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In Search of Excellence
In Search of Excellence is a book written by Tom Peters and Robert H. Waterman Jr. First published in 1982, it sold three million copies in its first four years, and was the most widely held monograph in the United States from 1989 to 2006.[1] The book explores the art and science of management used by several companies in the 1980s. BackgroundContextIn 1982, at the time of publication of In Search of Excellence, America was looking to Japan as the rising economic force. American businesses were studying Japanese management techniques and looking to learn from their successes.[2] In Search of Excellence went against this trend, by focusing on American companies and studying what made the most successful American companies successful. OriginsIn Search of Excellence did not start out as a book, as Tom Peters explained when interviewed in 2001 to mark the 20th anniversary of the book's publication. In the same interview, Peters claims that he and Waterman were both consultants on the "margins" of McKinsey, based in the San Francisco office.[3] In 1977, McKinsey director Ron Daniel launched two projects; the first and major one, the Business Strategy project, was allocated to top consultants at McKinsey's New York City corporate HQ and was given significant resources, but could not manage to effectively implement strategy. Peters states that directly after graduating with a PhD from Stanford and returning to McKinsey, Daniel handed him a "fascinating assignment."[4] Motivated by the new ideas coming from Bruce Henderson's Boston Consulting Group, Peters "was asked [by Daniel] to look at 'organization effectiveness' and 'implementation issues' in an inconsequential offshoot project nested in McKinsey's rather offbeat San Francisco office."[4] While Daniel's first project was focused on Business Strategy, this second project was concerned with Organization, which Peters defined as involving "the structure-and-people side."[3] This "Organization" project was seen as less important, according to Peters in a Fast Company interview.[5] Despite being described as "marginal," the project "had an infinite travel budget that allowed [Peters] to fly first class and stay at top-notch hotels and a license from McKinsey to talk to as many cool people as [he] could all around the United States and the world."[3] Peters admits that "There was no carefully designed work plan. There was no theory that I was out to prove. I went out and talked to genuinely smart, remarkably interesting, first-rate people."[3] In addition to Karl Weick and Einar Thorsrud, Peters notes that Douglas McGregor's theory of motivation known as Theory X and Theory Y was directly influential on the direction of the project. In a 1978 article, "Symbols, Patterns and Settings," Peters argued that "shifting organizational structure" and "inventing new processes"—structure and system, respectively—were only two tools of organizational change. Peters then outlines eight "mundane" tools that every manager has at their fingertips. He described this article as a "tentative presentation" and "the first public expression of these ideas."[4] In 1979, McKinsey's Munich office requested Peters to present his findings to Siemens, which provided the spur for Peters to create a 700-slide two-day presentation. Word of the meeting reached the US and Peters was invited to present also to PepsiCo, but unlike the hyper-organised Siemens, the PepsiCo management required a tighter format than 700 slides, so Tom Peters consolidated the presentation into eight themes. These eight would form the chapters of In Search of Excellence. In 1980, Waterman joined Peters, and—along with Waterman's friends in academia Tony Athos and Richard Pascale—came together at a two-day retreat in San Francisco to develop what would become known as the McKinsey 7S Framework, the same framework that would organize In Search of Excellence. In June 1980, Peters published an op-ed in the Manager's Journal section of the Wall Street Journal titled "The Planning Fetish."[6] In this article, he "stressed the importance of execution and dismissed the whole idea of strategy."[7] As strategy was McKinsey's main operation at the time, this was seen as a "frontal assault" on the company, leading Mike Bulkin, the head of the New York office, to demand that Daniel fire Peters. The primary "innovative" theme that under-girded what would become In Search of Excellence was that "structure is not organization." This also happened to be the title of a 1980 journal article authored by Bob Waterman, Tom Peters, and Julien Phillips in which they argue that the "picture of the thing is not the thing...An organizational structure is not an organization."[8] In December 1981, Peters left the company, after agreeing to a fifty percent royalty split with McKinsey. Waterman stayed at the firm for three more years, but received no royalties from In Search of Excellence.[citation needed] Key ideasPart 1: Approach and methodIn the first chapter of the book, Peters and Waterman introduced the background for the book and their research methods. Peters and Waterman were concerned with how organizations were organized and managed. They wondered whether structure follows strategy, as Alfred Chandler had suggested. To address this, their perspective was that:
