Idea 35 - Organizational excellence
Many
esoteric works on management never make it past the campus gates. Others can
influence the way companies are organized and run, though they usually have to
filter their way through the consultancy profession first. A limited number of
management books deliver an idea that's gripping enough to be read by senior
management itself, drinking directly from the source. But only one has
single-handedly created a whole new industry - In Search of Excellence, by
McKinsey consultants Tom Peters and Robert Waterman.
You could say that the book created two new industries: the
mass business book industry and the Tom Peters industry. It appeared like a
torch of hope to a benighted corporate America that felt it had lost its way in
the dark. Battered by competition from the most unlikely source, in markets
they had dominated proudly only a few years before, American managers reached
for Peters and Waterman like a cartoon man-en-knees-in-desert reaches for
water. Their message was that there were excellent companies in America, and
that excellence was there for the taking, if only managers could concentrate on
the customer, realize the power of their people and do it with passion.
This was do-it-yourself management consultancy in the most
readable form, and people bought it in their millions. It remains the
best-selling business book ever and launched a highly lucrative career for Tom
Peters, with his personal appearances, books, videos and TV series.
Published in 1982, In Search of Excellence was based on a
simple methodology, which was part of its charm. The authors screened a number
of companies on the basis of 'measures of long-term superiority', looking at
20-year compound asset and equity growth, ratios of market value to book value,
return on capital, return on equity and return on sales. Other criteria were
industry rankings and innovativeness. Emerging unscathed at the end of this
obstacle course were 43 companies, 14 of which were singled out as having shown
up especially well on all counts. They were Boeing, Caterpillar, Dana, Delta
Airlines, Digital Equipment, Emerson Electric, Fluor, Hewlett-Packard, IBM,
Johnson & Johnson, McDonald's, Procter & Gamble and 3M.
Right
enough to be wrong the authors noted that professionalism in
management was often equated with 'hard-headed rationality'. There was a belief
that well-trained professional managers could manage anything, that all
decisions could be justified by detached analysis. That was just right enough
to be dangerously wrong, they maintained, and it had led America astray. 'It
doesn't teach us to love the customers', they said. 'It doesn't show how
strongly workers can identify with the work they do if we give them a little
say-so.' They took a pop at other practices - inspector-generated instead of
self-generated quality control, a failure to nourish product champions, a lack
of obsession with customer service. Rationality 'doesn't show, as [Harvard
business administration professor] Anthony Athos puts it, that "good
managers make meanings for people, as well as money".' Peters and Waterman
also took issue with the negative view that most companies took of their
people. We want to feel good about ourselves, and the number of us that think
we're above average is way above average. Yet companies set impossibly high
targets, punish tiny failures and kill the spirit of the champion even as they
call for innovation. 'Excellent' companies didn't behave in this way. The two
consultants pinpointed eight common attributes that characterized the chosen
few:
1. A bias
for action - they got on with it. They might have been analytical
over decision-making but they were not paralyzed by it. In many, standard
operating procedure was 'do it, fix it, and try it'.
2. Close to
the customer - they learnt from the people they served, providing
unparalleled quality, service and reliability (virtues that work and last).
Many got their best product ideas from listening intently to customers.
3. Autonomy
and entrepreneurship - they fostered leaders and innovators and were
hives of champions. They didn't hold people on so short a rein that they
couldn't be creative, but encouraged risk-taking and supported good tries.
4.
Productivity through people - they treated the rank and file as the
basic source of quality and productivity gain. No we/they attitudes to labor
and no regarding capital investment as the principal source of productivity
improvement - they had respect for the individual.
5.
Hands-on, value-driven - IBM's Thomas Watson and Hewlett- Packard's
William Hewlett were legendary for 'management by walking about'. McDonald's
Ray Croc regularly visited outlets and assessed them on the fast food chain's
dearly held factors of quality, service, cleanliness and value.
6. Stick to
the knitting - Johnson & Johnson's former chairman, Robert
Johnson, used to say: 'Never acquire a business you don't know how to run.'
Edward Harness, ex-CEO of Procter & Gamble said: 'This Company has never
left its base. We seek to be anything but a conglomerate.'
7. Simple
form, lean staff - none of the excellent companies was organized in
a matrix structure (where staff report to both a project manager and a function
manager). They had 'elegantly simple' structures and systems, and a lean
top-level of staff.
8.
Simultaneous loose-tight properties - they were both centralized and
decentralized, mostly pushing autonomy down to the shop floor or product
development team. Yet, when it came to their few most important core values,
they were fanatical centralists.
Sadly, in many cases, the excellence did not endure. Within
five years, two-thirds of the companies on the list were in trouble of one kind
or another and one had actually gone out of business. It didn't seem to matter.
Peters and Waterman had inspired a generation of businesspeople with the
thought that something better was possible, and much of their advice is as
pertinent now as it was then. While the two have since pursued separate writing
careers, Peters achieved the kind of superstar status that allowed him to begin
his third book, thriving on Chaos, with the line: 'There are no excellent
companies.'
Reference: 50 Management Ideas You Really Need to Know
Book by Edward Russell-Walling
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