Friday, April 19, 2013
65 Surveys Completed
Thank you to all those 100-year-old U.S. companies that have filled out surveys for my research! We are now in the process of tabulating the responses and will compare them to responses from old Japanese companies. So far it looks like there are many similarities, but we will need to conduct statistical analysis to test for significance.
Friday, August 10, 2012
What Is Unique About Old Companies?
My research partner in Japan, Makoto Kanda, recently completed a study of over 1,000 companies to test our theoretical framework regarding the behaviors of old companies that have enabled them to survive for over 100 years. By comparing the survey results from 'young' companies with those from companies founded before 1911, he came up with several statistically significant items which indicate we are on the right track with our hypothesis regarding longevity factors. Here are a few of the results:
* Old companies scored significantly higher in every aspect of developing future leaders and succession planning
* Old companies put much more emphasis on their relationships with suppliers, customers, and local communities
* As might be expected, the old companies focused much more on tradition and improving what they see as their core strengths; when large-scale change is necessary, they admit to taking a long time to plan and implement such change
* The old companies have conservative financial practices (emphasize profitability over sales volume; are reluctant to borrow money)
The complete results have been published in the IMDA book "Global Competitiveness in a Time of Economic Uncertainty and Social Change: Current Issues and Future Expectations" (ISBN: 1-888624-11-6).
* Old companies scored significantly higher in every aspect of developing future leaders and succession planning
* Old companies put much more emphasis on their relationships with suppliers, customers, and local communities
* As might be expected, the old companies focused much more on tradition and improving what they see as their core strengths; when large-scale change is necessary, they admit to taking a long time to plan and implement such change
* The old companies have conservative financial practices (emphasize profitability over sales volume; are reluctant to borrow money)
The complete results have been published in the IMDA book "Global Competitiveness in a Time of Economic Uncertainty and Social Change: Current Issues and Future Expectations" (ISBN: 1-888624-11-6).
Friday, April 27, 2012
A Theoretical Framework for Corporate Longevity
Makoto Kanda, my research colleague in Japan, has completed his research of shinise (revered Japanese companies that have remained in business for a very long time). The first phase of his research was to conduct in-depth interviews in 17 companies out of which he built a theoretical framework describing common factors observed in these companies that have survived well over 100 years. He then developed a survey to test the five factors identified in this theoretical framework. It is this survey that we are using both in Japan and in the United States to test our hypothesis: In Japan he is comparing survey results of shinise and non-shinise to see where there is a significant difference on these factors; then we will compare results of 100-year-old U.S. companies to those of Japanese shinise. Since we are now ready to begin reporting some of our results, I thought we should start with an explanation of the five factors that form the theoretical framework we are testing.
Our hypothesis is that there are five factors which together result in unique corporate behaviors leading to longevity. These factors are:
1. Building corporate identity through careful management of organizational culture
2. Protecting core/unique strengths through a balance of maintaining tradition and continuous improvement and innovation
3. Strong relationships with business partners (customers and suppliers)
4. Investments in developing employees, with a particular emphasis on leadership succession
5. Strong relationships with the local community
Future postings will explain the results of our research: check back to discover what behaviors are unique to long-lived firms!
Our hypothesis is that there are five factors which together result in unique corporate behaviors leading to longevity. These factors are:
1. Building corporate identity through careful management of organizational culture
2. Protecting core/unique strengths through a balance of maintaining tradition and continuous improvement and innovation
3. Strong relationships with business partners (customers and suppliers)
4. Investments in developing employees, with a particular emphasis on leadership succession
5. Strong relationships with the local community
Future postings will explain the results of our research: check back to discover what behaviors are unique to long-lived firms!
Saturday, February 4, 2012
Surveys of 100-Year-Old Companies Beginning
Now that I have returned from a semester teaching in England I am re-starting my research on 100-year-old U.S. companies. (I was interviewed last month by the BBC for an article on corporate longevity.) My student researchers and I are starting with small to medium sized companies, only because I suspect it will be easier to contact a person within the firm who is willing to work with us on completing our survey. The survey itself has been developed by my Japanese colleague, Makoto Kanda, who has used the instrument to gather information on behaviors and strategies of old Japanese companies. Once we obtain enough information on U.S. companies, we are planning to do a comparative analysis. If you work for a 100-year-old company or know of someone who does, please email me at tenhaken@hope.edu. The survey only takes a few minutes to complete and all individual company information will be completely confidential. I look forward to posting the results of this research in the future - it will all be in consolidated form, with individual companies identified only with prior permission. We hope to work with many interesting old companies to discover their 'secrets' to living a long life!
