In March/April of 1997 Arie de Geus published an article in the Harvard Business Review titled, “The Living Company.” It was really nice to read something ‘fresh,’ and it came from 1997! This was a similar reaction when I read Robert Greenleaf’s essay on “The Servant as Leader,” written in 1968! Both further the notion that we get the very best from our organizations by how we care with and for our people. What can we learn from Mr. de Gues?
In talking about corporate lifespans de Gues says, “If you look at them in light of what they could be, however, most commercial corporations are underachievers. They exist at an early stage of evolution; they develop and exploit only a small fraction of their potential.” Why do so many companies die young? Mr. de Gues points out that, “Mounting evidence suggests that corporations fail because their policies and practices are based too heavily on the thinking and the language of economics. Put another way, companies die because their managers focus exclusively on producing goods and services and forget that the organization is a community of human beings that is in business – any business – to stay alive.”
To understand what separates ‘Living Companies,’ Mr. de Gues used information from a study done by his company, Royal Dutch Shell, in 1983. Shell wanted to understand how large companies of similar age (Shell was 100 at the time) survived and thrived over time. Shell found 27 companies that ranged in age from 100 years to 700 years old that had well-documented histories. (Note: the average age of a Fortune 500 company is 40 – 50 years old.)
Living companies have a personality that allows them to evolve harmoniously. They know who they are, understand how they ‘fit’ in the world, they value new ideas and people, and steward their money in a way that allows them to build long term sustainability. They also demonstrated these similar characteristics.
- Good ability to Manage for Change – flexibility and adaptability
- Conservatism in Financing – money on hand allowed them to take advantage of options compared to their competitors
- Sensitivity to the World Around Them – they adapted to the changes in markets in the world around them
- Awareness of Their Identity – employees always felt like parts of the whole. They had a strong sense of community, essential for long term survival. Managers considered themselves ‘stewards’ of the survival of the enterprise.
- Tolerance of New Ideas – they tolerated activities in the margin: experiments and eccentricities that stretched their understanding
“The manager of a living company understands that keeping the company alive means handing it over to a successor in at least the same health that it was in when he or she took charge. To do that, a manager must let people grow within a community that is held together by clearly stated values. The manager, therefore, must place commitment to people before assets, respect for innovation before devotion to policy, the messiness of learning before orderly procedures, and the perpetuation of the community before all other concerns.” Arie de Gues
Managers who want to build an organization that will survive pay attention to the development of employees above all other considerations (my emphasis). It is part of the way they build community. They also build it through collaboration.
One of the ways that collaboration is most powerful is where the benefits of what is ‘earned’ is shared by the many, not just the few. In these settings there is a sense of shared responsibility, particularly around the organization’s future. This ‘shared’ environment generally means that individuals are engaged and will provide their discretionary energy for the good of the company and the stakeholders it serves. This increases productivity and sense of belonging.
The vast number of companies today are still about the ‘benefits for a few,’ but de Gues, and others, expand the conversation, invite discussion of ‘another way,’ and gain traction with Millennials and others who would rather collaborate to success rather than compete. Mr. de Gues gives a look at history and highly successful companies who have tended to focus on people first. Is there merit in what he says? Yes! I believe there is great value as we continue to shift how works gets done and under what conditions. Thank you, Arie, for sharing your understanding and insights on how organizations work best for survival. If you are a student of leadership, Google Mr. de Gues sometime. You’ll be glad you did.
To a better you…