In Search of Excellence: Lessons from America's Best-run Companies (Paperback)

Based on a major McKinsey study, In Search of Excellence identifies eight characteristics common for excellent companies: (1) a bias for action, (2) close to the customer, (3) autonomy and entrepreneurship, (4) productivity through people, (5) hands-on, value-driven, (6) stick to the knitting, (7) simple form, lean staff, and (8) simultaneous loose-tight properties. Personally, I don't find this set of characteristics very surprising or insightful - it would be difficult to imagine a financially excellently performing company that doesn't get things done, doesn't care about customers, is excessively bureaucratic and so forth. Moreover, some of these characteristics are at most directionally true such as "stick to the knitting" (consider e.g. GE - which btw. was part of the book's sample).

Nevertheless, In Search of Excellence provides interesting examples and a lot of good practical advice. I have to admit, though, that for me many of the examples were tedious reading as they represented often quite outdated issues. What I liked most in the book was the theory. Peters and Waterman have succeeded in picking up theory that mostly has stand the test of time. I would assume that for instance Henry Mintzberg and Karl Weick were much less known in 1982 as they are today. James March, Alfred Chandler and many others still are considered great management thinkers. My fancying for the theory is partly explained by that I in general agree with the author's that it is more often the soft issues that are important, not the hard issues.

The methodology used in the study is not particularly robust. An original convenience sample of 62 companies is analyzed on six different measures of financial excellence such as average return on equity between 1961 and 1980. In order to be "excellent", a company must be in the top half within its industry in four of the six measures. 43 companies met this criterion and the authors conducted interviews in them. Underperforming companies were not really included so the study doesn't tell are the identified characteristics unique to excellent companies (although the authors make a vague statement that underperforming companies were also analyzed, but they didn't focus on them). Also, for unclear reasons, companies that were perceived excellent but were not part of the initial sample, were included in the book's example, which is a little confusing (are those companies also excellent, and if yes, on what basis?).

Finally, a point I find very intriguing, is that in an article for FastCompany in 2001 (http://www.fastcompany.com/magazine/53/peters.html), Peters admitted that he and Waterman faked the data. This raises some interesting ethical questions: why does the new foreword of In Search of Excellence (written in 2003) not raise the issue? Why does McKinsey still embrace the book on its web page without mentioning that the data has been cooked? To me it seems to imply that an aspiration for truth is easily put aside in order to serve self-interested purposes.

So what is the "so what" of In Search of Excellence? Considering that the methodology is as weak as it is, it's hard to draw any far-fetched conclusions from the study. Neither does the book try to do that - it rather states that excellent companies seems to have these characteristics in common, and if you focus on them, maybe also your company will be excellent. Now considering that the data was cooked, the book doesn't really say even that, but rather provides a seemingly good narrative and dwells on some interesting ideas, while at the same time being short on intellectual rigor and ethics.

In this book, the authors report on the findings from the excellent companies: "It will define what we mean by excellence. It is an attempt to generalize about what the excellent companies seem to be doing that the rest are not, and to buttress our observations on the excellent companies with sound social and economic theory." The authors' research started in 1977 when two internal task forces at McKinsey & Co. were set up to research a general concern with the problems of management effectiveness, and a particular concern with the nature of the relationship between strategy, structure, and management effectiveness. One of these task forces was to review thinking on strategy, the other was to review thinking on organizational effectiveness. Peters and Waterman were the leaders of the project on organizational effectiveness. Their research involved talking extensively with executives around the world and extensive literature reviews. Initially they worked mainly on the problem of expanding our diagnostic and remedial kit beyond the traditional tools for business problem solving, which then concentrated on strategy and structural approaches. This resulted in the now well-renowned 7-S framework (structure, strategy, systems, shared values, skills, style, and staff). "But there was still something missing. ... we were shore on practical design ideas, especially for the 'soft S's'." So the authors decided to look at management excellence itself. "We asserted that innovative companies not only are unusually good at producing commercially viable new widgets; innovative companies are especially adroit at continually responding to change of any sort in their environment." The authors labeled the companies that seemed to have achieved that kind of innovative performance as excellent companies.

The authors eventually chose 75 highly regarded companies, in which they conducted intense, structured interviews. Their project showed that the excellent companies were, above all, brilliant on the basics. The authors use eight chapters to discuss in detail the eight attributes that distinct excellent, innovative companies: 1. A bias for action, for getting on with it; 2. Close to the customer; 3. Autonomy and entrepreneurship; 4. Productivity through people; 5. Hands-on, value driven; 6. Stick to the knitting; 7. Simple form, lean staff; 8. Simultaneous loose-tight properties. None of these eight attributes are something special. In fact, they can even be called simple and predictable and the authors refer to them as "motherhoods". Most essential to each of these excellent companies is the intensity within them. This intensity is build on the strongly held beliefs of these companies.

Yes, I do like this book. I must admit that I had heard plenty about this book and had read several reviews before I actually started reading it. The biggest criticism I heard was that the example companies are not so excellent now. Perhaps true, but I do not think that this book is that much about the excellent companies themselves. I believe that it is much more about the attitude of the example companies, the positive culture. Highly recommended to business leaders, managers, and MBA-students. Read it sooner rather than later. The book is written in simple US-English, although it contains quite a heavy literature review.