Chapter One

Let a Winner Lead the Way

The lyrics from the song “Step to the Rear,” in the 1967 Broadway production How Now, Dow Jones, announced that “here’s where we separate the notes from the noise, the men from the boys, the rose from the poison ivy.” In this rousing musical, the characters center their lives around the stock market and saving the U.S. economy. Sounds like a familiar theme resurfacing—reality imitating art? In the world of business, separating the critical from the unimportant, the real thing from the imposter, the business where average people want to work from the exceptional organization, is no less essential.

We suspected then, but know now, that ordinary just won’t work anymore. Research indicates that only a handful of star performers create the vast majority of valuable ideas for their organizations. These top thinkers, who also deliver stellar results, define the talent you’ll need to create your exceptional advantage, but they don’t usually perform to their maximum capacity alone. They are not free agents; rather, these highly talented, extraordinary thinkers need the structure of an organization and effective leadership to do their best work.

Leaders who choose to lead a team of these top performers need to understand that these clever—often brilliant—individuals offer more, so they expect more in return. The major-league player wants to play with other stars, not benchwarmers. Similarly, organizational stars define themselves by their excellence, so they want to associate with an organization that does too. They hold high standards for themselves, so it makes sense that they will hold their places of employment to equally high standards. They want to work with other exceptional players in a culture that fosters their growth, formulates a clear strategy for their success, and then creates the day-to-day processes that allow them to achieve their personal goals and realize their need for accomplishment. In short, they want strong leaders who lead exceptional organizations—agile yet stable organizations that hold on to their core values while responding adeptly to the temporary nature of the global economy.

The Paradoxical Organization: Transient and Timeless

A paradox, from the Greek word meaning “contrary to expectation,” is a statement that seems self-contradictory but may be true. It seems to conflict with common sense, but we believe it nonetheless. It contains two true statements that, in general, cannot both be true at the same time, yet it challenges us to explore the distinction between truth and plausibility. For example, if I say, “I’m a compulsive liar,” do you believe me or not? Can someone be both a compulsive liar yet be telling the truth at the same time?

Throughout history, artists, poets, writers, and philosophers have used the paradox to reveal human nature—the conflicted and complicated inner world that separates us from other beasts. Oscar Wilde wrote, “I can resist anything but temptation.” Robert Frost noted, “Men work together whether they work together or apart.” In Animal Farm, George Orwell observed, “All animals are equal, but some are more equal than others.”

The examples from literature show that paradoxes are more than just witty or amusing statements. They have serious implications because they sum up the totality of the work in one statement and create a meaningful and memorable way to illustrate something important. People say, “I must be cruel to be kind,” often not realizing they have transcended history to offer a universal truth that Hamlet spoke to explain why he had to kill his stepfather, Claudius—the cruelty involving the murder, the kindness relating to sparing his mother the tragedy of unknowingly living with her former husband’s killer. A modern-day philosopher, Yogi Berra, inadvertently emerged as the king of the paradox with such statements as “Nobody goes there anymore. It’s too crowded,” or the ever-popular “If you don’t go to other people’s funerals, they won’t come to yours.”

Organizations that have an exceptional advantage offer their own paradoxes: They must react nimbly to the current, ever-changing global economy while steadfastly holding to their mission, vision, and values. They must balance a “just in time” orientation with coherence. To remain the same, exceptional organizations must change adeptly and agilely, thus creating a “Ship of Theseus” or a Theseus’s paradox.

The Athenian hero Theseus was probably mythical, but the ancients regarded him as a historical person, the first king to establish Athens on a firm basis as a unified city-state. Theseus, simultaneously begotten by the king of Athens and the sea-god Poseidon, appeared in several Greek tragedies, nearly always embodying Athenian ideals of humaneness and magnanimity. He also overcame insurmountable challenges, like killing the half-man half-bull monster, Minotaur, and escaping from a mazelike labyrinth with the help of Ariadne, who held the end of a thread at the entrance to the labyrinth.

After killing the Minotaur, Theseus returned to Athens, where his countrymen maintained his ship in a seaworthy condition to honor Apollo, the god to whom they had pledged their fealty for Theseus’s safe return. Legend implies that the devotion to the god and the commitment to maintain the ship lasted at least until about 300 BC, but a paradox emerged—one that metaphorically mirrors the paradox that business leaders face.

The Ship of Theseus paradox raises the question of whether an object that has had all its component parts replaced remains fundamentally the same object. Through several centuries, every worn or rotted plank and wooden part of Theseus’ ship had to be replaced with new, stronger timber. That prompted the philosophical question about the nature of identity: how much can something change and still remain the same?

Regardless of these issues of the originality of the ship’s structure, for Athenians the preserved ship kept alive their understanding that Theseus had been an actual, historic figure—which none then doubted—and gave them a tangible connection to their divine providence. They didn’t care whether it remained the same ship or not; it served the function that they needed it to.

