UK: Management Classics - The eight pillars of wisdom.

UK: Management Classics - The eight pillars of wisdom. - In Search of Excellence was one of the most-quoted and most-read management books of all time and, with a few exceptions, its messages are still relevant today, says Trevor Merriden.

Last Updated: 31 Aug 2010

In Search of Excellence was one of the most-quoted and most-read management books of all time and, with a few exceptions, its messages are still relevant today, says Trevor Merriden.

In Search of Excellence heralded the emergence of not one but two international management gurus. It provided the first of many moments in the limelight for Tom Peters, who is still famously wowing his audiences many years later with his upbeat stage performances and eccentric writings. The book also brought to the fore his McKinsey colleague, Robert H Waterman Jr, who, while building his consultancy business in California, went on to produce three thoughtful books of his own: The Renewal Factor (1987), Adhocracy (1990) and The Frontiers of Excellence (1994).

Published in 1982, In Search of Excellence became the world's best-selling business book. It did so well not just because it defined the key elements of corporate excellence but because it managed to point clearly to those companies practising what the authors preached. The timing of publication was also a factor behind its success. The early 1980s provided many dark moments for corporate America. A global recession was being exacerbated by the apparent ease with which Japanese producers were eating into US domestic and export markets. The book went against the grain of the time by pointing out the number of excellent US companies not lagging behind the Japanese. Their success, the authors claimed, could be easily learned and passed on to any company that was willing to listen. The moral crutch that their words provided proved irresistible to any eager manager desperate in his search for answers.

Peters and Waterman chose six yardsticks by which to measure long-term excellence in a company's performance. The first three yardsticks measured growth and wealth creation (compound asset growth, compound equity growth and the average ratio of market value to book value), while the other three measured the return on capital and sales (the average returns on total capital, equity and sales). To qualify as 'excellent', each company needed to have been rated in the top of half of a league table of its industry rivals in at least four of the yardsticks over the 1961-1980 period.

The two authors ended up with 43 companies and identified no less than eight common reasons for success, each of which formed a chapter in their book. The first reason, 'a bias for action', highlighted a tendency for successful companies to encourage more rapid innovation through the use of smaller focused teams. The second, 'close to the customer', urged others to listen and learn from those to whom they sell. Today, it is almost a business mantra but 16 years ago many companies gave little thought to customer feedback.

The third feature, 'autonomy and entrepreneurship', encouraged managers to give their innovators a freer rein, even when to do so resulted in embarrassing failure from time to time. The fourth, 'productivity through people', emphasised that, for the top companies in America, employees were the company's core asset. Again, this is common language today but, in the early 1980s, such talk may have been dismissed as far too 'touchy-feely'. The fifth attribute of corporate success, 'hands-on, value-driven', was that the chief executive should embody the clear values of a company.

In this context, Peters and Waterman recommended management 'by wandering about' (making your presence felt) as a way of achieving this end. Sixth came the now famous mantra, 'stick to the knitting', which advocated that all successful entrepreneurs should stick to their core businesses, rather than diversify - something that perhaps rings truer today than ever before.

The seventh key message, 'simple form, lean staff', has also been borne out through the downsizing of the 1990s, with massive global companies able to decentralise their operations while running their global headquarters on staff often numbering less than one hundred. The eighth and final attribute, 'simultaneous loose-tight properties', emphasised the need for the 'loose', team-based units, while acknowledging the need for tight central control over the key values of the company.

In Search of Excellence has, in retrospect, two major question marks against it. For a start, half of the 43 'excellent' companies had, by the mid-1980s, fallen from grace in the view of American stock markets.

Second, many of the companies picked by Peters and Waterman were high-tech and were therefore modelled around principles not necessarily relevant to more traditional industries. Both flaws, however, have not altered the book's status as a management classic. Even today, In Search of Excellence continues to sell heavily and it is not hard to see why. Every manager is interested in excellence and Peters and Waterman obliged by telling an entertaining story, however flawed in practice. The book struck a chord then and much of what is says seems even more relevant 16 years later.

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