Executive summary
A Level 5 leader is described by their will to pursue greatness for their company and humility to give credit to others. A Level 5 leader has the ability of the initial levels of leadership. Will is described as the ability to make major decisions without wavering. Humility has been described as pursuing a company’s greater rather than individual greatness. Smith’s will is elaborated by his decision-making when Kimberly-Clark sold its paper mills.
Smith meant that Kimberly-Clark had to beat rivalry in the consumer paper business. AutoZone and Apple are two companies whose CEOs assisted them to outperform the market during their tenure. A Level 5 leader builds the organization’s brand quietly through quality products, work standards, and profitability. Humility may not be acquired through learning but through personal experiences.
Introduction
A Level 5 leader is distinguished from the rest by their personal humility and unwavering resolution. A Level 5 leader has the ability to give credit to others for good performance and take the blame for poor performance. The strong will of a Level 5 leader can be seen through the difficult decisions they make when faced with a dilemma. They have the ability to make choices that will last for decades without the need for restructuring.
In the story of Darwin Smith, he decided that Kimberly-Clark should sell its mills. It appeared shocking to most of the people at the moment. People were curious to know how a paper milling company would survive without its mills. Charles Cork Walgreen III moved his company out of the foodservice business at a time when they had 500 restaurants. The CEOs demonstrated unwavering will. William C. Rhodes III was appointed as the new CEO of AutoZone on March 14, 2005.
AutoZone stock outperformed the market performance by 3.8: 1 between 2005 and 2012. Steve Jobs was appointed Apple’s CEO in 1997, where he stayed until 2011. Apple’s stock beat the market price 76: 1 within 14 years. The CEO should make an unwavering resolution early enough and channel all resources towards the decision. A Level 5 leader maintains high-quality products and eliminates low-quality products from the firm’s product mix.
The humility ascribed to a Level 5 leader appears to be very difficult to develop. It is difficult to pursue personal interests as well as those of the company without putting personal interests first. It is the reason why humility helps a Level 5 leader to outperform a Level 4 leader. I need to rely more on standards than charisma to match a Level 5 leader. Standards require less control to maintain the quality of products and a good work environment for employees.
Analysis
A Level 5 leader has all the qualities of the other four levels of leadership. The other leadership levels involve qualities such as team-building, pursuance of clearly set visions, organizing people, and management by objectives, among other roles. A Level 5 leader is distinguished from the rest by their personal humility and unwavering resolution (will). Collins (2005) describes the humility of a Level 5 leader has the ability to give credit to others.
A Level 5 leader’s humility is also described by the ambition to make the company look great. On the other hand, a Level 4 leader wants to make the company great so that he/she can receive a lot of praise and media attention. A Level 5 leader pursues the greatness of the company when a Level 4 leader pursues the success of their company without individualized gains such as fame, fortune, and power (Collin, 2005). The Level 5 leaders have no motivation to feature in news headlines and magazines. Their humility may be described as acting quietly and accurately (Collins, 2005). Collins (2005) describes the many instances they came upon Level 5 leaders giving credit to luck. They are quick to take the blame when things do not work out as expected.
The strong will of a Level 5 leader can be seen through the difficult decisions they make when faced with a dilemma. They make major decisions that may appear shocking at a glance. Collins (2005) elaborates through the story of Darwin Smith, who decided that Kimberly-Clark should sell its mills. It appeared shocking to most of the people at the moment. People were curious to know how a paper milling company would survive without its mills.
Collins (2005) also uses the story of Charles Cork Walgreen III, who moved his company out of the foodservice business at a time when they had 500 restaurants. In both cases, the CEOs recognized what the company could do best and gave it absolute focus. A Level 5 leader identifies their strength and gives it absolute attention. Collins (2005) recognizes the attribute as “intense professional will” (p. 2). The ability to make choices that will last for decades without the need for restructuring. The choice is strengthened gradually as the turning of a wheel before it gains momentum.
Humility is not a frequently observed attribute because many of the leaders selected by the boards are usually egocentric. Collins (2005) discusses that before the study, and even after the study, most people believed that leaders who are ‘larger-than-life’ deserve to be made CEOs. They are associated with creating change that brings success to their firms because they also like featuring in the media to promote their success. Collins (2005) explains that Level 5 leadership is a rare quality. It is evident that out of the 1,435 companies that were studied, only 11 successful companies had CEOs who had the humility ascribed to a Level 5 leader. It is a very small proportion.
One of the companies that experienced great improvement in their stock performance is AutoZone. The firm announced William C. Rhodes III as the new CEO on March 14, 2005 (Citrin, 2012). The announcement was followed by investors’ lack of confidence in the company’s stock, which dropped by 12.8% (Citrin, 2012). Looking at the firm’s stock prices between his appointment and the end of 2012, the prices have increased 4.13 times the initial level. The price was $85.75 on March 14, 2005, and $354.43 on December 3, 2012 (AutoZone, Inc. (AZO), 2014). The NYSE 100 index changed slightly from 5111.06 on March 14, 2005, to 5541.06 on December 3, 2003 (NYSE INTL 100 Index (NYI), 2014). It represents 1.08 times the initial price. AutoZone stock outperformed the market performance by 3.8: 1.
Steve Jobs was appointed Apple’s CEO in 1997, where he stayed until 2011 (Brian, 2011). Jobs’ performance was exceptional through his tenure. Apple Inc.’s stock prices were $5.05 on Jan 2, 1997, and $389.27 on December 30, 2011 (Apple Inc. (AAPL), 2014). The price is 77 times the initial price. The NYSE 100 index was at 4557.3 on Jan 12, 2004, and 4,569.57 on December 30, 2011 (NYSE INTL 100 Index (NYI), 2014). It represents 1.003, the initial price.