Similarly, your organization will need to find the balance between legend and truth, originality and innovation, today and tomorrow. Most leaders build their companies based on their beliefs about the future; however, that future has shown itself to be unpredictable and fickle. Worse, should the future not turn out as expected, the requirements of breakthrough success demand implementing strategy in ways that make it impossible to adapt. Thus, the paradox. Devotion to an outdated strategy or fealty to an unrealistic vision won’t help you, but a culture that has its roots in tradition will. Much as the Athenians maintained the seaworthiness of Theseus’s ship, you’ll want to preserve the aspects of your organization that define it, while replacing the worn and rotten aspects of it.

Therefore, organizations with the greatest possibility of success also have the greatest possibility of failure. That is, the same behaviors and characteristics that maximize a company’s probability of notable success also maximize its probability of failure. The status quo stands firmly at odds with innovation, and the commitments of today often don’t align with the reality of tomorrow. In the past, we have relied on past performance to predict the future. Now we can’t. Past performance still plays a role, but only those companies that develop crystal ball accuracy in their predictions will outrun the competition. We can no longer base decisions on traditional best-practice questions such as “Does this fit with the organization’s core competencies and culture?” because we don’t know if the competencies and culture of today will match the challenges of tomorrow. As Yogi also said, “The future ain’t what it used to be.”

Five Reasons for the Paradox

1. Workforce Changes

The assumptions we once made about our workforces no longer apply. Demographic changes continue to happen so rapidly that business leaders can no longer base talent decisions on tried-and-true approaches. Gone are the days of someone entering an organization in the mailroom and rising to the CEO position. You can’t assume you’ll have the same talent for 30 years the way business leaders once could.

Similarly, you don’t want that same talent. As your organization responds to the rapid changes happening around it and to it, you’ll find that you need different kinds of specialists, depending on the nature of your products and services. “Retention” will no longer serve as a universal goal or gold standard of excellence. Instead, retention of key players and top performers will become the new battle cry and leveraging that talent an evolving strategy.

But the gods will conspire against you in your attempts. As the need for specialized talent evolves, we will see more foreign students in our graduate technology and science programs—students who intend to take their talent and education back to their countries of origin. In the near future, our public schools will continue to disappoint, and many of our students won’t be able to compete for positions in our universities. Simply put, not enough people have been getting ready for the top positions.

During the recent recession, in some industries we took a four-year time-out. For example, construction ground to a screeching halt, and those who should have been preparing to take over from the retiring Baby Boomers didn’t get ready. The senior people who have specialized experience, like renovating a large hospital, will be retiring. There are few on the bench who can step up.

The eminent retirement of senior Baby Boomers also means that those with the corporate knowledge and industry history won’t be available for mentoring the future leaders. We will have lost a succession-planning advantage we’ve long taken for granted.

Adding to the confusion, researchers tell us that there has been a sharp increase in the number of companies complaining that competitors are trying to recruit their top people. Yet too few companies have changed their approaches to retaining them. Consequently, competitors have started to pirate the industry stars, a practice that was once held in disfavor.

Social media, in particular, and technology in general, have played significant roles in the poaching. In a given industry, two degrees of separation now divide the star performers from the recruiters. Penetrating today’s organization and gaining information about key contributors have never been easier, and Websites like Linkedin will even supply the names of people who can do introductions. The negative implications for an organization’s bench strength and leadership succession are apparent.

To our detriment, we became too reliant on human resources for recruiting and hiring. They implemented detailed, often-daunting hiring practices that take too long. Only then will you position yourself to attract the talent you’ll need.

But the basic assumption that HR should be the hiring body has to change too. Now, senior executives need to identify the kinds of people and the specific people they want to hire. They need to add to their impressive list of responsibilities “Talent Magnet.” All this cooks up a recipe for new, unprecedented challenges for businesses—especially those involved in cutting-edge research and development.

2. New Rules of the Road

The road that got you here won’t take you into the future because today’s global economy does not allow for mediocrity or outdated approaches. The rules and players have changed, and ordinary simply won’t work anymore.

Advancements in technology explain many of the new rules of the road. The amount of data in our world has been exploding, and analyzing large data sets—so-called “big data”—will become a key basis of competitive analysis, underpinning new waves of productivity, growth, innovation, and consumer behavior. Now, more than ever before, leaders in every function and industry—not just a few IT or data-oriented managers—will have to grapple with the implications of big data. Big data involves data sets so large and complex that processing all of it with traditional data processing applications has become unrealistic, but the rewards provide the motivation to create pragmatic solutions.¹

Big data can unlock significant value by making information transparent and usable at much higher frequency. As organizations create and store more information in digital form, they can collect more accurate and detailed performance statistics on everything from product inventories to vacation days. Leading companies use data collection and analysis to make better strategic decisions; others use them to develop tactics—to adjust their business levers just in time so they can precisely tailor products or services to specific customers and exact needs. Exceptional organizations will have to do both.

