IN SEARCH OF EXCELLENT MANAGEMENT

Despite important advances in recent years, no agreement exists concer ning what constitutes management excellence. Specific knowledge of how managerial behaviour is perceived and evaluated by others will help t o resolve unsettled questions about what is meant by management excell ence and improve the actual decisions of managers. This article examin es the determinants of managerial excellence as perceived by corporate CEOs, directors, and financial analysts in Fortune magazine's annual survey of the best-managed American firms in 33 industries. While the firms perceived to be best managed are more profitable and less risky, and grow faster and reward their stockholders more than less well-man aged firms, these variables explain only about 30 per cent of the vari ance in management ratings. The firms perceived to be best managed hav e more involvement in international markets and research and developme nt, while large firm size and firm diversification reflect negatively upon perceived managerial quality. The relative inability of conventio nal financial measures of firm performance to explain perceptions of m anagerial excellence underlines the complex nature both of these perce ptions and strategic behaviour. The results support Varadarajan and Ra manujam's conclusion that excellent management depends upon a diverse set of competencies and values, as well as Chakravarthy's contention t hat the most important characteristic of firm performance is managemen t's ability to transform the firm and adapt to a rapidly changing envi ronment. By contrast, little support is found for the maximization of stockholder wealth criterion of Rappaport.