The excellence - business performance link : findings of an empirical study from service based firms in Britain

Abstract

The interest in excellence owes much to the work by Peters and Waterman ( 1982) in their best-selling book, In Search of Excellence. Their endeavours have been met with reservations in academic circles, but, written as it is in an informal style with obvious appeal to practising managers, it has enjoyed considerable influence among this audience. Peters and Waterman (I 982) assess a sample of 62 U.S. companies on three criteria, namely: (l) Large size (2) Sustained financial performance (3) Innovative capability, over the 20 year period ( 1961 to 1980). A 25 year literature review plus interviews were used to analyse a final sample of 43 companies. Based mostly on this analysis of these firms, Peters and Waterman ( 1982) identified 8 organisational design attributes that they assert distinguish excellent companies, the characteristics of which, are the basis of their book. Shanna, Netmeyer, and Mahajan ( 1990) have reviewed the literature that has sought to verify or otherwise Peters and Watermans' claims. From their review they identified four general criticisms. The authors proceed to develop an instrument which they called EXCEL, that captures the eight attributes identified by Peters and Waterman. This provides the researcher with the possibility of testing Peters and Waterman's paradigm. This study seeks to test the hypothesis that: •H1: A company's excellence is related positively to business performance. The performance of companies identified as excellent can be measured. To do so it was thought impractical to expect busy top managers to collect actual performance data, so self report measures of performance were used. 1000 postal questionnaires were mailed to the largest (by number of employees in the last three years) British service based firms, as identified from the 7566 service firms listed on the FAME CD-ROM database as at the end of October 1993. By the cut off date, three weeks later, a 13.8% response rate was recorded. Data reduction utilising the principal components method of factor analysis followed by a varimax rotation revealed two factors. These were subsequently used in a regression analysis with the performance items. The results provide support for a statistically significant relationship between excellence and performance in the larger British service firms.