Peters, T.J. & R.H. Waterman, Jr.

In Search of EXCELLENCE: Lessons from

America’s Best-Run Companies. Harper & Row,
Pub. 1982.
Introduction
“…man is driven by an essential ‘dualism’; he needs both to be a part of something
and to stick out. He needs at one and the same time to be a conforming member of
a winning team and to be a star in his own right.” p. xxiii
“‘Man transcends death by finding meaning for his life…. What man really fears is
not so much distinction, but extinction with insignificance….’” p. xxiii

PART ONE
THE SAVING REMNANT
1 Successful American Companies
“The state of theory is in refreshing disarray….” p. 5
“…it is attention to employees, not work conditions per se, that has the dominant
impact on productivity.” p. 6
CRITERIA FOR SUCCESS
Basics “Tools didn’t substitute for thinking. Intellect didn’t overpower wisdom.
Analysis didn’t impede action.” p.13

PART TWO
TOWARD NEW THEORY
2 The Rational Model
“Above all, we deplore the unfortunate abuse of the term ‘rational.’ Rational means
sensible, logical, reasonable, a conclusion flowing from a correct statement of the
problem. But rational has come to have a very narrow definition in business analysis.
It is the ‘right’ answer, but its missing all of that messy human stuff, such as good
strategies that do not allow for persistent old habits, implementation barriers, and
simple human inconsistencies.” p. 31
“…research effectiveness was inversely related to group size…. principally ‘because
something just seems to go wrong when you get more people under one roof’….
p. 33

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“The analytic tools are there to assist…they still can’t make or sell products.” p. 33
MBA grads “‘[They] lack liberal arts literacy…need a broader vision, a sense of
history, perspectives from literature and art….’” p. 35
THE MISSING PERSPECTIVE
“…much of excellence in performance has to do with people’s being motivated by
compelling, simple—even beautiful—values.” p. 37
“Treating people—not money, machines, or minds—as the natural resource may be
the key to it all.” p. 39
ANALYTIC IVORY TOWERS
“‘The majority of businessmen are incapable of original thought because they are
unable to escape from the tyranny of reason.’” p. 40
“…Thomas Kuhn, in his landmark book The Structure of Scientific Revolutions ...
argues that scientists in any field and in any time possess a set of shared beliefs
about the world, and for a time the set constitutes the dominant paradigm. What he
terms ‘normal science’ proceeds nicely under this set of shared beliefs. Experiments
are carried out strictly within the boundaries of those beliefs and small steps toward
progress are made.” p. 42
“Much as the conventional business rationality seems to drive the engine of business
today, it simply does not explain most of what makes the excellent companies work
…. What are its shortcomings?” p. 44

“For one, the numerative, analytic component has an in-built conservative bias.”
p. 44
“The exclusively analytic approach run wild leads to an abstract, heartless
philosophy.” p. 45
“The rationalist approach takes the living element out of situations that should, above
all, be alive.” p. 46
“To be narrowly rational is often to be negative.” p. 46
‘” …American managers have increasingly relied on principles which prize analytic
detachment and methodological elegance over insight…based on experience….
‘Creative thought [the precursor to invention] requires an act of faith.’” p. 47
“Today’s version of rationality does not value experimentation and abhors mistakes.”
p. 47

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“Anti-experimentation leads us inevitably to overcomplexity and inflexibility. p. 48
“The rationalist approach does not celebrate informality.” p. 50
“The rational model causes us to denigrate the importance of values.” p. 51
“There is little place in the rationalist world for internal competition.” p. 51

3 Man Waiting for Motivation

“The central problem with the rationalist view of organizing people is that people are
not very rational….man is the ultimate study in conflict and paradox.” p. 55
“…contradictions that are built into human nature:
1. All of us are self-centered, suckers for a bit of praise, and generally like to think
of ourselves as winners.
2. Our imaginative, symbolic right brain is at least as important as our rational,
deductive left. We reason by stories at least as often as with good data.
3. As information processors, we are simultaneously flawed and wonderful.
4. We are creatures of our environment, very sensitive and responsive to external
rewards and punishment. We are also strongly driven from within, self-
motivated.
5. We act as if express beliefs are important, yet action speaks louder than
words. One cannot, it turns out, fool any of the people any of the time.
6. We desperately need meaning in our lives and will sacrifice a great deal to
institutions that will provide meaning for us. We simultaneously need
independence, to feel as though we are in charge of our destinies, and to have
the ability to stick out.” pp. 55-6
“The fundamental attribution error that so intrigues the psychologists is that we
typically treat any success as our own and any failure as the system’s.” p. 58
“Researchers studying motivation find that the prime factor is simply the self-
perception among motivated subjects that they are in fact doing well.” p. 58
“In a study of school teachers, it turned out that when they held high expectations of
their students, that alone was enough to cause an increase of 25 points in the
students’ IQ scores.” p. 59
“…people reason intuitively. They reason with simple decision rules, which is a fancy
way of saying that, in this complex world, they trust their gut.” p. 63

