Excerpted from A Random Search of Excellence:
There’s one more step before we can determine what constitutes statistically remarkable performance: we have to define a benchmark. For the purposes of our success study, we have defined two categories of exceptional performance, tentatively labeled “Miracle Workers” and “Long Runners.” The former deliver whatever number of 9th decile years is statistically unlikely given their lifespans, while the latter deliver whatever number of years in the 6th-8th decile band that is similarly improbable. Our definition of excellence is motivated by a desire to contrast the behaviors of firms that do exceptionally well for a long period of time with those who do merely well (rather than exceptionally well) over long periods.
Finally, we have identified “Average Joes” – companies with statistically unremarkable life span, performance level, and performance variability. Our intent, in the time honored tradition of the success study, is to compare and contrast the behaviors of these firms and thereby tease out the necessary and sufficient conditions for exceptional performance.
Every success study needs a definition of successful companies and predefined categories of firms to compare. (Unless you’re In Search of Excellence, in which case no comparisons are required J.) There doesn’t seem to be a strong theoretical reason to pick any particular set of performance profiles to compare. Looking at “climbers” vs. “tumblers”, “winners” vs. “losers”, “good” vs. “great” – all make good sense.
We were unable to find clear evidence of firms that had clear – that is, statistically significant – performance trends over time, so comparing rising with falling firms wasn’t an option for us. As a result, we settled on looking at “Miracle Workers”, “Long Runners” and “Average Joes”. Think of it as “great” vs. “good” vs. “okay”.
