In Search of Excellence| A review of the elements and the book. | | | | | 8/30/2010| | Thomas Friedman in his book “The World is Flat” outlines how the entire world is shrinking and become a close net ball replete with information highways transferring data, ideas and meaningful business information at a pace that was never imagined before. In the same way the concept of “speed” is conceptually driven in the mind of business leaders by Bill Gates in his famous book. Scores of management books today are being churned out virtually every day and it’s very difficult to judge how impactful they might be for the time they represent.
What works for today has often been seen to be redundant the next time. In Search of Excellence, a revolutionary book by Tom Peters and Robert Waterman, published in 1982, changed the way business looked at itself for that decade and also became the reference point of debates, business ideas and strategies even till date. Even though critics have labeled the book as being “deficient in Theories” and lacking is strong models that come out of theories, it nevertheless has impacted business worldwide to change the way they function. The Book The Book was fallout of a project conducted by McKinsey in the year 1972.
There were two projects first and major one, the Business Strategy Project, was allocated to top consultants at McKinsey’s New York corporate HQ and was given star billing and later was branded as a total failure. The second ‘weak-sister’ project concerned Organization – structure and people. The Organization project was seen as less important, and was allocated to Peters and Waterman at San Francisco. Peter went berserk on this project and travelled the entire globe talking to CEO’s, business entrepreneurs, Consultants on business and Teams with no aim to chart out a “business model or a plan. What culminated after this was a mammoth 700 page presentation which was later pruned down to produce the eight themes. The platform for the book was however adopted from McKinsey 7-S Model Elements as shown below:- The Eight Themes 1. A Bias for Action: The name of the title clearly gives an indication that the ultimate goal of an organization is about the results. The effort is important but unless results are seen, the effort is rendered futile. The methodology any organization can opt for is to enable a platform of seamless information exchange.
This will ensure that communication permeates the very fabric of an organizational setup and this can be achieved only if the communication line and processes are flexible and open. The main reason being that such a setup of built in flexibility ensures quick transmission, interpretation, analysis of information and break up of those information into action points. The basis of such a platform is simple. The almost trivial experiment task force, small groups, temporary structure etc all lead to action orientation. Management needs to get out of the office and out and about to communicate with the people of the organization.
E. g. of such can be the introduction of the IBM’s System 360 or a 3 day ad hoc task force at Digital. These companies despite their vast size have been able to keep communication simple and have not been transfixed with organizational charts and job descriptions. The basic aim as can be put in words is to ensure experimentation. Companies like Betchel, TI, Digital, Fluor, Emerson, IBM, Dana, Boeing have developed such systems that enables even the most senior leadership employees communicate with people bypassing the obstacle posed by time. 2. Close to the Customer:
The main objective of every company is customer focus however not every company can follow it because as Peters and Waterman put it, that despite of all the lip service that is given to market orientation in today’s world, the customer is either ignored or considered as a bloody nuisance. Excellent companies get up close and personal with their customers and one of the company that does that better than anyone else is HP. The main intent of such a company as clearly elaborated by John Doyle is that the best companies are looking at getting the nest product generation into the customer’s premises.
Dell does that in terms of it PC BUSINESS where the internet bridges the distance barrier and customers can easily customize their laptops according to their specification. IBM again is referred to in the book as a company that will sell the Brooklyn bridge to its customers like it’s no tomorrow. The other company that did it betters than the most, even better than IBM, was Lanier who ensured that its customers were the closest. Other examples include Disney and McDonalds and have been rated as the best Mass Service providers in America. 3.
Autonomy and Entrepreneurship: Tom and Robert have laid emphasis that the very thing that made companies become behemoths in their game of play is being disregarded: innovation. A survey was taken which clearly highlighted that small firms produced about four times more innovation than medium sized firms and about twenty-four times more than large firms. The reason was pointed out as the lack of autonomy in the big firms. Small firms encourage the entrepreneurial spirit among the people while the top notch ones are entangled in bureaucracy.
