In Search of Excellence

For decades, people have debated the best way to manage a company.

Every business leader wants to know the best way to manage their company. But why are there so many different approaches and schools of thought?

Well, management theory has long been a topic of general concern and disagreement among academics. In the 1930s, Harvard’s Chester Barnard rejected long-held ideas about bureaucratic management that were put forward earlier by thinkers like Max Weber. Barnard’s work kicked off a debate about whether management was an impersonal, objective and exact science, or more of an art relying on charismatic leadership.

In the 1970s, when the authors began their research, a key area of concern among management theorists was international competition – especially in countries like Japan, where companies were growing at a much faster rate.

Observers noticed that Japan’s lack of business schools had produced a different management culture than in the United States. This observation led to questions about whether Americans, with all their management classes, had adopted an overly theoretical approach.

The authors decided to find some concrete answers amid the speculation. So they assembled a list of America’s top 15 companies – boiled down from 43 contenders – and spent six months conducting interviews and doing research to figure out what they all had in common. Their results were popularized in the book’s first edition, published in 1982.

The 15 companies were selected using two criteria:

1. The company’s reputation among businessmen, consultants and business academics.
2. Basic measures of growth and long-term wealth creation (like average return on capital or average return on sales) over a 20 year period. Companies were deemed excellent if they’d stayed in the top half of the original ranking of 43 companies for these measures over the full period.

So, according to these criteria, in 1982 the 15 top American companies were: Bechtel, Boeing, Caterpillar Inc., Dana, Delta Airlines, Digital Equipment, Emerson Electric, Fluor, Hewlett-Packard, IBM, Johnson & Johnson, McDonald’s, Procter & Gamble and 3M.

But what attributes did all of these companies share? Read on to find out.