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Have you ever wondered why some companies are hugely successful and others, quite frankly, just don't come up to scratch? Have you also ever wondered why some of those companies that you invested in turned out to be real dogs? And of course the real question for any intrepid investor is whether any of the fledgling businesses of today will be able to stand the test of time and become the next IBM or General Electric of tomorrow?
Tom Peters and Bob Waterman were interested in what made excellent companies tick. These two men, from the business consultancy McKinsey and Company, were intrigued by the concept of corporate excellence. They wanted to know why some businesses continually attained ever-higher levels of distinction while others failed to cut the mustard. They set off on their quest for truly excellent companies in order to determine if there was some secret force that drove these businesses.
Their book is a montage of anecdotes and yarns that have become part of folklore within these successful corporations. The more they dug into the companies, the more they realised the excellent companies abounded in stories and imageries that implied a strong sense of cultural excellence. Their primary task was to sift through the hundreds of tales and then structure their findings in some coherent format.
They distilled their stories and data into eight basic findings. In their own words: "The eight basics of management excellence don't just work because they work; they work because they make exceptional sense." Employees of these truly excellent companies have been able to practice these eight principles sometimes without even knowing it. These simple rules run the gamut from "A Bias for Action" through to what Peters & Waterman described as "Sticking to the Knitting".
The anecdotes not only make interesting reading but also underline the importance of people to an organisation. Their book also stresses the importance of recognising the interrelationship between the company, its employees and its customers. Hence their findings that excellent companies showed a proclivity to be "Close to the Customer". For example, for one week every year at Walt Disney, executives leave their desks and their usual business garb. They don a theme costume and are required to sell tickets and popcorn, drive the monorail or park cars or even take on some of the on-stage productions.
This is an excellent book and would not be out of place on any bookshelf dedicated to organisational behaviour. It also embodies much of what we, as Fools understand "Foolishness" to mean. Peters and Waterman stress that the share prices of the truly excellent companies will always be subject to the vagaries of the market and the whims of investors. However over the long term, they demonstrate that their excellent companies have performed well and are a testament to the good sense of the investor that buys into these companies for the long term.
Conclusion
It probably goes without saying that I enjoyed this book. In Search of Excellence does not contain a lot of management theory and should appeal to a wide audience. I found it hard to put the book down once I started reading it. There is a tendency to try and compare some of the companies that you might have in your investment portfolio with the criteria that Peters and Waterman have identified in excellent companies. To find out if any of your companies fit their bill, get the book here.
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Where Next?
• Buy In Search of Excellence from the Fool's bookshop on Amazon.co.uk
• Discuss this and other books on the Books Foolish and Financial discussion board
More book reviews:
• A Killing On Wall Street
• A Random Walk Down Wall Street
• Butterfly Economics