Thursday, September 1, 2011
3 Principles of Corporate Longevity
I came across a study by Zenlin Kwee from the Erasmus University in Rotterdam that discusses some strategic principles of long-lived firms. As with most other studies of old companies, this one focuses on a very small data set. In fact, Kwee's work is an in-depth study of just two firms in the same industry: Shell and BP. The three principles of "sustained strategic renewal" which he identifies are interesting:
1. Manage the internal rate of change to match or exceed the external rate of change
2. Optimize the principle of self-organization (this principle implies the delegation of decision making to the lowest possible level and maximizing capabilities at every level of the organization)
3. Engage in concurrent exploitation of existing capabilities and exploration of new opportunities (this involves balancing innovation and knowledge creation with improvements in productivity process, efficiency and product extensions and enhancements)
1. Manage the internal rate of change to match or exceed the external rate of change
2. Optimize the principle of self-organization (this principle implies the delegation of decision making to the lowest possible level and maximizing capabilities at every level of the organization)
3. Engage in concurrent exploitation of existing capabilities and exploration of new opportunities (this involves balancing innovation and knowledge creation with improvements in productivity process, efficiency and product extensions and enhancements)
Saturday, August 27, 2011
When Leadership Matters
One of the most frequent questions I receive about the characteristics and behaviors of companies that have survived over 100 years is why I haven't identified any particular leadership behaviors. As I've said in earlier posts, the short answer is that no consistent leadership qualities emerged from the research. Most companies revere their founder or another leader who led the company during a critical juncture in the firm's history. And most of these companies have leaders who have "grown up" in the company, which usually produces some consistency in leadership style within a particular organization. But there was not any consistency in leadership behavior across organizations. What did seem important was that the leaders follow the principles of survival: have a strong core ideology and corporate values that drive your business; invest in experimentation and change while protecting those core values and building on your strengths; develop true partnerships with your constituents and learn from the relationships throughout your value chain; and practice conservative financing.
Of course leadership matters, and these companies thrive under astute leaders who make good business decisions. But they also seem to survive under poor leadership as long as these core principles are not violated. I'm writing today about one of the principles - drive for change while building on your core values and unique competencies. Following is a story about how two different organizations navigated through very difficult business transitions. The different approaches in implementing the necessary changes provide a good example of what a difference it makes when a leader follows this principle.
Both organizations had very strong cultures that were employee-focused: they provided good pay and benefits, including profit-sharing and a management style that included employees' opinions in the decision-making. As a result employees stayed with the firms and the companies had many employees with several decades of service. Both companies were going through a leadership transition with the retiring CEO having spent his entire career with the company. and both were also facing difficult industry dynamics resulting in a rather dismal business forecast. Company A brought in a young but well-respected leader who was president of a smaller company in the industry; Company B promoted their CFO - also young and well-respected. Both new CEOs believed their company had become too inwardly-focused and that the culture needed to change if the company was to succeed in the new competitive reality facing the firm. Both companies were more "differentiators" than "cost leaders" with products that were fast becoming commodity-like in terms of customer purchasing behavior. It is the difference in how they navigated the company through the changes they thought necessary that is the lesson.
Company A's new CEO's first action was to fire or retire much of the leadership team. Many of the people he brought in the replace them were young leaders who had worked for him in his previous company. His instructions to them were to change the culture of the company from what he saw as one of employee entitlement to one of operational efficiency. When falling sales drove the need for employee cut-backs, he saw this as an opportunity to remove many long-term employees whom he felt were barriers to change. He also shifted investments from the firm's traditional R&D focus to ones that would improve manufacturing efficiency. The people who remained in the company weren't quite sure how to be effective in this new reality: they became demoralized and lamented the loss of the company as they knew it. The new CEO never was able to turn the company around and it limped along until it was bought by a competitor.
