Business is full of mysteries, but none is greater than this: What are the elements that contribute to a company’s success?
Executives have spent 100 years guessing about what makes a company succeed–and usually guessing wrong. In the best of times, most don’t fully understand what they’re doing right. Even fewer really know how to keep their companies prospering when the economy falters.
That’s why 50 leading consultants and academics undertook a five-year study called the Evergreen Project, a systematic analysis of the practices that create business winners. Using well-accepted research tools and procedures, the Evergreen team analyzed the experiences of 160 companies over a 10-year period, from 1986 to 1996, in search of the management practices that directly correlate with superior corporate performance as measured by total return to shareholders. Their findings were originally released in a book called What Really Works (HarperBusiness, May 2003).
The study found that just eight practices, four primary and four secondary, make all the difference. Winning companies achieved excellence in all four of the primary practices, plus two of the secondary ones–what they came to call the 4+2 formula for success. Losing companies failed to do so
The correlation between 4+2 practices and business success was astonishing. Companies that scored high in all four primary areas and any two of the four secondary ones had better than a 90% chance of consistently delivering high shareholder value. Over the 10 years studied, these “winners” saw their sales increase an average of 415%, assets increase 358%, and operating income lift 326%. Total returns to their investors rose 945%.
Companies that didn’t follow the formula, meanwhile, produced just 62% in total returns to shareholders over the decade; their sales rose only 83%; their assets, 97%. Operating income grew just 22%.
Strangely enough, over the intervening years, while technology and tactics have changed, the core elements have not.
What do you think the 4 primary, and 4 secondary practices of success are? Have you achieved the successful “4+2” level of proficiency? Would you like to?
If you’d like answers to any of the previous 3 questions, give Coach Kent Boehm a call, 403.690.8363