Management And Accounting Web

De Geus, A. 1999. The living company. Harvard Business Review (March-April): 51-59.

Summary by Michael Becker
Master of Accountancy Program
University of South Florida, Summer 2003

The purpose of this paper is to illustrate that living, learning companies stand a better chance of surviving and evolving in a world they do not control. When a modern corporation’s length of life is examined, the findings are dismal. With a life which could potentially span centuries, the mere decades that most corporations actually survive are pathetic. The reason for this is that managers focus exclusively on producing goods and services rather than on the fact that their company is a community of human beings.

This narrow-minded view of the actuality of corporations is what causes them to fail. “It appears that in the corporation we have a species with a maximum life expectancy in the hundreds of years but an average life expectancy of less than 50 years.” It was for this reason that the author examined 27 different “long-lived” corporations to determine what it was that kept them afloat for so long. He found the following:

Conservatism in financing - these companies did not risk their money needlessly.

Sensitivity to the world around them - the companies were able to adapt to changes in the marketplace.

Awareness of their identity - regardless of the degree of diversification the companies chose, they implemented systems to ensure that their employees all felt like parts of a whole.

Tolerance of new ideas - these companies “. . .tolerated activities in the margin. . .”

When dealing with the issue of succession, the manager of the so-called “living company” needs to keep in mind that the company will only survive as long as it is passed on in at least the same (but preferably in better) health than when it was first passed to them. As such, the manager must:

Value people, not assets.

Loosen steering and control.

Organize the company for learning.

Shape the human community (that is, the managers must decide whether they are going to simply make money for the inner circle of executives and stockholders, or whether they are going to develop an environment where the organization can become a community).

When these keys are kept in the forefront of managerial decision-making, the optimization of capital becomes nothing more than the complement to the optimization of people. However, if money is insufficient, the employees will become dissatisfied. Nevertheless, increasing money above a certain threshold will not motivate the employees to give more to the company. As such, it is up to the managers of the corporation to foster a community within the company which will not only motivate the employees to aid in the corporation’s survival but will also allow the corporation to reach its full life expectancy of continued successes for hundreds of years to come.

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