In Search of Excellence
By Tom Peters and Robert Waterman (1982)
What do management consultants actually do? Since 1982, they have been writing management books, inspired by the commercial success of 'In Search of Excellence' - the best selling business book of all time.
The book was written in by two McKinsey consultants - Tom Peters and Robert Waterman - at a time of crisis for American industry. Politically, America was falling behind in the Cold War against Russia. Economically, the country was stilled gripped by stag-flation - stagnation coupled with inflation.
America was facing a crisis in competiveness and its position as the world economic superpower was being threatened by Japan and West Germany. Managers brought up in the mode of Ford, General Motor and IBM suddenly realised that simply doing what they did yesterday might not be good enough for tomorrow and looked for help.
They found it partly on the book-stands.
Peters and Waterman identified eight qualities possessed by excellent companies:
1. A bias for action - a preference for doing something, anything - rather than sending a question through cycles of analysis and committee reports.
2. Close to the customer - learning their preferences and catering to them.
3. Autonomy and entrepreneurship - breaking the corporation into small companies and encouraging them to think independently and competitively.
4. Productivity through people - creating in all employees the awareness that their best efforts are essential and they will share in the rewards of the company's success.
5. Hands-on, value driven - insisting that executives keep in touch with the firm's essential business.
6. Stick to the knitting - remaining withthe business the company knows best.
7. Simple form, lean staff - few administrative layers, few people at the upper levels.
8. Simultaneous loose tight properties - fostering a climate where there is dedication to the central values of the company combined with tolerance for all employees who accept those values.
They subsequently identified 43 companies out of the Fortune 500 and held them up as bastions of excellence, measured by six financial yardsticks over 20 years: -
1. Compound asset growth
2. Compound equity growth
3. Ratio of market value to book value
4. Return on capital
5. Return on equity
6. Return on sales
After the book was published, however, some of the companies featured ceased to be excellent. Some totally tanked - including Atari, Avon, DuPont and Wang.
This led to the thinking behind Peters' follow up book - 'Thriving on Chaos' - and the ethos that excellence was not a static quality to be attained forever, but that it required constant change and adaptation.
Peters and Waterman wrote 'In Search of Excellence' while they worked for strategy consultancy McKinsey and Co. Prior to McKinsey, Peters worked for the Pentagon. Later, he went on to Stanford to study for his MBA.
Peters is an inspiring speaker. His maxim is "If it ain't broke, break it." He champions empowerment of middle management and a ripping up of the rule-books on layered bureaucracy. His thinking indirectly gave rise to the business process re-engineering movement that gathered pace in the 1980s causing widespread unemployment and the closure of manufacturing plants.
He always published the slides from his speeches on his website www.tompeters.com and if you are ever faced with speaking on a management topic, it is well worth checking out his latest thoughts and borrowing some killer quotes.