In Search of Excellence: What makes a company outstanding

When Tom Peters and Robert Waterman researched the qualities shared by America's best-run companies, they found eight basic principles for excellence. Although the research was conducted over 40 years ago, across 43 businesses in six industries, it's as relevant as ever...

The first basic principle is a bias for action. A company with organizational fluidity allows people to address issues (e.g. low supplies) on an ad hoc basis rather than slowing things down through bureaucracy. Processes get simplified and experimentation is encouraged.

Top companies stay close to customers and cater to their preferences. Prioritizing a commitment to service can be costly in the short term, but the long-term reward is customer loyalty. Listening to consumers’ needs is also a key driver of innovation.

Great businesses promote autonomy and entrepreneurship by dividing staff into teams that are encouraged to be creative and even competitive – on the condition that cross-company communication is strictly adhered to.

The best companies believe in a principle of “productivity through people”, i.e. treating employees as essential assets. By creating a people-focused culture that makes staff feel appreciated, they’re more likely to thrive and feel invested in the company’s success.

Successful firms are hands-on and value-driven. They carefully identify a set of guiding principles and make sure they live up to them. This ensures greater attention to detail, a healthy culture, and keeps executives connected to the day-to-day running of the company.

The best in businesses stick to what they know. If there’s an opportunity to branch into a new area, it must be one that draws on an existing strength. Even then, they test the water by dipping a toe in, not both feet. Companies that diversify are generally less successful.

Keep your structure simple and your staff lean. Top companies prefer to have as few layers as possible. This keeps priorities from getting diluted and emphasizes operation over administration.

Excellent businesses cultivate “simultaneous loose-tight properties” i.e. they balance a sense of individual freedom with a focussed overall direction. The company’s values are clear, but as long as everyone recognizes those values, there is flexibility and tolerance.

Bottom line: outstanding companies prioritize getting things done, listening to their customers, and sticking to what they know. They also make sure staff feel valued and autonomous, while the overall structure combines focussed direction with a spirit of indepence.