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 SIMPLICITY AND COMPLEXITY
“..as the number of people in a company goes up arithmetically, the number of
possible interactions among them goes up geometrically.” p. 64
“The mark of the true professional in any field is the rich vocabulary of patterns,
developed through years of formal education and especially through years of
practical experience.” p. 67
POSITIVE REINFORCEMENT
“As Skinner notes, the way the reinforcement is carried out is more important than
the amount. First, it ought to be specific…. Second, the reinforcement should have
immediacy…. Third, the system of feedback mechanisms should take account of
achievability…. The fourth characteristic is that a fair amount of the feedback comes
in the form of intangible but ever-so-meaningful attention from the top
management…. Finally, Skinner asserts that regular reinforcement loses impact
because it comes to be expected. Thus unpredictable and intermittent
reinforcements work better.” pp. 70-1
“…people most strenuously seek to evaluate their performance by comparing
themselves to others, not by using absolute standards.” p. 71
“But the larger context of high performance…is intrinsic motivation.” p. 72
“…lasting commitment to a task is engendered only by fostering conditions that
build intrinsic motivations…. people must believe that a task is inherently worthwhile
if they really are to be committed to it (…. if we too regularly reward a task, we often
vitiate commitment to it.) p. 72
ACTION, MEANING, AND SELF-CONTROL
“Probably few of us would disagree that actions speak louder than words, but we
behave as if we don’t believe it. We behave as if the proclamation of policy and its
execution were synonymous.” p. 73
“Intriguingly, this ambiguous area is a subject of heated long-term debate in
psychology. There are two schools of thought. One says that attitudes (beliefs,
policies, proclamations) precede actions—the ‘Tell, then do’ model. The other,
clearly more dominant, reverses the logic…. ‘You more likely act yourself into feeling
than feel yourself into action.’” p. 73
“‘Doing things’ (lots of experiments, tries) leads to rapid and effective learning,
adaptation, diffusion, and commitment; it is the hallmark of the well-run company.”
p. 74

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“‘If we hope to live not just from moment to moment, but in true consciousness of our
existence, then our greatest need and most difficult achievement is to find meaning
in our lives.’” p. 75
“…we find it compelling that so many thinkers from so many fields agree on the
dominating need of human beings to find meaning and transcend mundane things.”
p. 76
“The cultures that make meanings for so many repel others.” p. 77
“Unfortunately, in seeking security, most people seem all too willing to yield to
authority, and in providing meaning through rigidly held beliefs, others are all too
willing to exert power.” p. 78
“…our culture ‘has failed almost entirely in inculcating internal controls on actions
that have their origin in authority.’” p. 79
“At the same time that we are almost too willing to yield to institutions that give us
meaning and thus a sense of security, we also want self-determination. With equal
vehemence, we simultaneously seek self-determination and security.” p. 80
“…if people think they have even modest personal control over their destinies, they
will persist at tasks. They will do better at them. they will become more committed to
them.” p. 80
“We need to succeed and stick out—desperately—se we overestimate the possibility
of doing the easy task. And to preserve face and ensure security, we underestimate
the possibility of getting the difficult task done.” p. 81
TRANSFORMING LEADERSHIP
“The transforming leader….is concerned with the tricks of the pedagogue, the
mentor, the linguist—the more successfully to become the value shaper, the
exemplar, the maker of meanings.” p. 82
“‘Leadership, unlike naked power wielding, is thus inseparable from followers’ needs
and goals.’” p. 83
“‘[Transforming leadership] occurs when one or more persons engage with others in
such a way that leaders and followers raise one another to higher levels of
motivation and morality.” p. 83
“…transforming leadership ultimately becomes moral in that it raises the level of
human conduct and ethical aspiration of both the leader and the led, and thus has a
transforming effect on both….” p. 83

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“…nonexcellent performers…. Losing instead of winning is the norm, as are negative
rather than positive reinforcement, guidance by the rule book rather than tapestries
of myths, constraint and control rather than soaring meaning and a chance to sally
forth, and political rather than moral leadership.” p. 86

PART III: BACK TO BASICS

4 Managing Ambiguity and Paradox
“The clear starting point is acceptance of the limits of rationality, the central theme of
the last two chapters. Building on that, four prime elements of new theory would
include our observations on basic human needs in organizations: (1) people’s need
for meaning; (2) people’s need for a modicum of control; (3) people’s need for
positive reinforcement, to think of themselves as winners in some sense; and (4) the
degrees to which actions and behaviors shape attitudes and beliefs rather than vice
versa.” p. 102