Successful "Cultures"?

One of my students made a presentation last week on corporate cultures. His literature search was trying to find out if there were cultural behaviors that led to a company being more successful. So far he hadn't found any specific behaviors, though some literature does indicate certain generic cultures seem to lead to more company success over the long term than others. He's still working on it (the paper isn't due for two weeks). But his presentation reminded me that there has been research on very old companies which identifies some common behaviors that would appear to help these organizations survive for the long term. Though these studies were done mostly on very large, publicly-owned companies (only the Japanese study included small-to-medium sized, private companies), they did uncover some similar results:
1. The presence of a strong core ideology, corporate culture and values (Collins and Porras, Iwasaki and Kanda, de Gues, and Stadler)
2. The ability to drive for change while protecting these core values (Collins and Porras, Iwasaki and Kanda, de Gues, Stadler)
3. Conservative business practices (de Gues, Stadler)

In the next phase of my research, I plan to survey U.S. 100-year-old companies (regardless of size, industry or ownership) to see if similar items are identified.

Industry "Clusters"

When I first presented a paper on West Michigan companies over 100 years old that we had surveyed, one question I received from a colleague was whether certain industries lent themselves to longevity. Perhaps some industries are less affected by economic downturns, global competition, etc. It certainly is the case that many local old companies are retail stores or otherwise service-related. Therefore, I was very surprised when we analyzed our national data base of 100 year old companies to discover that over 40% of the companies were in manufacturing! This is even more remarkable when we note that only 4% of U.S. businesses in general are classified as manufacturing.

Of the 18 U.S. Bureau of Labor Statistics NAICS industry classifications, "old" companies clustered into six: Manufacturing, Mining, Utilities, Information, Finance & Insurance, and Management Services. These were the industries where the old companies had a significantly higher representation than in the U.S. business population overall. (Including the Management Services category in this list is misleading since there was no number reported in the U.S. Census data.) The highest percentages of old companies are found in Manufacturing (41.95%), Finance & Insurance (17.8%) and Retail (12.44%). All other categories were less than 6%.

Old Companies DO Grow Large!

Because so many of the 100-year-old local companies I had interviewed were small (less than 100 employees), I had surmised that many old companies tend to remain small - a result, perhaps, of an emphasis on survival rather than growth. However, once we assembled our data base of U.S. companies over 100 years old, we discovered that only about one-third of the companies would be considered "small" (under 100 employees). We know that we are missing many small local companies that simply haven't come to our attention and are not in any of the state records we have been able to find, but this still is a far smaller percentage than for U.S. companies overall (where over 95% of the companies have under 100 employees).

However, over 50% of the companies in our data base are "large" - over 500 employees - compared with only 1% (or less) of U.S. companies overall. The only size category where old companies and all U.S. companies appear to be similar is that of medium-sized businesses - those with 100-500 employees.

Public v.s Private

Interviews with local (that is, West Michigan) 100-year-old companies indicated that remaining privately-owned was a key factor in company survival over the long term. (Many of those interviewed were adamant about this!) We decided to test that theory on our new data base of over 400 old companies from throughout the U.S. Turns out 62% of these old companies are privately-held, with 38% being publicly-traded. This sounds as if the theory proves out until one compares these numbers with U.S. companies in general, where well over 90% of firms are private!

Association of Global Business Conference

I'll be presenting the findings of our data base research on 100 year old U.S. companies at the AGB conference in New Orleans this weekend. Great thanks to student researcher, Katelyn Rumsey, for all the hard work on "scrubbing" the company list for accuracy! Comparing relative size, industry, and private/public ownership of "old" companies with U.S. companies overall show some very interesting results! I'll post this information next week.

The Wisdom of Shinise

"Strength from living over 100 years"

Following are some of the results of research from my colleague, Makoto Kanda from Meiji Gakuin University in Japan. In 2009 he sent surveys to nearly 3,000 small to medium-sized companies that were over 100 years old (exculding those with less than 10 employees) and received responses from 500 (a 16.8% response rate). These companies were spread over various industres: 37% wholesale, 34% manufacturing, 12% construction, 12% retail, and 5% services.

Kanda uncovered three factors, which he calls the "three sacred principles of Shinise." These are:
1. Credo: Most companies have a strong sense of corporate vision and values, often established by the founding family. Half of the companies had a written credo and others passed it on verbally.
2. Family ownership and control: Not only were almost all shinise privately-owned companies, over 80% were still owned and run by the founding family! Only 10% did not have any ownership or management involvment by the founding family.
3. Continuity of business, company name and brand: Though most companies have diversified their business, their traditional business still remained (more than 60% have retained their orignial line of business); 40% of the companies have made no changes in company name or brands for more than 100 years, 30% have changed one but not the other, and only 30% have changed both their company name and the brand name under which they do business.

Kanda goes into detail on what practices make up these three factors, which I will explain at a later date.

