Idea 35 - Organizational excellence (50 Management ideas you really need to know)

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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