Companies like 3M, IBM, TI, GE, Bristol Meyers were all involved in bootlegging, killing programs and certain degree of madness all around. This fostered “Champions” to come out and shine in their full glory. The theory of the champions being irrational was given all due credit and became the underlying principle of such companies. The freedom to engage is circuits, groups and function as autonomous bodies with optimum levels of decentralization has fostered Autonomy and led to the spirit of innovation develop around the cultural premises of such organizations.
The success of companies such as GE, Wang, J. J, Bloomingdale have more would be champions than their competitors with 3M being the case to be looked into as the forerunner in innovation, entrepreneurial spirit and autonomy to its divisions. The company hence fosters in-house competition, with intense communication and is able to tolerate failure. 4. Productivity through People: The most valuable asset of an organization today are its people. The companies who have valued people have seen to excel more rapidly than those who treat them as second best.
The Japanese regarded people as the front- Enders of the business and considered them to be the ones who knew business the best. They keep telling their employees the same and that innovation and improvement must come from Genba (where the action is). IBM’S philosophy of the treating the individual with respect, Delta’s philosophy of “Family Feeling”, HP’s HP- WAY and “Management by wandering around” are examples of some HR brands that have gone a lot way to improve productivity of the employees. The philosophy of treating employees as “workers” have a different affect than when it is when you call them “people”.
The way to ensure productivity however does not involve only devising philosophies, it also means that such philosophies are backed up with heavy people centric management programs, rich systems of monetary and non-monetary benefits and amazing varieties of employee experimental programs. The notable success stories that the book highlights are:- * RMI:- a subsidiary of US Steel and National Distillers. The company was bedridden with low employee performance till they instituted the “pure corn-a mixture of schmaltzy, sloganeering, communications and a smile at every turn” .
This lead to a huge dip in grievance related cases being reported and boosted the morale of the employees. * Hewlett-Packard:- The success of the “HP way” has won accolades across the world and a lot of companies are now trying to replicate a model for their own concerns. The 1970 recession hit HP in a big way but instead of downsizing the employees accepted a 10% pay cut and weathered the recession with its “family”. * Other success stories worth mentioning is that of Wal-Mart, Dana, Delta Airlines, McDonalds, IBM but due to words constraint it’s suggested to read the book. . Hands On, Value Driven: In today’s world of cut throat competition, firms are always looking at enhancing their competencies to gain a considerable competitive advantage in the domain/s they function. The emphasis is always on cutting costs, improving efficiency and in the bottom line without giving a thought to the importance to values in an organization. It always pays for a company to be value driven because that is the catalyst that will enable the company to leverage its human resources to attain high efficiency quotient.
Companies always want to invest in models of budgeting, policies and procedures and organizational structure. These hardlines pail in front of an initiative that lays emphasis on values and culture. The book by Thomas Watson Jr wrote an entire book on Values in IBM called “A Business and Its Beliefs”. However designing a belief system is just the start as the employees right from the line employee to the CEO must adhere to the belief system else the system collapses with severe ramifications. Companies, great ones that is, are seldom hesitant in propagating their values and belief systems in the public.
Frito lays tells stories on services, J;J tells stories on quality and 3M tells stories on Innovation. The best way to gauge if a company is serious about its values is through its annual reports. Great companies make it a point to announce their belief systems in their annual reports for the world to know. Some of the beliefs systems are as follows:- Delta Airlines: “There is a special relationship between Delta personnel that is rarely found in any firm, generating a team spirit that is evident in the individual’s cooperative attitude towards others and pride in a job well done”.
Dana: “The Dana style of management is getting everyone involved working hard to keep things simple. There are no policy manuals, stacked up layers of management…….. The Dana style isn’t complicated or fancy. It thrives on treating people with respect. It involves all Dana people in the life of the company. ” Digital: “Digital believes that the highest degree of interaction in activities needs to be in the area of customer service and support” 6. Stick to the Knitting: Organizations that branch out remaining somewhat close to their primary skill will be more successful than organization that does mindless diversification.