They used these seven "variables" to create a visual framework, which became known as the McKinsey 7S Framework. They then used their 7S framework as a lens through which to evaluate organizational excellence. They conducted in-depth interviews with leaders at 43 "excellent" publicly traded companies using this lens.[9] They then reduced the set of emerging insights from these interviews down to eight "themes." Part 2: Intellectual orientationThe second chapter of the book, "The Rational Model," introduces and then critiques the rationalist approach to management. An example of the rationalist mindset is reproduced below:
By contrast, a more "social" form of management takes into account the realities of what really motivates people. This set of real human motivations is explored in the third chapter, "Man Waiting for Motivation." The fourth chapter puts these concerns into a historical context, exploring the evolution of management theories between 1900 and the time of publication of the book in the early 1980s. The latest era of management is characterised as more "social" than "rational," meaning that real human motivations drive business goals and activities. It also more "open" than "closed," meaning that outside forces such as market pressures can shape the evolution of structure and organisation within a firm. This leads to an increasing concern with the ongoing evolution of an organization, and the role of culture in maintaining and shaping an organization. Ultimately, these chapters would be seen in today's terms as advocating for leadership over management. Leaders articulate values and purpose, and achieve buy-in to vision and values from employees. These chapters set the foundation for the rest of the book, which address eight core themes for the book. Part 3: The eight characteristics of excellent companiesPeters and Waterman found eight common themes which they argued were responsible for the success of the chosen corporations. The book devotes one chapter to each theme.
DiscussionThe "Drucker gap"Before and after In Search of Excellence, Peter Drucker was probably the preeminent management theorist.[11] Drucker presaged and covered similar perspectives to Peters and Waterman's approach to management theory, for example in Drucker's 1954 book The Practice of Management. Peters first read Drucker's The Effective Executive in 1968.[12] Peters claims that when writing In Search of Excellence, he was "pissed off" at Peter Drucker:[3]
After publication of In Search of Excellence, Peters re-read a wider body of Drucker's work, and commented:[11]
Peters's alleged confession of "faked data"In December 2001, Fast Company published an article entitled "Tom Peters's True Confessions".[13] Most of the "confessions" were humorously self-deprecating remarks (In Search of Excellence had been "an afterthought... a hip-pocket project that was never supposed to amount to much"). One of them, however, used the term "faked data:"
BusinessWeek ran an article about Fast Company's article. As related by BusinessWeek, the article was actually written by Fast Company founding editor Alan M. Webber, based on a six-hour interview with Peters. Peters reviewed and approved the article prior to publication, but the actual phrase "we faked the data" was Webber's, and Peters had not actually used these words during the interview. BusinessWeek quoted Peters as saying, "Get off my case. We didn't fake the data." According to BusinessWeek, Peters says he was "pissed" when he first saw the cover. "It was his [Webber's] damn word," he says. "I'm not going to take the heat for it."[14] CriticismsMarket performance of the "excellent" companiesIn Search of Excellence is not widely regarded as being great at predicting future success for individual "excellent" companies. NCR, Wang Labs, Xerox and others did not produce excellent results in their balance sheets in the 1980s. However, the set of "excellent" companies studied, as a whole, still outperformed the market. A 2002 analysis in Forbes found that:
In an article in Fast Company, 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."[13] The halo effectThe research methodology employed by the authors of this book is also severely criticized by Phil Rosenzweigh in his book The Halo Effect as the "Delusion of Connecting the Winning Dots". Rosenzweigh opines that it was not possible to identify the traits that make a company perform simply by studying already-performing companies as Peters and Waterman did,[16] similar to a retrospective cohort study without a control group. LegacyReceptionAlmost 40 years after its original publication In Search of Excellence remains a widely read classic and an influential book for leaders and managers. Inc. magazine reported that by March 1999, In Search of Excellence had sold over 4.5 million copies.[17] A 2002 panel of experts convened by Forbes rated In Search of Excellence as the most influential business and management book from the decades between 1980 and 2000.[18] ImpactTom Peters has identified several key contributions from the book, that changed the field of future management books.
In Search of Excellence also opened up the way for further research and publication around excellence in business. Jim Collins's books Built to Last and its prequel Good to Great are widely known influential later works in this genre. References
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