The challenges of big data include capturing, storing, searching, sharing, and analysis—that last one presenting the biggest challenge because big data sizes are a moving target, and the target moves constantly due to continuous improvements. Without question, sophisticated analytics can substantially improve decision-making and influence the development of the next generation of products and services.

The size of the company doesn’t matter. Big companies no longer own the corner market on big data. Now, small and medium-sized companies can buy sophisticated analytic tools for very little money, and sometimes these smaller companies can absorb and exploit these technologies faster and better than larger organizations, essentially leveling the playing field. Whether the organization is big or small, it will all come down to one thing: the rate of ROI in these technologies is only high when implemented correctly.

Exceptional organizations will leverage data-driven strategies to innovate, compete, and capture value from up-to-real-time information. But then someone will have to know how to use these data to make decisions. Companies will invest enormous sums to derive insight from data, but only those few exceptional organizations that boast extraordinary talent will translate big data into big judgment.

The use of data won’t be the only new rule for the road ahead. Agility and flexibility will no longer be optional. Those companies that wish to compete in the global economy will have to be willing to experiment with never-before-heard-of challenges and opportunities. They will need to steadfastly hold to their core values while remaining open to what the data tell them. They may have to address the demand for flexible work options among their employees, perhaps opening locations in new countries or involving more extensive remote working. Whatever options emerge, one thing will remain constant: those companies that define the competition will become more results than input focused. Things like “who works what hours” will become less important, while productivity will become more critical.

Strategic planning, bold leadership, decisive action—once the prerequisites of success—can now supply the ingredients for a formula for failure. Leaders must now make choices about far-reaching consequences based on a future that hasn’t existed before. These successful leaders will need to learn to live in harmony with complexity, speed, instability, and ambiguity. In short, they will need to create exceptional advantages.

3. Global Tilt

The world has shifted its economic center from Western countries of the northern hemisphere to fast-developing countries such as China, India, Indonesia, and Brazil, and parts of the Middle East. These countries of the South have started to drive change that scares their Northern neighbors. New dynamics of global competition have emerged as more countries begin to seek a larger share of the jobs pie, an improved standard of living, increased financial reserves, and more political stability. But there are no clear rules for the new game.

The United States practices some protectionism in selected areas but has no coordinated economic plan, and other countries are creating their own rules as they go along. Some countries have government funding in the form of low-cost loans; others are using their country’s sovereign wealth funds; in others, private equity firms are trolling for opportunities. As they are learning, economic power creates political power—not the other way around.

Leaders of exceptional organizations will start with a clear grasp of the global context, a world with no central governing body and no set of enforceable rules—a hard-earned lesson from Europe. Several things to keep in mind about this economy: it’s huge, growing at a breakneck speed, interconnected, complex, unstable, and lacking in transparency. The system that affects the lives of millions of people around the world continues to be overseen by totally uncoordinated players.

Are you willing to forgo profits in the early years to win against the Southern competition? Can you convince the capital markets to live with a longer time horizon? Most leaders will answer “no.” However, expansion requires commitment of people and money. Additionally, the leaders you assign or hire locally in foreign countries will have to be high-level, and you’ll have to be comfortable entrusting them with significant decisions and hefty budgets.

How do you begin to think about this shift? First, educate yourself so you can understand and anticipate the global business context. Because information is readily available, there’s no excuse for geoeconomic or geopolitical illiteracy. Now, more than ever, you’ll need to understand trends beyond your industry and geography. Chief among these trends—trends that keep shaping and reshaping markets, society, and GDP—will be the ever-changing role of U.S. and foreign governments in economic activity. Also, changing demographics will put pressure on resources or drive markets.² A solid grasp of global dynamics and the ever-emerging rules in global environment will help you pinpoint those key trends that could either upend your world or create once-in-a-lifetime opportunities. Use the insight and information that experts provide, but then form your own opinions of the total system, seeing patterns at the highest level, crystallizing what it all really means.

4. Fear

Emotions and perceptions affect market movement and prosperity. Similarly, stock prices, unemployment rates, gross domestic product, and debt drive emotions and perceptions. Since 2008, fear has been the emotion that has influenced decisions from the highest levels of government to the decisions of small business owners. Collectively, we have created an economic engine that uses fear as its primary fuel, and the media supply this fuel through threats and doomsday predictions.

Twenty-four-hour news feeds need to draw audiences, and to draw audiences, those in the media require sensation. Consequently, they constantly search for the “man bites dog” story and embrace the “if it bleeds, it leads” orientation. Adding complexity to the situation, people on the other side of the globe hear news from the United States within seconds of it happening. In the new global economy, that which affects one country eventually affects others. At some point, we become immune to another “cliff” scare, but that does not imply that the stories don’t hold sway. They do.

