visionary companies understand their purpose, establish core values, are unwilling to compromise on core values, and communicate their philosophies throughout their organizations. In almost every instance, they also promote from within and ultimately develop strong cultures. When Porras and coauthor James Collins studied the stock performance of 36 companies back to 1926, they found that visionary organizations have outperformed the overall market by a factor of 16 to 1.

What separates the exceptional organizations from the ordinary? That’s a question that Jerry I. Porras and James C. Collins asked several years ago in their book, Built to Last: Successful Habits of Visionary Companies (HarperBusiness, 1994). The text reveals a few striking observations: Exceptionalism is not the result of larger-than-life CEOs, it does not transcend great ideas and products, and it has nothing to do with maximizing shareholder value. “All these things come out of great companies, but that wasn’t what they set out to do,” says Porras, the Lane Professor of Organizational Behavior and Change Emeritus at Stanford University. “In almost every instance, they understood who they are and what their values are. That, in turn, led to great products and solutions.” Since Built to Last hit shelves, it has been a definitive source on corporate success, residing on bestseller lists and considered by business leaders to be one of the most influential books on leadership. iQ Magazine asked Porras what traits leaders need to be effective and transform their organizations in today’s environment of rapid change and economic uncertainty.

Enduring Purpose iQ: What is Built to Last about? Porras: It’s about the values that lead to success and the reasons why some companies are phenomenally successful while others, despite having a great deal of brainpower and talent, achieve less impressive results. It’s also about what we call building an “enduring purpose” for the organization. iQ: How does an organization identify its enduring purpose? Porras: Too often, organizations develop mission statements that merely reflect what the organization does. For example, “We provide state-of-the-art solutions for the banking industry.” Instead, they should ask, What fundamental things do we offer? For example, Walt Disney Company’s purpose is to make people happy. Its leadership and employees believe if they do this really well, they will succeed and make a lot of money. In the past, Hewlett-Packard’s purpose was to make technical contributions, and Wal-Mart’s has always been to be good to its customers. These organizations push the philosophy down through the company until it permeates the culture. iQ: In your book, you describe organizations as either “clock builders” or “time tellers.” Can you explain the difference? Porras: There are two types of companies—comparison companies and visionary companies. The comparison company leader is a time teller. Employees who need to know the time and what to do, they go to that leader. The visionary company leader is a clock builder. When these leaders leave or retire, their companies don’t miss a beat. These organizations—which include the likes of American Express, Procter & Gamble, General Electric, Sony, and Wal-Mart—continue to transform themselves because they can. While the comparison companies don’t go broke, they’re not as good at adapting to change. These companies simply don’t have the collective skills, resources, and organizational knowledge to help them adapt. Clock builders focus on building the next generation of leaders so the company doesn’t miss a beat.

The Difference iQ: How different are these organizations in terms of profits and shareholder value? Porras: We studied the visionary companies dating back to 1926 and found they collectively outperformed the stock market by a factor of 16 to 1. They also outperformed the comparison companies by a factor of 4 to 1. What’s interesting is that they didn’t set out to maximize profits and shareholder value. Instead, it happened as a result of their focus on core values and on knowing their enduring purpose as an organization. They realized that if they live their values, they will succeed. iQ: How can a company determine which qualities and values are truly important? Porras: Every company has different core values. When we researched the book, we found there was no ideal set of core values and no single value that all 18 of the visionary companies shared. One of the best ways to manage the process is to put together a group of senior managers or a cross-sectional team and let them discuss why it’s important to do what they’re doing. You get many different points of view, and from that discussion you try to capture key words and ideas to see if you can come up with a deeper statement. Along the way, it’s important to ask, Why is it important to do that? Eventually—typically three to five iterations into the why question—you get to the point where people can’t justify why they think an issue is important, it just is. More important, they will say, “I just want to be part of an organization that is doing that.” When you get to that point, you’ve probably ventured as deep as you can in making a statement of purpose.

Vision Transformation iQ: What’s the best way to transform vision, purpose, and values into tangible reality? Porras: There are a lot of visions floating around that don’t get to be reality. Vision is a complex concept that consists of four components: purpose, core values, audacious goals, and vivid descriptions that convey and communicate what the other three things are all about. We came up with this comprehensive approach because vision has been a very confused term. No one agrees on what it is, and when we ask a group of managers what vision is supposed to do for an organization, they typically come up with a list of 15 to 20 items. Then we ask if the company’s vision satisfies all these requirements. And the answer is no. This indicates that there’s something missing in the way organizations think about vision. When researching the book, we asked that question about these companies and identified what they were doing that satisfied one or more of their vision requirements. That’s where we saw the four components develop. A company must guide itself toward its goals. It must also communicate and reinforce desired behavior and values. iQ: How effective are most companies in finding and maintaining a set of core values? Porras: A very small number of companies have a unique set of core values that has guided them from their earliest days and will continue to guide them 100 years from now. These are values that an organization sticks with—even if it means suffering in the short term. The question becomes, Are you willing to take a hit on profits or lose a big customer in order to live your values? That’s where the rubber meets the road. Unfortunately, 90% of companies don’t have these kinds of core values. iQ: Why is it so difficult to develop and maintain these core values? Porras: Too often, values change when leadership changes. Visionary companies define a set of core values and find ways to ensure that the values are continued across generations of leaders. These values originate in the guts of company founders or leaders and eventually become entrenched in the culture. As employees move into leadership positions, their values are consistent with those of the organization.

Blueprints iQ: How can a company develop a blueprint for becoming truly visionary? Porras: A company must understand its structure and how vision transforms into organizational reality. For example, say a company’s core value is teamwork. It must examine whether its rewards and support systems are set up to encourage and support teamwork. If the company has designed jobs for people to work alone or put team members in different parts of a building or across a campus, it will probably inhibit the ability of teams to function effectively. If a building has a small number of meeting rooms, it might unwittingly sabotage team efforts. Too often, companies send mixed signals. They say they want employees to act in a certain way, but they don’t put the systems and tools in place to make the stated goals a reality. Organizations also don’t put the proper reward systems in place. For example, people get bigger and better financial rewards by acting alone than they do as part of a group. Ultimately, an organization needs to look at all its parts and make changes when it sends different signals. iQ: What are the key attributes of a Built to Last leader? Porras: When we began researching the great visionary leaders, we expected that they would be charismatic, larger-than-life types. In fact, we found that many of the best leaders were described by others as “soft-spoken,” “a good listener,” “somewhat shy,” “a bit humble,” “thoughtful,” and “professorial.” These qualities, above all, helped them become good leaders because they could relate to other people and appear human. This was an interesting finding because it says that many types of people can build visionary companies. However, the key finding was that comparison company leaders focused on creating an organization that revolved around their particular brilliance. Some were great marketers, strategists, or product idea people. As long as they were leading the organization, it was highly successful. In fact, in almost all cases, they were more successful than the visionary company leaders. Visionary leaders, on the other hand, created an organization with the capabilities to do great things well into the future. Built to Last leaders and companies are willing to take what appear to be huge risks, and they often succeed. For example, IBM had virtually no experience with the electronics business when it moved into computers; Boeing had never built a commercial jetliner before the 707; and Marriott had no background in hotels when it branched into the business. The common denominator is that leaders applied a core ideology to a new line of business and managed to expand its opportunities and profits. 

iQ Magazine, November/December 2002