PSS World Medical: Opening the Books Boosts Commitment and Performance JOURNAL OF ORGANIZATIONAL EXCELLENCE / Spring 2001 65 JOURNAL OF ORGANIZATIONAL EXCELLENCE / Spring 2001 Reprinted by permission of Harvard Business School Press. Excerpt of Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People by Charles A. O’Reilly III and Jeffrey Pfeffer. © 2000 President and Fellows of Harvard College; All Rights Reserved. PSS WORLD MEDICAL:OPENING THE BOOKS BOOSTS COMMITMENT AND PERFORMANCE EXCELLENCE Running an open company, giving people authority and accountability, sharing the wealth, and having lots of leaders, not managers—these are the four central ideas behind the surprising success of PSS World Medical. Despite having been built on acquisitions and being in a low-margin and extremely competitive in- dustry, the company—a distributor of medical supplies—has thrived, with a strict customer focus defined and applied down to the smallest detail. © 2000 President and Fellows of Harvard College. by Charles A. O’Reilly III and Jeffrey Pfeffer Charles A. O’Reilly III is the Frank Buck Professor of Human Resources and Organizational Behavior at the Graduate School of Business at Stanford University and the Henry Ford Carroll Visiting Professor at the Harvard Business School. Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business at Stanford University. * * * 65 P SS World Medical headquarters is located on the top two floors of an ordinary-looking building in an office park just off a busy freeway on the outskirts of Jacksonville, Florida. The lobby, although pleasant, decorated in dark wood panel- ing with comfortable furniture, is not showy. A small shelf contains a few of the medical supplies the company distributes to physicians, and an in- terior staircase leads to the fourth floor. Even the people, at first glance, seem like pleasant and friendly, albeit regular, people. Few have gradu- ated from elite educational institutions—there are a lot more people from Florida State than Harvard—and the firm hasn’t hired MBAs. Pat Kelly, the CEO, has commented, “We’ve tried to hire MBAs, but they’ve all failed. They’re too structured, too hard core in their beliefs that they’ve got the answers.” Certainly no one would mistake this for a Wall Street investment firm, a presti- gious consulting practice, or the bustling center of a high-tech start-up company. What is extraor- dinary about PSS, however, is its history of growth and financial performance, all built with ordinary people working in a highly competitive, low-mar- gin industry—the distribution of medical sup- plies—who have performed in a most extraordinary way. PSS World Medical offers several myster- ies as we seek to understand how companies are able to accomplish extraordinary things with their people. First, the company operates in one of the fiercely competitive industries in the economy—distribution. It is an industry under- going constant change as both evolution and