The duration from 1997 to 2004 is similar to the duration from 2004 to 2011. Assuming a constant rate of growth for the NYSE 100, the change from 1997 to 2004 should be about 1.006 times. By dividing the values, it can be obtained that Apple’s stock beat the market price 76: 1 within 14 years.
Smith’s actions meant that Kimberly-Clark had to succeed in making consumer paper by facing rivalry or shut down completely (Collins, 2005). It shows professional will. It involves analyzing what you can do best and giving it full attention. It is a resolution made when you know that you can beat competitors no matter where they are located.
In today’s management, it means making the right decisions and sticking to them. Collins (2005) argues that the comparison companies lacked unwavering resolution. The comparison companies were characterized by “lurching back and forth, reactionary moves, and restructuring” (Collins, 2005, p. 6). The main implication for today’s management is that businesses need to cut off weak components that divert attention from their strengths. Kimberly-Clark was able to focus on consumer paper after leaving out the coated paper in which they lacked competitiveness. Cork Walgreen III was able to make the company focus on retailing drugs rather than spreading their expertise in managing restaurants that had become a point of weakness. It involves selecting the best product mix.
Collins (2005) describes that a Level 5 leader has a humility that makes them shy away from the media. A Level 4 leader would try to use the media to build their brand. A Level 5 leader relies on high performance to build the brand of his/her company. A Level 5 leader builds a brand quietly through performance. People notice the brand through its profitability.
A Level 5 leader builds a brand by proving that the company is the best in the industry. As noted in the examples provided by Collins (2005), a Level 5 leader is out to beat competitors through production economics. When a company uses the most efficient operations, it can provide customers with the lowest prices in the industry. A Level 5 leader maintains high-quality products and eliminates low-quality products from the firm’s product mix. Smith in Kimberly-Clark left out coated paper because they were of a lower quality compared to competitors. These examples show that Level 5 leaders build brands by creating high-quality products at the lowest price.
A Level 5 leader builds a brand by focusing on what the company can do better. Such a decision gives the company an absolute advantage because the company can beat competitors at any level. The brand is built gradually through continuous improvement of operations and quality of products. Collins (2005) discusses that a Level 5 leader never reaches a conclusion that a system is operating at its best and that no more improvement can be made. They foresee an improvement in all aspects of the company’s operations.
Efficiency in an organization led by a Level 5 leader becomes efficient through purchasing new technology selectively. Most companies shift their operations into new technology, increasing the cost of assets when the additional benefit from the new technologies does not outweigh the cost. Collins (2005) explains that a Level 5 leader chooses technologies that “are linked to their hedgehog concept” (p. 6). A Level 5 leader makes similar decisions on technology as on product mix. It involves choosing one major form of technology and enhancing it as new developments emerge. It lowers the cost of assets, making high returns to shareholders. The brand is recognized through returns to shareholders as a result of efficient asset costs.
One of the ways in which Level 5 leadership can be developed is through difficult life-changing experiences. An individual develops a personal need to create something. Collins (2005) elaborates that most of the leaders identified with Level 5 leadership had experienced difficult times in their lives that gave them genuine humility. They do not pursue personal interests that undermine the performance of their firms. They give credit to others, even when they have contributed to the success.
The humility ascribed to a Level 5 leader appears to be very difficult to develop. Fame, fortune, and power that come from taking credit for the success of one’s organization are overwhelming. It is difficult to pursue personal interests as well as those of the company without putting personal interests first (Collins, 2005). Level 5 leadership can be developed by pursuing long-term goals for the company. The Level 4 leader needs to separate the ambition he/she has for his/her personal achievement from the achievements he/she wants the company to make.
The Level 5 leadership can also be developed when an individual acquires beliefs that require him/her to do something for the sake of humanity and can be sustained for generations to come. Collins (2005) discusses that the difference between a Level 5 and a Level 4 leader is that a Level 5 leader builds sustainable success. A Level 4 leader wants to achieve immediate success and take credit for it. The need for quick solutions creates the temporal success of a Level 4 leader.
My first step towards developing Level 5 leadership is to start by giving credit to those who contributed to the success of my team or company. However, genuine humility is difficult to develop. It is also difficult to overlook fame and fortune. I would pursue the sustainable development of the organization by seeking lasting solutions. I may lack genuine humility, but I would be able to achieve sustainability attributed to Level 5 leadership.
The next step is to listen to the management team and supervisors before making key decisions. The Level 5 leaders that made major changes on traditional products, such as Kimberly-Clark’s Smith and Abbott Laboratories’ Cork, relied on expert guidance from their colleagues in the workplace. Listening to others allows the Level 5 leaders to make informed decisions based on experience, not only of oneself but also of others.
I would employ disciplined individuals in my organization. Collins (2005) explains that “disciplined individuals do not need bureaucracy” (p. 6). Bureaucracy creates delays in making decisions. According to Collins (2005), I also need to rely more on standards than charisma. Standards require less control to maintain the quality of products and a good work environment for employees.
Conclusion
Level 5 leaders have better performance than the leaders in the other four levels because they are not distracted by personal greatness. Their companies are able to outperform the market because they pursue long-term goals. Their will is linked to adopting technology that creates sustainability. They prepare their companies to last for generations by creating a favorable environment for their successors. I need to have genuine humility and a strong will so that I can become a Level 5 leader.
References
Apple Inc. (AAPL). (2014). Web.
AutoZone, Inc. (AZO). (2014). Web.
Brian, M. (2011). A look at Apple’s CEOs from 1977 to 2011. Web.
Citrin, J. (2012). When naming a CEO, ignore the market reaction. Web.
Collins, J. (2005). Level 5 Leadership: The Triumph of Humility and Fierce Resolve. Harvard Business Review, 1-12.
NYSE INTL 100 Index (NYI). (2014). Web.