In Search of Excellence: Conclusion

Just finished reading the book "In Search of Excellence". I would like to summarize my observations and learning.

I feel that this book is not an attempt to revolutionize but to synthesize, i.e. it does not look to come up with a radically different management theory but tries to consolidate on the existing ones. However, it is not done with a view of academic research. Instead, the synthesis has been achieved by retro-fitting the elements of old management theories with all that seems to work for excellent companies. In this, the book is very practical and hands-on in its approach. There is a lot to take away from this wonderful book. All the same, I feel it does not sufficiently highlight the role of the leader. It does mention how a leader's personality shapes the company and determines its future. But it also tends to make the reader believe that it is possible to reach that stage in a series of calculated steps. I am not sure about this. I agree that learning from experience of excellent companies can help the managers to avoid fundamental mistakes. However, I am more convinced than ever that without an able leader you are not going anywhere. No matter what you do. It is good to talk about building leaders, but only a leader can build a leader. You cannot always manufacture one in any factory, university or consultancy. Finally the company will become the embodiment of the ideals and beliefs of its top leadership. Period.

All the same, the basic principles espoused by the book can make any work place better. It can help all people with any trace of level 5 leadership to recognize what they can achieve (and for them "Built to Last" and "Good to Great" may prove to be good as well). It can also seriously burn your fingers (and more) if you seriously have no idea where you are going. Overall, I think that the basic principles advocated may be an important step in the growth of a leader or forming of an excellent company. This book is also a valuable resource for any management student who wishes to quickly re-cap the main management theories in Business History.

Easy Answers Can Be Misleading

Business executives, especially those of large corporations, do bear a responsibility to the society. Nevertheless, I find the recent attack on "executive greed" by GE chief Mr. Jeffrey Immelt in somewhat bad taste. I guess with recession in full force it is becoming increasingly fashionable to air socialist views as panacea of all evil. Why, I think Hugo Chavez would be delighted. It is true that inequality has increased in the US and the corporations have played their part in it. However, to link the current problems directly (and only) to executive greed is both absurd and far-fetched. I think it is a demagogic effort to find an easy answer to a very difficult question. If US wants to find answers to its problems, it will have to do better than trying to throttle its bankers and executives.

The American dream is about the ability to make it big, no matter who you are, by sheer force of your brain. There in lies the magic of US. America's entrepreneurial spirit defines US and ensures its dominance. All the same, US does face a multitude of problems (to name a few: a hyper-active judicial system that can really sound funny, a broken medical care system, an increasingly bureaucratic structure of governance that may stifle creativity, lack of interest in education in youngsters, the weakening family structure, tense race & religion relations, increasing number of homeless, under-privileged & unemployed). People are living much beyond their means, consuming wastefully and getting into debt. The American dream is not about being irresponsible/lazy and not all its ills result from corporate negligence. Accountability is not the domain of bankers and executives only. Unless each citizen learns to take responsibility about their finances, the size of their family, their personal life and their education, it is useless to irresponsibly point fingers. As someone has rightly said, US needs a "Statue of Responsibility" to balance the "Statue of Liberty". Bashing bankers and executives is not going to solve America's problems. But perhaps they would make convenient targets for politicians so as the Government can hide its own failures and escape the public ire. Considering a career in politics, Mr. Immelt?

Excellence: Creativity is not Innovation

As I move along this book, I see that Peter Drucker's principle of employing the "whole" person is pretty central to this book. In fact, the book actively champions the principle and supports it with umpteen anecdotes, stories and examples. It mixes it pretty nicely with having a strong focus on the end-user. In this whole mix, something that struck me as pretty important was the place of creativity and innovation in this whole equation. The writers are pretty clear: creative and new ideas come dime by dozen. What is rare is the ability to see a practical use for these ideas, the will to implement a vision and the willingness to learn by experimentation. This is termed as innovation and dubbed as one of the most critical factors behind the success of excellent companies.

I think this should serve as a stark warning for new entrepreneurs and inventors alike: if you do not get the business basics right but have a good product, ultimately you will be displaced by somebody who can take your ideas to the end customer in a better way. Or, as the book says, an innovator can be an idea-thief (not always). Patents may not always help as there can be many ways to achieve the same thing. Once anybody has proved that a market exists, everybody would want a piece of it. Fewer problems and good communication would help to retain customers. Hence, it may be worth it to go a few months late into the market if it means lesser problems with the product. Moreover, the second-mover can potentially learn from the mistakes of the first mover and cash on it. As I read somewhere, the early bird gets the worm but the second mouse gets the cheese! The vice-versa is also true: to start an enterprise one does not need a multi-million dollar research team: an innovative idea and customer focus will suffice.

One-off big bets with strong patent possibilities (as in pharma, computer chips, chemicals and biotech) may come to the mind as exception to this rule. The book points that the culture of innovation and openness fosters new products (as in 3M) and there is no substitute for innovation. Confusing it with creativity can take one down the wrong road.

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.

Worth

Life is short, it is going by
Fears and prejudices will make it a lie
Hard work and loneliness may often hurt
But keep kicking your feet in the dirt

Without an aim life is a broken star
Without an aim you will not go far
Life is not a desert, it is an ocean
So get rid of every silly notion
And feel the plenty that you get
For the worst may not have come yet

Wipe your tears and your sweat
With every sunrise and sunset
To work hard and to grow
To move forward and to know
Is the best gift that one can get
Is the blessing that I covet

Past is a shadow and a dream
And as glorious as it may seem
Work for now with the goal in sight
Let valor be your guiding light
Use your time on this earth
Life is short, make it worth

Reasoning and Survival

I was just thinking about what a system (a nation, a company, an organization) needs (or does not need) to be able to do to survive over the long run.

One thing that any system that expects to survive over a long period of time cannot afford is complacency. I am not talking about any idealistic thought that claims, "Excellence is a never ending journey." No misty-eyed idealism please. This is about one ground fact that is undeniable: change. If there is one thing that is certain, it is that things will change. Sooner or later, for worse or the best. If anything, information technology has just speeded up this change. Only those who keep their ears to the ground and make decisions based on facts will survive in the long run. In fact, only by doing so can a company grow.

Complacency, generally, is the child of success. Success can make a company (or a person) believe in its infallibility and hence become haughty or careless. It is just one step short of hubris and total destruction. In Hemmingway's words. you can be either lucky or exact. Luck you cannot control, but your due diligence you can. Complacency often leads to obstinacy. Following a fixed path blindly can only lead to trouble. Let blind faith be for destructive fanatics who are close to reason. In real time complacency translates to lazy thinking, lazy action and refusal to see the facts. So question everything from time to time. If there is something that somebody says and you do not like it, especially hear that. If something looks bad, it probably is. Do not accept or reject anything at face value, except assertion of a person who refuses to reason.