People get stressed out at work from usually more than just their work. For example, it’s stressful to watch people politically maneuver for power and control and then get promoted instead of the other person who has authentic talent and ability to do the job. Work environments can become stifling when cynicism and resignation have replaced commitment, energy and imagination, and when employees secretly have one foot out the door. Most people would call these work environments “toxic,” others might call it “poor corporate health.”
What might surprise everyone is that this company is most likely suffering from low life expectancy. The famous worldwide study done at Royal Dutch/Shell Corporation discovered that the average life expectancy of Fortune 500 companies is only 40-50 years. According to Arie De Geus, author of The Living Company, the vast majority of companies die prematurely before 50 because they are unable to adapt and evolve as the world around them does.
This surprisingly low life expectancy of multinational corporations – Fortune 500 or its equivalent – is based on a survey of corporate births and deaths. One survey, for example, recorded that one-third of corporations that were listed in the 1970 Fortune 500 had disappeared by 1983 – being either acquired, merged or split apart. These types of conditions can make for difficult work environments.
De Geus, coordinator of the study, contrasts these statistics to a small percentage of companies that have lasted a long time. Out of Sweden, for example, is a paper and chemical company – The Stora Company – that has been around 700 years. Another “oldster” is The Sumitomo Group out of Japan founded in 1590. In a more recent study by the Stratix Group in Amsterdam, the average life expectancy of all companies-all sizes- is only 12.5 years.
Why the wasted potential in otherwise successful companies? Accumulating evidence points to the dominant thinking and behaviors of leadership and management who too narrowly focus on economics, a focus not found in other types of institutions, such as universities, churches or even armies which don’t share the same short term demographic of the corporate life form.
Employees and even governments are addressing the social responsibility of large corporations whose loss affects not only the lives of employees, but can affect communities, nations and worldwide economics. Think of the fall of our U.S. Financial institutions in the 2008 crash and the global effects that were felt from it. Among other contributing factors, the lack of suitable and ethical supervision in securities trading and financial practices permitted careless asset managers to pump up the economy through progressively risky lending practices.
Organizations preoccupied on profit continually emphasize short term gains. The problem is that these types of companies are controlled by brokers and subservient to stockholders. Today, regulators are calling for a diminished role of the trading and transactional culture because of a conflict of interest between the anonymous agents attempting to make short-term gains at the expense of the long-term goals of the corporation. Some governments, like the U.K., are currently calling for the elimination of quarterly reports to encourage companies to focus on long-term goals.
Where is there a company worthy of the passions of the people that work there? No one wants to be treated like a number. When shareholder value far exceeds the stakeholder needs, myopia will result from the pressure to produce immediate results and the mistaken idea that if you work harder and longer hours than the shareholders will be happier. Quality of work is forfeited in favor of the expectation of a greater quantity of output. This is when leadership manages by statistics – equating longer hours to greater productivity.
What gets forgotten is that the true nature of any company is that it is a community of human beings. It is social cooperation and the application of human skill within it – this creates the best work environments. De Geus found four common factors present in long-lasting companies. 1) They all have an ability to adapt and learn, 2) They have an innate ability to build a community and brand persona, 3) They are tolerant and decentralized, and 4) They all adhered to conservative financing and could govern their own growth and evolution effectively.
What did not contribute to longevity was the ability to return investment to shareholders.
In Part 3 we will look at why an Industrial Age way of thinking-the Mechanical Metaphor-is still causing trouble in organizations.
