It astonishes me that 'Good to Great' [GTG] is on anyone's reading list. I believe that the book's research and inferences are the greatest hoax since "One Size Fits All." As a world-class case study in how NOT to conduct business research, it's terrific. But, as serious scholarship, it's one of the all-time crocks.

Before I get into why I say that, I want to mention the fact that Collins's eleven "great companies" include these three: Circuit City (later liquidated through Chapter 7 bankruptcy), Wells Fargo (in the news these days for highly questionable business practices - its CEO for the last nine years resigned under fire this week and also gave back bonuses in excess of $41 million), and Walgreen's (which made the mistake of affiliating itself with a Silicon Valley start-up, Theranos, which allegedly had created a proprietary blood-testing machine, but is now under fire for lying to its investors and for fabricating a lot of information, thanks to a series of articles that began a year ago in the Wall Street Journal).

For starters, Collins's method of choosing his eleven "great companies" is deeply flawed. In their paper, "From Good to Great to . . .", which was published in the Academy of Management Perspectives, Resnick & Smunt (2008) find that Collins's work "suffered from three major problems:

"1) data mining with respect to the selection of the starting month of the company transformation period,

"2) the failure to test for the sustainability of greatness over subsequent time periods, and

"3) the failure to use modern portfolio theory that accounts for the costs of risk and then whether the performance differences are statistically significant." [In other words, not using risk-adjusted returns - WDM]

They close their paper with this:

"Moreover, the fact that none of the 11 companies currently has a significantly positive alpha suggests that the market now appears to be fully aware of whatever the managerial abilities are at all of these corporations and has priced their stocks according to their market risk."

Another paper, "Good to Great, or Just Good?", published in the same issue of the Academy of Management Perspectives (2008) by Niendorf & Beck says the following:

"We contend that due to two fundamental research design errors, GTG does not show that the five GTG principles lead to 'sustained great results,' as Collins claims. Rather, it shows only that the 11 GTG firms had these principles in common during the specific time period studied by Collins. The different in these two conclusions is enormous, and the principal implication is this: GTG provides absolutely no evidence that applying the GTG principles to other firms during other time periods will lead to anything other than average business performance. Thus, Collins has not identified 'timeless, universal answers that can be applied by any organization.'

"The two fatal errors in GTG are data mining and mistaking association for causation. In this article, we discuss these two errors, and then test the performance of the 11 GTG companies after the time period used in the GTG study. By doing so, we find evidence that addresses the generalizability of the GTG principles. Our test results provide no empirical evidence for Collins's claims that applying the GTG concepts leads to 'sustained great results'."

Despite being written by academics, both of these papers are highly readable. For a PDF of either or both of them, please contact me directly: [email protected].