Social networking is another game-changer, though the game is still one of guessing. We know that it can spread new ideas and influence behaviors on a massive scale, in moments. Social media, cell phones, and texting have given us new ways to stay in touch but also new ways to annoy and scare each other. But all the consequences are not so mild as married Senator Weiner “sexting” a picture of himself to a young woman. Some of the social media platforms have provided outlets for information sharing that sparks protests and violence. All this combines to fan the flames of fear and causes the cycle to repeat itself.

5. Change

The fifth reason for the paradoxical organization presents its own paradox. According to the research Jim Collins presents in Great by Choice, the great organizations they studied were not necessarily more innovative than their less successful counterparts, and in some cases, the great organizations were less innovative. As the researchers concluded, innovation by itself turns out not to be the trump card we expected. More important is the ability to calibrate innovation, to blend creativity with discipline.

Great leaders do not have visionary ability to predict the future, but they can observe what has worked in the past, figure out why it worked, and build on proven foundations—all combining to decide about what changes to make when. As Collins and his team learned, dramatic change outside the organization does not mean leaders should inflict radical change on their organizations. Instead, a disciplined approach and the right cadence about change must guide them.³

Accuracy and agility will play a bigger part in your ability to create an exceptional organization than speed will. You will need to move quickly—probably before you think you’re ready—but pace will prove more reliable than haste. You’ll need to know when to run and when to walk. But you’ll also have to understand that you’ll have to jump too. Change comes more often by infliction than invitation, and Lady Luck will play her role too. The critical question won’t be whether you’ll have luck, but what you will do with the luck you get.

In addition to offering its own paradox, the fifth reason for overall organizational paradoxes encompasses the previously mentioned four reasons. The workforce will change because the rules of the road have changed, and both of these will change because of global tilt. All of this will promote the fear that probably played a role in it starting in the first place. We now face a future that won’t forgive the mistakes we’ve always made or the new mistakes we’ll be tempted to make. Only those who steadfastly commit to creating exceptional organizations will thrive—but they will have to do so consciously and continuously.

The Four Traits of the Exceptional Organization

The economic downturn of 2009 taught us a valuable lesson that we don’t want to have to relearn: we can’t ever count on certainty again. Those things we always “knew” were safe bets disappointed and sometimes devastated us. Yet we can’t afford to lose confidence, because with it goes optimism and success. Instead, you need a new plan that leaves little room for error. It will hinge on the strategy you select, the culture you create, a commitment to excellence, and the talent you attract. And it will look like this:

Strategy: Separating the Notes From the Noise

Traditionally, leaders analyzed customer feedback and industry data to make a decision about what the future would look like and how their organization would respond to it. Then, someone changed the rules of the game.

Today, rather than developing a single strategic commitment, leaders need to invent practical strategies, based on multiple choices that respond to different requirements of several possible futures. In short, they need to hedge their bets. Instead of imagining one possible future, they need to envision and anticipate several future alternatives. For each they will need to accumulate data and formulate a plan for implementation. They will need to be agile, sure-footed, and speedy—willing to change when they have to, but clear about the direction they want to go.

There are two kinds or organizations: those with a strong strategy that can respond to change and those going out of business. In other words, what got you here won’t necessarily get you to the next level. The Pony Express did not become the railroad, and the railroad did not become the airlines. Vanguards in their days, at one time both the railroad and airline industries thrived. Today, however, both industries suffer from decades of bad management.

Unlike the leaders in these two industries, you will need to excel at reading the tea leaves. What opportunities and threats loom on your horizon? How can you leverage your strengths and mitigate your weaknesses to ready yourself for them? Let’s take a lesson from recent history.

In 2012, the Wall Street Journal reported that Wal-Mart was in the midst of the worst U.S. sales slump ever, posting its second straight year of declining sales. How can this happen to America’s behemoth, a store that should have been thriving as customers looked for low-cost alternatives amid an economic downturn? They misstepped. To jump-start lethargic growth and counter the rise of competitors, decision-makers veered away from the winning-formula mission: “Saving People Money So They Can Live Better.” Instead, the world’s biggest retailer raised prices on some items while promoting deals on others.

That wasn’t the only change to its mission. A foray into organic foods didn’t catch on with discount shoppers. Similarly, a push to sell trendy fashions and an attempt to cut clutter in stores to attract higher-income customers ended up alienating the company’s traditional shoppers. The chain succeeded in attracting wealthier clientele but at the cost of its original customer base, those earning less than $70,000 a year, which made up 68 percent of its business. “The basic Wal-Mart customer didn’t leave Wal-Mart. What happened is that Wal-Mart left the customer,” according to former Wal-Mart executive Jimmy Wright.⁴ The revolving door at corporate continues to spin as decision-makers scramble to go back to the mission that led to their success.