Japanese Shinise

I have kept in touch with the Japanese professor who first spurred my interest in 100 year old company research (Makoto Kanda) and he has given me permission to share the results of his updated research on small-medium sized old Japanese companies. Stay tuned!

Data Base is Almost Ready

A recent email from Cargill's archives director (as they prepare for their 150th anniversary) reminds me that I have not updated this blog in a while. My student researchers have been busy building our data base of 100 year old U.S. companies and and Katelyn Rumsey is now doing an analysis based on size, industry, etc. The results of this work will be presented at the Association for Global Business Conference to be held in New Orleans in November. Hopefully they will see it as worthy for publication in their journal.

We have done a few surveys along the way (talking to these companies is much more fun than the data base work), but we will begin surveying in earnest in 2011. In the meantime, if you run across an "old" company of which you think I might not be aware, please post a comment or email me.

Not All 100-Year Companies are Dinosaurs

DeWitt Barrels is a 117-year-old company that just won the Michigan Family-Owned Business of the Year award. In the Grand Rapids Press article announcing the award, president Peter DeWitt (whose great-great-grandfather started the business) says "We looked forward to see trends and adapted and made changes to meet demands.....We wouldn't make it if we stayed the same." DeWitt Barrels has never made barrels - it reconditions them for re-use. Today that mostly means cleaning 55-gallon steel drums for oil and chemical companies rather than wooden barrels.

Though their business has changed over the years, how they run it has not. "There are no shortcuts," says Peter DeWitt. "You follow all the rules, even if it's expensive or you have to work more." This particularly comes into play in the area of environmental care: the company has been a state-designated Clean Corporate Citizen since 1999.

Businesses overall are using barrels less often and the DeWitts have watched many other re-conditioners leave the industry. But Peter DeWitt is confident the company will adapt again and last another generation. "Our father gave the company to us [Peter runs the company with two of his brothers] with the same mandate he had - to build it, take care of it and pass it on. When we pass it on to Jason [Peter's son, who is currently the plant manager] it needs to be in a situation for him to make it grow."

Many Old Companies Are Family Businesses

An article recently appeared in the Muskegon Chronicle about a 100-year-old shoe store in Fremont, Michigan. The owner of Vredeveld Shoes is Lon Vredeveld - the fourth-generation of his family to run the store, which opened in 1909. In the article Vredeveld likens his and other independent stores to dinosaurs for their old-fashioned methods of customer service and community involvement.

But what Vredeveld characterizes as dinosaur behavior may just be a type of business-savvy wisdom passed on through the years. Family Business magazine has been researching old family-owned businesses and their research offers four lessons of survival:
1. Stay small
2. Don't go public
3. Stay out of the big cities
4. Keep the business in the family

Vredeveld says that the poor economy has hurt his store, but he thinks a niche for independent shoe stores like his will remain. "We're not getting to 100 years and stopping," he reports. Though Vredeveld has three grown children, he said he is not sure if any of them will every take over the business. He's hoping there is still plenty of time to figure out the future.

In a recent profile in the Holland Sentinel, Max Lokers (co-owner with his brother Tom of Lokers Shoes) also uses the dinosaur analolgy when describing their family shoe store as a dying breed. "I would call us one of the dinosaur types of businesses.....We're still in our brick-and-mortar building, doing what we've been doing for going on 100 years." However, within the last decade Lokers has added services, including some provided by Max's step-son, and he reports that he and Tom hope to continue selling shoes in downtown Holland for generations to come.

Since they appear to be following the advice given in the Family Business research, perhaps these "dinosaurs" will survive.

305 Companies and Counting.....

One of my student researchers, Alison Meshkin, has put together our first "scrubbed" list of U.S. companies over 100 years old and it has over 300 companies on it. This list consists mostly of large, national companies. Another student researcher, Kurt Goldsby, has a list of around 30 Michigan companies we have culled from various sources, including newspaper stories and ads. I'm sure there are many smaller local or regional companies we can add to our data base as we hear about them, so I am sending this appeal to my "followers" out there to post a comment when you hear of a company that should be part of this Century Club.

100-Year-Old Businesses Lost in 2009

According to CNN Money.com more than 45,000 businesses closed their doors for good in 2009, including some that survived for longer than a century. They profile six of these historic companies that vanished, including a candy company and several retailers in businesses as varied as school supplies, food and a department store.
http://money.cnn.com/galleries/2009/smallbusiness/0912/gallery.100_year_old_business_deaths/index.html

I just heard from a friend that the century-old independent bank for which he had been a board member is being acquired. These economic times are tough on many companies, but it is particularly sad to see these old companies with all their history go away. For many customers and community members, it's like losing an old friend. (One owner reports that he is still receiving condolences from area residents about the store's closing in August.)

It is my hope that identifying common success factors of those century-old companies that do survive might help other companies weather tough times.