Company B's new CEO also believed major changes needed to take place, but he went about it in a very different way. He built the case for change and presented the facts to employees. Then he used the culture of the company to drive the changes. Once employees understood the reality of the company's current situation, they were asked for their ideas and help in making the needed changes. The CEO promised he would continue to invest in the company's core competencies - that they would continue to produce new and innovative products - but that they also needed to find a way for their operations to become more efficient. Employee involvement was a long-standing tradition in the company and the new CEO used the culture to make the necessary changes rather than abandoning it. This company also needed to reduce their workforce because of deteriorating industry conditions, but did so in such a way that they still ended up on FORTUNE's list of best companies to work for. This company continues to introduce "disruptive" products, but it is also one of Toyota's prize TPS pupils.
The point of this story: Don't walk away from your past when change needs to take place. Build on it. The company's culture and core competencies are not things that never change or evolve: rather they are the building blocks used to make the changes. Change is absolutely necessary to survive over the long term - but how you change makes a difference: Drive for change by building on your company's core competencies and unique technologies rather than abandoning them. Yes, leadership matters. But it's not your particular style that makes the difference - it's your ability to practice the principles that enable company longevity.
Of course leadership matters, and these companies thrive under astute leaders who make good business decisions. But they also seem to survive under poor leadership as long as these core principles are not violated. I'm writing today about one of the principles - drive for change while building on your core values and unique competencies. Following is a story about how two different organizations navigated through very difficult business transitions. The different approaches in implementing the necessary changes provide a good example of what a difference it makes when a leader follows this principle.
Both organizations had very strong cultures that were employee-focused: they provided good pay and benefits, including profit-sharing and a management style that included employees' opinions in the decision-making. As a result employees stayed with the firms and the companies had many employees with several decades of service. Both companies were going through a leadership transition with the retiring CEO having spent his entire career with the company. and both were also facing difficult industry dynamics resulting in a rather dismal business forecast. Company A brought in a young but well-respected leader who was president of a smaller company in the industry; Company B promoted their CFO - also young and well-respected. Both new CEOs believed their company had become too inwardly-focused and that the culture needed to change if the company was to succeed in the new competitive reality facing the firm. Both companies were more "differentiators" than "cost leaders" with products that were fast becoming commodity-like in terms of customer purchasing behavior. It is the difference in how they navigated the company through the changes they thought necessary that is the lesson.
Company A's new CEO's first action was to fire or retire much of the leadership team. Many of the people he brought in the replace them were young leaders who had worked for him in his previous company. His instructions to them were to change the culture of the company from what he saw as one of employee entitlement to one of operational efficiency. When falling sales drove the need for employee cut-backs, he saw this as an opportunity to remove many long-term employees whom he felt were barriers to change. He also shifted investments from the firm's traditional R&D focus to ones that would improve manufacturing efficiency. The people who remained in the company weren't quite sure how to be effective in this new reality: they became demoralized and lamented the loss of the company as they knew it. The new CEO never was able to turn the company around and it limped along until it was bought by a competitor.
Company B's new CEO also believed major changes needed to take place, but he went about it in a very different way. He built the case for change and presented the facts to employees. Then he used the culture of the company to drive the changes. Once employees understood the reality of the company's current situation, they were asked for their ideas and help in making the needed changes. The CEO promised he would continue to invest in the company's core competencies - that they would continue to produce new and innovative products - but that they also needed to find a way for their operations to become more efficient. Employee involvement was a long-standing tradition in the company and the new CEO used the culture to make the necessary changes rather than abandoning it. This company also needed to reduce their workforce because of deteriorating industry conditions, but did so in such a way that they still ended up on FORTUNE's list of best companies to work for. This company continues to introduce "disruptive" products, but it is also one of Toyota's prize TPS pupils.
The point of this story: Don't walk away from your past when change needs to take place. Build on it. The company's culture and core competencies are not things that never change or evolve: rather they are the building blocks used to make the changes. Change is absolutely necessary to survive over the long term - but how you change makes a difference: Drive for change by building on your company's core competencies and unique technologies rather than abandoning them. Yes, leadership matters. But it's not your particular style that makes the difference - it's your ability to practice the principles that enable company longevity.
Monday, August 15, 2011
Data Base at 1,000 Companies!
Our data base of 100-year-old U.S. companies now officially has 1,000 members. Though this represents just 0.01% of all U.S. businesses, it is a substantial group to research. Two-thirds of the companies are privately held - many are family owned. Half employ over 500 employees. Nearly 40% are manufacturing organizations and nearly 20% are banking and finance institutions; retail is the only other category coming in at over 10%. More info to come.... We will be sending out surveys soon.
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