Exceptional organizations will abandon the five-year strategy and replace it with a three-year, or maybe even 18-month vision. Leaders of these companies will realize that strategies begin with ideas, not analysis. Noise will continue to stream into our lives through new and unprecedented sources, creating large banks of information. But those who create an exceptional advantage will separate the notes from the noise, even when that means making the necessary disruptive changes to their plans. They will learn the value of speed and agility because they will have created a culture that values both.

Culture: Separating the Duck From the Quack

Mention the words “Jeremiah Weed” to a group of veteran Air Force fighter pilots, and they will assure you they have drunk the delightful kerosene-tasting, 100-proof, bourbon-flavored liqueur. At the completion of a long week at the Fighter Weapons School, which is the Air Force equivalent to TOPGUN, or just for any reason at any bar in the Air Force, pilots will join each other in a toast to “fallen comrades.” All know the tradition, yet few can recount the legend of Jeremiah Weed, much less the true story.

The true story involves the ejection from and crash of an F-4 on December 1, 1978, in the desert near Nellis Air Force Base. Major Nort Nelson, a student at the Weapons School, responded to instructor Joe Bob Phillips’s scripted attack by putting his plane into a position from which he could not recover—at least in the estimation of Nelson’s own instructor, Dick Anderegg. Anderegg ejected them both safely, but they lost the plane.

A year later Joe Bob, Nort, and another friend returned to the crash site, but not before stopping at the Paranaghat Bar, where they met a bearded bartender who eagerly heard the three pilots’ story and engaged them in drinking games. The bartender lost.

Joe Bob asked the Grizzly Adams–looking man whether he knew how to do “afterburners.” He did not. Normally, the pilots explained, this procedure involves lighting a shot of brandy and drinking the flaming liquid. The bartender apologized that the closest thing to brandy he could offer was Jeremiah Weed. The three pilots filled their shot glasses with the bourbon and demonstrated flawless afterburner technique, all three glasses returning to the bar empty, except for a small blue flame flickering at the bottom of each.

The bartender poured himself a shot and lit it—overlooking a couple of key steps in the procedure and the fact that he had a beard. Apparently, in addition to tasting like kerosene, Jeremiah Weed also has the flame-accelerant properties of it.

By the time the three pilots could beat out the flames, the bar had filled with the smell of barbequed lips and singed hair. Feeling guilty about winning the bar games and nearly immolating their new friend, the three pilots purchased a bottle of Weed and headed to the crash site.

The three decided they wanted to remember their own brush with death and to establish a custom for honoring others who have not walked away from crashes. So, on their return to Nellis, they showed the bottle to the manager of the Officers’ Club and suggested she add it to the bar stock. She did. Soon Nellis fighter pilots were downing shots of Weed for no good reason except that drinking it set them apart and gave them an excuse to toast fallen comrades. As scores of other fighter pilots passed through Nellis, they saw the weapons school guys upholding the ritual, so they did too. A legend was born and a part of a culture created.⁵

As the Jeremiah Weed story illustrates, organizations learn as they adapt to the world around them and solve their problems. When something works well for a period of time, and leaders consider it valid, members of the organization begin to teach the behavior or idea to new people. Through this process, new members find out what those around them perceive, think, and feel about issues that touch the organization. Sometimes the behaviors will relate to traditions that make members of the group feel connected to one another, as the drinking tradition does; at other times, the behaviors will have more direct links to the way the organization does business. Smart leaders recognize that both hold important keys to unlocking the secrets of the organization’s success.

Culture survives because of talent, but because the same talent might not stick around, you have to create a culture that is independent of talent. Sometimes star performers join an organization and work there their entire careers, but not too often anymore. More frequently, talent comes and goes, in spite of or because of the culture. In the case of the Weapons School, Nellis has been the cradle of fighter weapons and tactics since the Air Force established the Aircraft Gunnery School there in 1949 in an effort to capture the lessons and experiences fighter pilots had learned in World War II. Later the school became the Fighter Weapons School, and each successive fighter model has had its own squadron within the Weapons School. By design, talent streams through on a regular rotating basis, and the syllabus changes routinely, but significant aspects of the culture remain resistant to change, and aviators have always worn the patch on their shoulders with great pride—it separates them from those who didn’t qualify to attend.

Conversely, today’s organizations face an onslaught of factors that can influence and even ruin their cultures. Mergers and acquisitions often have a detrimental effect on the two individual cultures attempting to merge, leaving neither intact and none to emerge. Top performers frequently lose patience and leave the merged enterprise, causing more loss overall. Like the paradoxes mentioned earlier, culture needs to be both reliable and amoebic. It needs to hold to those things that make exceptional people proud of it while reinventing itself to be attractive to the talent you want, not just the talent you have.