The most successful are the ones who are diversified around a single skill- eg the coating and bonding technology at 3M. The reason is simple. Organizations in the course of business always focus on their core competencies and the product line is based on the platform of core competency. The organization is hence able to leverage that process into designing products that have a high degree of product differentiation however an organization cannot have diversified core competencies because there is only so much to do and so much to specialize on.
Mobil once attempted to diversify into retailing by acquiring Marcor and the result was a total disaster. If we look at certain companies and how they have stuck to the concept of “Knitting” we observe certain stories mound up. Boeing:- “Observers,” notes The Wall Street Journal, “say Boeing’s strength comes from its almost singular devotion to the commercial airline market where it derives almost 90% of its revenue. “The other guys are too busy chasing military bucks,’ says one airline official. “At Boeing the airlines come first”.
Fluor: – Chairman Bob Fluor comments, “We can’t be everything to all people. ” Wal-Mart:- Wal-Mart’s extraordinary record of growth has come from an overpowering niche strategy. It has stayed in a dozen states. Sticking to what it knows best, if overpowers better financed and more deeply experienced organizations such as K Mart in its chosen area. Deere: – Deere’s president, Robert Hanson, states: “We’re sticking to the customers we know. ” Forbes adds: “For years Deere has outperformed its archrival, International Harvester.
Ha- allegiance was divided between its truck business and farm Machinery. Deere, by contrast, knew what its business was, who customers were, and what they wanted. ” Amoco:- The Wall Street Journal contrasts the successful straits of Amoco with its competitors: “The wisdom guiding the mammoth oil acquisitions is that it’s cheaper to buy someone else’s reserves than to develop them internally. But at Standard Oil Co. (Indiana), we don’t believe that, not for ourselves,’ tea chairman John Swearingen. (Source: – In search of Excellence by Tom Peters and Robert H Waterman) 7. Simple Form, Lean Staff: The size of the company is directly related to the level of complexity of the system, processes and the organizational structure. As the company grows, it adds to it other smaller companies, subsidiaries and complex processes in order to achieve perfect synergy between processes. The key to successful companies is however to ensure that as they grow, the process become simpler.
This is a tough nut to crack and companies will dismiss it out rightly. The biggest enemy of the organisation, according to the author is “Matrix” structure and the only way to achieve simplicity is through divisional structure or Product based structure. The above mentioned structure with a tinge of flexibility proves to be the perfect recipe for organizations today. Companies like Frito lays, Kodak have achieved a lot by following such a platform and so is Johnson ; Johnson. 8. Simultaneous loose-tight properties:
The last of the eight elements calls in for the existence of a loose-tight Model which can be translated to be the coexistence of the firm’s central direction and individual’s autonomy. Companies that are loose- tight may be rigidly controlled, but they still foster entrepreneurship and innovation within the ranks. Some of the most exceptional companies like 3M, etc have the most tightly knit models where customer Focus, Customer service and Quality cannot be compromised but at the same time the Model also allows its people to be flexible and at the same time, innovative when it comes to operation.
Criticism and Conclusion:- The book remains one of the most successful management books of all time. It sold copies by the millions and became the reference point for so many companies and their strategies. However the term used here, “reference point” bears testimony to the fact that the book was only theoretical and was criticized as lacking in practical Implications. We have little evidence that it changed corporate practices and produced substantive gains.
The other main argument about the validity of the elements is that there exists no empirical evidence on the research done to show the objectivity of the claims and the conclusions. The choice of the companies branded excellent was also questionable as 1/3rd of the excellent companies were in financial difficulties after 5 years of publishing of the survey result. In an article in Fast Company, cited below, Peters remarked that the criticism that “If these companies are so excellent, Peters, then why are they doing so badly now,” in his opinion “pretty much misses the point”. By Sani Sharsar 2010HR047