The man did not fit the mold. He had two engineering degrees from Cornell University; two business degrees from Stanford University; five years in the Navy rebuilding bombed bridges in Vietnam and at work in the Pentagon. a year as the White House drug-abuse adviser; and stints as a consultant for Peat, Marwick, Mitchell & Co. and at McKinsey. Yet he was not what his background might suggest. He was messy, disorganized, and in a hurry. He did not seem the sort who might foment any kind of management revolution. In fact, some people weren't sure that his work had anything to do with management at all.
Peters had returned to McKinsey to conduct a study of corporate structure. It was a minor project. He was not a mover and shaker at the firm, and those who were tended to think of organizational issues as a little "flaky." The heavy-weights were huddled over another project, on strategy, which was bigger and directed by higher-ups in New York.
The truth was that Peters himself found structure boring, but he was intrigued by certain aspects of his research. The people he interviewed kept talking about organizational "style" and the leaders responsible for it, and about what Peters calls "mundane change tools," the daily events that maintain strategic themes and accomplish goals. They seemed to be saying that structure per se did not have much to do with the way companies actually got things done.
Then, in April 1978, fate intervened. Shortly before Peters was to give a presentation to a McKinsey client, the computerized financial analysis system crashed, locking up the data needed to support his report. Peters walked into the office of John Larson, managing director of the San Francisco office, and said, "What do we do?" They decided to talk about "good management," a subject for which they would need no hard data. They put together eight or nine pages on the topic and called the paper "Excellence." Peters doesn't remember much about the content of the report, but he does recall that the client "glommed on to it."
Peters began talking to other clients about good management, and they liked what they heard. McKinsey's ruling fathers, Ron Daniel and Warren Cannon, thought enough of what Peters was coming up with to assign another man to the project, San Francisco director Bob Waterman. Soon, the "Excellence" paper grew to 14 or 15 pages, and Peters and Waterman took it on the road.
McKinsey's clients found the content fascinating. Somehow it rang a bell. Excellent companies they knew of did have informal cultures, legends about their founders, and a "do it, fix it, try it" approach to new ideas and products. They had seen the advent of shirt sleeves and open collars, heard stories about Forrest Mars throwing poorly wrapped candy bars at his vice-presidents and about Hewlett-Packard's practice of fiddling with new product ideas. They knew as well that the language at top-performing companies was different, that employees talked about their company as a family and called each other by their first names. The excellent companies realized that all this stuff was important, but they had never heard anyone, especially an outsider, talk about it in quite the sameway.
The enthusiasm was not universal, however. At McKinsey, the theme of "excellence" got little respect as the project progressed, according to Peters. But there were some advantages to focused elsewhere, the climate was perfect for developing what the book calls a "skunk works," a small band of mavericks monomaniacally working to get a particular task done. Peters believes that the majority of innovations take place in the bushes off the main corporate track -- in start-ups or small companies, or in the nooks and crannies of large companies. Peters was happy to develop his theory in the same manner.
His own skunk works included Waterman and another McKinsey cohort, David Anderson. They unleashed themselves on 35 well-run U.S. companies to ask "simple, dumb, naive, basic questions" about how things got done. They asked mostly wrong questions at first, says Peters, about such things as the organization of the sales force and the planning of product development. But they kept coming back to the simple fact that the excellent companies "felt different." In regard to Hewlett-Packard, for example, Peters had heard about its method of "management by wandering around" -- and, lo and behold, the managers really did wander around. It was completely alien to my six years experience as a consultant," he says. "If you haven't walked around a GE or a Westinghouse, I'm not sure you can appreciate how different [it feels]."
The observations led to an interesting discovery: The companies that were also excellent by traditional standards of asset growth, equity, and sales were similar in ways that the analytic focus of the 1960s and '70s overlooked. They had long tables in the company cafeterias to promote interaction among the people who worked there. They had small staffs, and they spent a lot of time talking to their customers. They set up "universities" to teach people about company values. They shared no particular structure but rather a practice of regularly and continually reorganizing. Whatever the company's particular goal, each company exhibited an almost fanatical intensity about broadcasting it to employees. Moreover, all the companies had climates that encouraged taking risks and allowed mistakes.
It was tricky stuff to report. It was very difficult to define and almost impossible to quantify. Peters and Waterman found themselves explaining everything in stories -- not always successfully. In May 1980, Peters gave a speech on the subject of excellence to PepsiCo Inc. executives. He distilled the findings into the eight basic attributes that later appeared in the book. "It bombed," says Peters.
Shortly thereafter, Peters had lunch with Lewis H. Young, the editor-in-chief of Business Week, who encouraged him to submit an article to the magazine. Peters was flattered, but he didn't think anything would come of the invitation. Nevertheless, McKinsey s new communications director sent along the PepsiCo speech. To Peters' utter astonishment, Young said he would like to edit and publish it.
The piece appeared in July 1980, and, almost at once, Peters' telephone began to ring. His calendar was blackened with speech dates. "The response was just amazing," he says. Among the responses was a query from a woman at Harper & Row, asking if Peters was interested in doing a book. "It took me about 30 seconds to sign a contract," he says. Writing the book was another matter, however. Indeed, he might never have gotten around to it, if fate had not intervened again -- this time in the form of an automobile accident.