Learning corporate culture doesn’t involve drinking the Kool-Aid, or even the Kentucky bourbon. It’s more about knowing when to raise a glass and to whom. But two components characterize all successful corporate cultures: a culture of change and a commitment to learning. When you have these in place, you can more effectively address the direction the company needs to take and do so excellently.

Excellence: Separating the Ace From the Pack

In American folklore, the feud between the Hatfields and McCoys has long served as a metaphor for bitterly warring rival parties. However, this 28-year dispute in the backcountry of West Virginia pales in comparison to the battle that rages between competence and excellence in most organizations. When people deliver pedestrian performance, senior leaders too often settle, and mediocrity reigns. Leaders of exceptional organizations—those that attract and develop exceptional performers—realize the time for errors has passed.

Excellence, the overarching requirement for exceptional organizations, defines everything else: talent, culture, and strategy. Without a clear commitment to and focus on excellence, nothing else matters.

It all starts with “who?” Your organization can be no more excellent than the least-excellent employee that holds a key position. Certainly, top performers in senior positions will hold the most sway, but at every rung of your organizational ladder, you must have the best talent for the money. Not every person needs to offer the skills, aptitude, or desire to move up that ladder, but each, from the janitor to the CEO, should represent a high standard of performance. If you accept less, you compromise excellence.

Frustration leads myriad reasons people don’t perform to their potential. They simply don’t know what you expect; strategy remains fuzzy, priorities change too often, or the implementation plan, if it ever existed, can’t be found. Without clarity and transparency on these issues, you can’t hope to attain excellence. If senior leaders fail to communicate to those who crave it, they stand no chance of attaining excellence. Clarity is the image: accountability the reflection. Once people understand the direction the company needs to take, they must be aware of the specific roles they will play in winning the race.

After “who?” comes “what?” What do we do that is world-class? If the answer isn’t obvious, discover where the gaps exist between you and the competitor who outruns you. If the answer is apparent, become acutely aware of the factors that keep you in first place. This knowledge will help you maintain your best-in-class position and avoid diluting your excellence with products and services that don’t support it.

People use the terms “excellence” and “exceptional” synonymously. However, the two differ. “Excellence” implies a distinction from others but not necessarily rarity. For example, one might comment that a fourth-grade pianist is excellent, but she might be one of many in her class that shares the honor.

On the other hand, “exceptional” denotes someone or something that stands apart—something extraordinary, rare, and incomparable. Mozart played the piano excellently at the age of 3, which made him exceptional. Also, he continued to improve his musicality throughout his life, distinguishing him as both brilliant and atypical. Often that which we consider excellent is also exceptional, and exceptional usually implies excellent, but not always.

In June 2013, Redmond High School in Oregon graduated 29 valedictorians because the school implemented a system that allowed all students who achieved the highest grade point average to receive the honor. Arguably, all 29 displayed enough academic excellence to earn distinction, but if 28 others shared the designation, the exceptional element faded. This example also illustrates that we have lost the ability to decide. Those 29 students may have differentiated themselves from the others in the class, but no one with decision-making authority recognized the nuances that would have allowed people to recognize the unique or singular contributions of any one of them.

College admissions boards face unprecedented challenges with this pervasive everybody-gets-a-trophy approach in high schools. Now, we see a push for a valedictorian “club” of sorts—people who took advanced placement classes and received all “As.” However, traditionally the very term “valedictorian” implied exceptional achievement—even when compared to others who also accomplished excellent performance standards. It was the Most Valuable Player award high schools bestowed at the end of the game—and only one student received it, no matter how many others played well.

Imagine how we would regard the Most Valuable Player award if every player in the NFL, or even the Super Bowl, were to receive it. Certainly, we consider all players who qualify to don an NFL jersey exceptional players, if we compare them to the best high school and college players. But we don’t. Instead, each year we single out two teams of excellent players to attend the Super Bowl and then from among them, decision-makers pick one and only one player to receive the award that only a handful of men have received since the league’s inception. Players who receive the MVP award stand apart—they’re exceptional.

People have also begun to bat the words “egalitarian” and “elite” as if they were conversational shuttlecocks. At some time, perhaps during the 1960s, the emotional meanings of these words overshadowed their earliest meanings.

“The elite” originally referred to the most carefully selected members of a group, and egalitarian doctrines maintained that all humans are equal in fundamental worth and social status. Egalitarianism then began to touch every aspect of society—expanding to include political platforms, philosophy, theology, economics, education—and, most regrettably, business.

Because nature does not endow all people equally with beauty, intelligence, talent, or drive, egalitarians eventually tried to abolish the “unfairness” of nature—to establish universal equality in defiance of facts. Because personal attributes or virtues cannot be “redistributed,” egalitarians seek to deprive people of consequences—the rewards, benefits, and achievements created by personal attributes and virtues.

