Excellence: About Culture and Action Bias of Excellent Companies

Moving further "In Search of Excellence", I find that in the beginning it more or less advocates the basic principles of sound management laid down by Peter Drucker in his "Concept of Corporation" and "Principles of Management". The points about a need in people to feel like winners/achievers and the need that the top-line leader/CEO should cultivate a sense of pride and ownership for work/manage culture are fundamentally nicely repackaged Drucker principles. "In Search for Excellence" builds on it by squarely grabbing the user's attention when it matters and giving a number of solid examples to demonstrate its point. This makes it easier to understand and enjoyable. There are two major concepts that I have just read - the importance of culture and the inherent action-bias in excellent companies. What do I think about it?

Drucker advocate a definable, unified task in which a worker can take pride. He also urges the manager to have a vision for the company and the people, that people should not be perpetually tied down to roles form where they can never progress no matter how hard they try. He attributes a lot of labour problems and job dissatisfaction to these two factors. Jim Collins' books demonstrate how (particularly the case of Nucor Steel), if successfully implemented, this can lead to "a culture of discipline" and play a critical role in the rise of the company. I agree with it. "In Search of Excellence" re-brands this mix of strong work-ethic shaped by an able leader as culture by bringing in elements of internal marketing to the mix. It also rightly points out that internal marketing tactics can degenerate into "control games" if not implemented correctly. I am convinced about the usefulness of internal marketing as a potent supplement for a framework of strong work-ethic and able leadership. But leadership is as much about inspiring greatness, so this would also need a careful hiring. As Drucker and Jim Collins both point, hiring the right people is absolutely critical; with hire for attitude and can train for skill (within reasonable limits) being the mantra of good hiring in the long-term. Internal hiring and employee development is essential as well. No wonder a lot of excellent companies tend to hire graduates and then hone them over time; a.k.a. P&G, Goldman Sachs.

Action-bias revolves around the willingness of a company to experiment and innovate. To just do something, anything except standing still. Run around, look busy? I am absolutely sold-out on the idea of experimentation, testing and marketing trials. It makes a lot of sense. This principle when juxtaposed with Jim Collin's "hedge-hog" principle makes a potent mix of sound company strategy: experimenting but keeping your ears to the ground. Too long and expensive "experiments" and one-shot untested projects,as the writers point, are a no-no.

Finally, I feel that only a company that has a clear, hopeful vision based on brutal facts for itself and its people can excel, create value for its employees and enrich the society in which it operates. For me, this book captures certain critical aspects of this belief brilliantly. Let us see what else we learn from this book in days to come.

Excellence

I have just started reading "In Search Of Excellence: Lessons from America's Best-Run Companies" by Robert H Waterman Jr, Tom Peters. Just down the first few pages, already I have got some interesting insights about some questions that had been bothering me about the sustainability of a profitable corporation over time. The Mckinsey's 7S framework, as the writers point out, presents a good way to diagnose the possible factors holding back a company from achieving excellence but it does not present a solution to actually address those problems. The writers further define eight signs of excellence. However, in the same breath they go on to assert that an excellent company may NOT have all the presented signs but will have at least some of the features. They further acknowledge the role of a "strong" leader in setting the tempo and talk about a CEO as manager of that culture, a person who makes sure that the values set by the leader are carried on. The book sounds promising and there sure will be some good things to learn. Nevertheless, the initial pitch has got me thinking about whatever I have learned about companies by reading from other sources and my own observation.

Excellence consists of delivering quality customer service, quality returns on investment and being able to sustain both of them over a long period of time. I agree that only if everybody in the company is passionate about the product can we have a great company. In this respect, Jim Collin's research in "Good to Great" offers very powerful insights about good-to-great turn arounds. Not surprisingly, the role of a good leader (what Jim Collins defines as a level 5 leader) was a major finding that resonates well with what what this books talks about leadership. Essentially, it boils down to getting the right people, keeping them and having an effective succession. The basic problem is that human beings are not perfect and it is possible to abuse any policy. For this, I did suggest having a "living will" for a policy, that is trying to anticipate when and how the policy should be abandoned. Thinking over, I realize that it may make things more complicated. I am also reminded of Jim Collin's assertion that rules are made for people who are not committed, but they end up stifling the creativity of those who are. And it turns out to be a major factor in the death of the entrepreneurial spirit, so to say. Careful hiring and small teams come to mind as a logical solution. Still, it seems clear from the start that having enough good managers is going to be the final hurdle in growth of a company and sustainability of excellence.

I think a transparent, meritocratic succession system can help provided you have a level 5 leader at the helm and give him sufficient freedom. A good way to get get a level 5 leader may be to identify a level 5 company and try to poach its top people, as Bank of America did to some extent with Wells Fargo. That may not help much,as in this case, if the leader does not have enough freedom to restructure. I completely agree with Jim Collins that getting the right people on the bus, getting the wrong people off the bus and shifting people to places where they can perform best is absolutely critical before starting. The "who" is absolutely more important than "what". Another element to it would be effective internal communication and internal marketing so as the employees identify with the company, trust it and take pride in it. Sustaining it is not possible if it is just lip service. Having in mind a growth plan for your employee and willingness to let him go if you cannot offer him growth is part of the deal.

About sustainability, it is worth remembering that fastest growth does not necessarily mean sustainable growth. Many times a company sacrifices speed and profit for sustainability. Not surprisingly, the best example that comes to my mind is of McKinsey. Christopher McKenna in his book about Management Consultancy attributes the resilience of McKinsey to its simple yet effective organization and strong culture. Due to this, many times even though McKinsey has not been either the number one or the most profitable of all consultancies, it has grown incrementally and has never been in remotely any kind of financial trouble. Its survival ultimately helped it to dominate.

One also needs to remember that success is never final. In fact, sometimes it is easier to achieve success than staying consistently successful. A too successful company can also fall victim to its refusal to change with time, Government greed and unreasonable union demands. In fact, refusal to address the problems right away inflates the problem over time. There is no substitute for constant vigilance.

Finally, there is no magic pill to excellence. Frameworks can help to structure the thinking but they can never replace thinking. Leaders are perishable goods and don't come dime by dozen, so it is quite natural to seek for a way to grow without them. I feel it is like trying to get to heaven without dying. I feel that frameworks cannot replace disciplined thinking and "cultural mangers" cannot substitute for a level 5 leader. The answer lies in nurturing leaders, if we can really understand the alchemy of leadership, or by finding such leaders and promoting them.