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Updated Nov 03, 2023

Management Theory of Robert Waterman

Robert Waterman and Thomas Peters developed eight key attributes of successful and innovative companies.

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Sean Peek, Senior Analyst & Expert on Business Ownership
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Table of Contents

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In their 1982 book In Search of Excellence, Robert Waterman and Thomas Peters introduced the relationship management concept to the world. The men sought to integrate theory and practice — as a result, they created a set of principles to foster a successful organizational structure, built on employee engagement and active leadership.

Waterman’s management theory is most known for its eight key attributes of excellent, innovative companies. The eight points Waterman and Peters outlined were later adopted by the McKinsey 7-S Framework for business success, as each of the seven points starts with the letter “S.”

Did You Know?Did you know
Three million copies of In Search of Excellence were sold within the first four years, and it is still widely used as a management science and leadership reference book.

The management theory of Robert Waterman

Waterman’s theory, even decades after its publishing, remains one of the most well-regarded business management theory readings in any industry. Many of the principles have become best practices. The eight attributes outlined in the book are:

  1. “A bias for action, for getting on with it”: Also known as agility, the bias-for-action principle outlines the importance of rapid decision-making, efficient response processes and comfort in creating fluid groups in organizations that can solve problems quickly.
  2. “Close to the customer”: The most effective companies value what a customer has to offer their business and will treat each one as an individual. Companies should eagerly ask for and listen to feedback to improve a product or service.
  3. “Autonomy and entrepreneurship”: Encouraging the champion and/or the veteran champion of a product remains one of the most vital practices of excellent, successful businesses. These champions have the zeal to operate as a mini entrepreneurial center, and you should support and reward them.
  4. “Productivity through people”: This principle embodies the sentiment that employees are the backbone of successful organizations and you should treat them with respect, value them beyond their work output and foster them as unique individuals. 
  5. “Hands-on, value-driven”: Regarding principles directly related to culture, wholesome and ethical values should guide the work of successful companies. Employees, leaders and decision-makers should actively live out these values, demonstrating them to peers and customers.
  6. “Stick to the knitting”: Diversification comes at the cost of veering outside your expertise. When it’s time to branch out, successful businesses should understand the risks associated with diversification and experiment rather than jumping in headfirst. Prioritizing your core competencies ensures you continually innovate and progress with what you know how to do best. 
  7. “Simple form, lean staff”: Similar to the euphemism “too many cooks in the kitchen,” this principle encourages a simple, straightforward team to make decisions.
  8. “Simultaneous loose-tight properties”: Though it sounds hypocritical, this principle walks a nuanced line of instructing successful businesses to keep a central mission or vision at the forefront of work while allowing employees the autonomy to accomplish the goals that tie back to the company’s mission or vision in whichever way they see fit.
TipBottom line
These eight principles were later adapted by Waterman’s employer at the time, McKinsey, into another framework for business success.

Many management theorists believed that adding parts of an organization would equal a whole organization, but Waterman and Peters knew a workplace needed interaction and synthesis to be successful – not mere addition. Since management theories have a huge impact on how managers manage, Waterman and Peters sought to integrate management theories and practice with human beings and organizations. [Read more: Human Relations Management Theory Basics

Peters and Waterman knew that common management theories played an important role in how anxious or afraid people were in their workplace. Therefore, they developed a self-analysis tool for corporations to assess their standing, which often decreased fear and anxiety because corporations were in much better shape than originally thought. Discover the impact this team of theorists had on the working population, and consider using the theory today, with the following information:

  1. Understand organizational culture when studying common management theories.
  2. The McKinsey 7-S Model encompasses the management theory of Waterman and Peters.
  3. Waterman and Peters’ theory observations developed foundational points for successful organizations.

Lessons from Waterman’s management theory

Waterman’s management theory has clear applications to today’s world and business environments, offering a few distinct lessons leaders can apply to their own teams.

A pursuit of excellence

As evidenced by the title of his book, businesses can embody the spirit of excellence through Waterman’s management theory. Embodying this spirit doesn’t begin and end with the simple idea of “I want my business to be excellent.” Instead, it comes from setting high standards and having high expectations for a team, committing to continuous improvement, and prioritizing quality in every facet of a business. 

Becoming an “excellent” business comes from applying Waterman’s eight principles to your own team, which means each leader’s application of the principles will differ in daily use. However, the goal of having lofty aspirations remains constant across teams’ industries, sizes and scopes.

FYIDid you know
Don’t force yourself or your team to master the eight principles immediately. Make sure you fully understand the theory behind each one before putting it into practice.

A people-centered approach 

Waterman’s groundbreaking principles diluted complex theories into actionable principles, like putting both employees and customers at the forefront of a business to achieve success. While it’s easy to become entangled in numbers and lines of communication, Waterman’s principles demonstrate how straightforward it is to treat humans with respect, communicate their value and converse with them as unique individuals with something special to offer.

For employees, that means granting autonomy, providing support and offering training resources. For customers, it means valuing feedback to innovate the product or service they buy to keep you in business. [Read more about the management theory of Frederick Herzberg.]

A hunger for results

Pursuing excellence means not only setting clear goals and expectations, but also following through on analysis to measure progress against important key performance indicators. Your team will not challenge itself to attain excellence by setting easily attainable goals, nor will your employees get the opportunity to innovate solutions to problems and challenges as they appear.

A culture of innovation

Innovation begets progress. The principle of “stick to the knitting” can be misconstrued as a direction to do something “by the book,” but it actually means inviting leaders to dig deep into their expertise. By committing to continuous improvement – and giving employees both a guiding value and the autonomy to create – leaders will foster an innovative environment that not only invites progress but creates excellence.

An understanding of organizational culture  

Waterman and Peters noted that strong organizational cultures yield strong companies. Organizational culture develops from shared assumptions, beliefs and values exhibited explicitly and implicitly. For a strong culture to emerge, there should be alignment with the organization’s strategic context and the ability to adapt to environmental changes.

An examination of success 

As consultants for McKinsey’s New York corporate headquarters, Waterman and Peters began studying structure and people, which led to the discovery of similar outlines for excellent Fortune 500 companies. With this information, they developed the McKinsey 7-S Model to link strategy and organizational effectiveness; they effectively connected people, customers and actions as factors to study and develop.

author image
Sean Peek, Senior Analyst & Expert on Business Ownership
Sean Peek co-founded and self-funded a small business that's grown to include more than a dozen dedicated team members. Over the years, he's become adept at navigating the intricacies of bootstrapping a new business, overseeing day-to-day operations, utilizing process automation to increase efficiencies and cut costs, and leading a small workforce. This journey has afforded him a profound understanding of the B2B landscape and the critical challenges business owners face as they start and grow their enterprises today. In addition to running his own business, Peek shares his firsthand experiences and vast knowledge to support fellow entrepreneurs, offering guidance on everything from business software to marketing strategies to HR management. In fact, his expertise has been featured in Entrepreneur, Inc. and Forbes and with the U.S. Chamber of Commerce.
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