In the late 1960s, author and philosopher Ayn Rand attempted to explain the pernicious nature of this approach: “To understand the meaning and motives of egalitarianism, project it into the field of medicine. Suppose a doctor is called to help a man with a broken leg and, instead of setting it, proceeds to break the legs of ten other men, explaining that this would make the patient feel better; when all these men become crippled for life, the doctor advocates the passage of a law compelling everyone to walk on crutches—in order to make the cripples feel better and equalize the “unfairness” of nature.”⁶

If this is unspeakable, how does it acquire an aura of morality—or even the benefit of a moral doubt—when practiced in regard to man’s mind?

When something other than learning, talent, and achievement serves as a basis for favoritism, the outcome is morally repellent. The elitism I defend does not discriminate based on race, ethnicity, gender, wealth, or sexual orientation. Rather, the only differentiators are excellence and superior performance. The kind of elitists I admire and champion seek out and encourage excellence. They don’t grade on the curve, hire the underdeveloped, ensure lifelong employment, or suffer fools.

This sort of elitism does not promote envy or enlarge the number of society’s losers. Rather, it provides support for ideas that have shaped past progress and that will aid future advancement so that society as a whole wins—that is, it gets richer, better educated, more productive, and healthier.

Americans have stubbornly clung to the myth of egalitarianism—supremacy of the individual average person. We created that everyone-gets-a-trophy culture among our young that morphed into Cuckooland, a place where losers who lose on the basis of consequences should be shielded from thinking that their losing is deserved, and winners who win fairly should be barred from feeling comfort and pride.

Our economic recovery, and indeed global resurgence, depend on something better—better, not just different. They depend on a shift back to the notion that self-fulfillment—seductive though it may appear—must march in lockstep with a commitment to achievement.

We need to rediscover the intellectual confidence to sort out and rank competing values. Fairness is not the same as equality, and equal opportunity at the starting gun does not and should not guarantee equality at the finish line. Those who run through the tape at the finish line offer our greatest hope for thriving in the new economy. The battle between egalitarianism and elitism rages on, but now is the time to tip the scales in favor of the latter.

Businesses won’t enjoy the same kind of nonsensical grading system that seems to pervade our public schools. We build our school systems for teachers, not students, and our airports for planes, not people. In business we can’t lose sight of the fact that customers and markets drive businesses—not personal preferences. There will be no unionized customers who will want to avoid hurting your feelings or damaging your financial self-esteem. Only those companies that offer a systematic approach to excellence will distinguish themselves from the competition, and only those leaders who demand consistent excellence in every aspect of their organizations will classify themselves as exceptional. It all starts with the right people.

Talent: Separating the Rose From the Poison Ivy

How often have we heard “Our people are our greatest asset”? The facts tell a different story. Only some people are true assets. The point is to spot them, nurture them...and know when to leave them alone. These people will make the difference between surviving and thriving—between outrunning your competition and tripping at the finish line.

At one time, retention of talent, any talent, was an organization’s goal. Many considered a warm body with a pulse a better alternative to turnover. Then someone started tying performance to the numbers. These warm bodies, who contribute little but cost much, couldn’t sustain companies through difficult economic times. McDonnell Douglas learned this in the ’80s, right before Boeing’s acquisition of the company, and countless airlines have experienced this, apparently with no lessons learned.

Further contributing to the paradox, you can’t assume you’ll have the same talent for 30 years, as leaders once could. Instead, you’ll need a cocktail of characteristics to drive your business—the magic combination that I call the E⁵ Star Performer Model: Ethics, Expertise, Excellence, Enterprise, and Experience.

This model serves as the foundation for all the exceptional talent you’ll need in key roles. You’ll find, however, that even this list won’t adequately explain the stars’ performance you’ll need in your organization. When we examine exemplars and avatars, we find that the truly great in history offered even more, often embodying charisma, courage, passion, or an unidentifiable certain something that I call the “Je ne sais quoi” factor.

You’ll also find that your future talent won’t necessarily come from traditional sources. Our institutions of higher learning attract the best of the best from around the globe, but too often these stars take their education and talent back to their countries of origin. Some forward-thinking organizations have realized they need to stop that trend and recruit differently to address the organizations they hope to create in the future. That means they will have to become more attractive to the top talent still attending our universities and graduate schools. And business leaders need to play a bigger role in influencing how we educate the next generation at all levels.

Author Amy Chua attempted to offer a solution in her bestseller, Battle Hymn of the Tiger Mom, which stirred quite a controversy. According to Chua, raising successful children—those that we would consider stars in our organizations—involves the strict discipline that she experienced as a child and that she advocates for Western mothers.

