What are the Excellent Companies?

Abstract

The concept of an excellent company is complex and multidimensional. Most studies of “excellence” have focused on one, or sometimes two, dimensions with profitability and growth being the most common. Companies that have performed exceptionally well on such criteria have, however, proved far from robust. It is shown how the objectives of the firm partly conflict with one another and these conflicts are exacerbated when the firm seeks exceptional performance along one specific measure. Performance in the long run depends upon satisfying several stakeholder groups. A concept of a “tolerance zone” of performance is defined which is bounded by zones of disequilibrium. Within this tolerance zone the firm is likely to be in a position to satisfy its key stakeholder groups. Paradoxically, the financial performance of companies operating successfully within this tolerance zone will often be regarded as mediocre by students of “excellence” but in the long run such companies are more likely to prosper.

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