In her estimation, play dates, sleepovers, television, and sports waste the time of a child. Only academics and music lessons—specifically piano and violin lessons—equip the child for later success. I disagree. I’ve coached two high potentials who had Chinese tiger moms—Don and George. Don’s story has a happy ending, George’s a sad one.

Don grew up in China and moved to the United States for graduate school. George grew up in the United States. Both demonstrated outstanding analytical thinking, learning skills, work ethic, and command of both English and Mandarin. Both, however, also shared a common affliction: they took themselves too seriously.

Don and George had spent their childhoods working to become adults, so they missed the rites of passage that most American kids take for granted. They didn’t know how to play because they never had. They never learned the skill of influence without dominance—arguably a critical talent for negotiating how games would be played, in whose yard, and under what rules. They didn’t know the value of catching fireflies, getting dirty, playing without supervision, or crafting a game from nothing. They hadn’t ever played a team sport, so forget understanding the nuances of teamwork.

I approached both men the same way. I said, in essence, “You have a choice. You can run this company in a few years, or you can continue on the path you’re on, and you’ll be fired within a year.” Both committed to improvement, but only one did.

Don worked diligently to learn the interpersonal skills he would need to mend fences. George, who believed he had right on his side, chose not to change his behavior. Don was promoted twice within a year, and George was fired before the year ended.

Chua missed the mark with her instructions. Success, especially at the top levels, depends on many lessons that we don’t learn in the classroom. A good sense of humor, the ability to establish rapport quickly, responsiveness, and tolerance go further than violin lessons in acquiring leadership skills. (You’d be surprised how seldom “improve musicality” comes up when I coach executives.)

Chua got one thing right, however. She maintained that accomplishments cause self-esteem, not the other way around. Most successful people I know have accomplished much and have high self-esteem. They and their parents created an upward spiral that started at an early age. The more they accomplished, the better they felt about themselves. Whether people had a tiger or a lamb for a mother, the battle hymn they ultimately sing is up to them.

Books like Chua’s highlight the different talent world we live in now and will inhabit in the future. We will figure out how to attract some of the Asian superstars who attend our schools, but then what? How will we adjust our management style and cultures to accommodate the stars’ expectations? How do we teach cohesive efforts to those who have never learned them because all their lives people applauded them for solo contributions?

We have all read the diversity research that informs us that our companies will look different in the future, with women, blacks, Latinos, and Asians gaining stronger footing. We also know that as the Baby Boomers retire, new generations of X, Y, Millennials, and who knows what other designation will take over leadership roles.

Books about how to manage the different generations have started to fill the shelves in our bookstores, most ignoring the fact that exceptionalism, not generational differences, will determine how leaders need to respond to the talent needs of their organizations. Authors cram these books with advice about how you must manage and lead the people in your organization, based solely on the year of their birth. Apparently you will automatically understand all those who share your generation but remain flummoxed by those who don’t.

This new, pervasive, insidious “ism” is sweeping the country, if not the world. People who would never dream of engaging in sexism or racism don’t hesitate to jump on the “generationalism” bandwagon. Scores of experts have cropped up to explain how managers should handle each generation differently. But before you invest your time, consider this: Bill Gates, Bill Clinton—Baby Boomers. Tom Hanks, Michael Jordan, and Jay Leno, also Baby Boomers. Osama Bin Laden—also a Baby Boomer. Can somebody tell me what these men have in common with each other? If this much diversity exists in this short list of Baby Boomers, doesn’t it make sense that uniqueness and variety exist within each generation in your organization too?

Generationalism offers the lazy executive an excuse not to appreciate the unique contributions of each person. Aside from wasting your time studying this never-proven theory, you will engage in biases that will certainly stand in the way of you identifying your stars. Top performers know no generational, gender, race, or religious lines. But they do share three traits: they are smart enough to do the job, they are driven to do it well, and they have integrity. Throughout history, all the great leaders who positively influenced the course of humankind embodied all these traits. Certainly each came from a different generation—often separated by hundreds if not thousands of years. You probably don’t need to know more about each generation’s preferences, but what you do need to understand is how to size people up better—how to assess top talent—because the new world we live in has no room for talent errors in particular.

Conclusion

Exceptional organizations serve as magnets to stars who, by their very nature, require superior performance of themselves and those with whom they associate. They want to feel empowered to make decisions to improve both the organization and their own lives, and they want to align their excellence with an employer that distinguishes itself through excellence. They will eagerly use “big data,” but insist that it align with “big wisdom.” They will offer this wisdom themselves but also demand it of those who hold sway over them.

These stars crave an action-oriented culture that responds to change and reinvents itself whenever new information or learning indicates it should, because they understand that the new world order demands more—more direction, better cultures, excellence, and star performers. In short, they want to work for companies that strive to think strategically, grow dramatically, promote intelligently, and compete successfully—both today and tomorrow. That combination will allow them to step to the front and let a winner lead the way.