1.1General Background Information
The world's oldest business was Kongo Gumi a family run company. It stopped its long lasting operation only a few years ago. According to Business Week (2007) this Japanese construction giant that was established in 578 has stopped its long lasting operation only few years ago. http://www.businessweek.com/smallbiz/content/apr2007/sb20070416_589621.htm?campaign_id=rss_topEmailedStories
The perception of the causes for organisational survival and long-term existence of a business is the most common topic nowadays for managing companies. Why do some corporations tend to live longer while others die? What are the main determinants allowing some organisations to live longer and cause others to decline? These are common questions among top managers and management academics.
The research provided describes the principal characteristics of long-term survival of the big UK multinationals between 1884 to 2008 years. The factors that are concluded from the research correlating with decline will come from different academic sources as well as interviews with the top managers and find the relationship between these variables and company long-term success on the market.
1.1 Defining corporate longevity
The definition the long living company: a company which consist of four components according to 'THE LIVING COMPANY': Habits for survival in a turbulent business environment' by Arie De Geus they are:
- "Sensitivity to the environment" reflects the potential of the organisation to learn and adjust.
- "Cohesion and identity" specifies the main factors and the capacity of the company to create a society and identity it.
- "Tolerance and its corollary" are tending to be the elements of corporate environment awareness: the capability to establish communication within external and internal organisational bodies.
- "Conservative financing" identifies the main aspect of business entity: the capacity to manage own growth and development adequately.
The term of longevity in organisation is very contradictory. Z.Kwee (2007) in her research defines "immortality" as 'a sustained strategic renewal, merits thorough investigation' where others determine as a strong sense of identity, dispersed Structure Company (De Geus, 1999; Collins & Porras, 1999; Hall, 1997), or responsiveness towards the environment, (De Geus, 1999; Cohen & Levinthal, 1990; Volberda, 1998), and discreet finance (Hall, 1997; De Geus, 1999). Nevertheless, these essentials primarily concentrate on the systems within an organisation, ignoring the external processes.
1.2 Defining corporate identity: The strategic use of the past and future in organizational change
There is a party slogan dealing with the control of the past:"Who controls the past controls the future: who controls the present controls the past." (George Orwell, 1984). http://www.readprint.com/chapter-7618/George-Orwell
The problem of organisational history became a very important subject in strategic management area. People use new millennium (history moments) as a barrier or starting point of business development and implementation of new strategies.
The same can be applied to the organisations, they become more self-observing and strategy focused. On the other hand, the development of online database, the advance in technology and Internet allowed to the companies to expand the business information and making it more available for the rest. Therefore, the organisations tend to differentiate themselves in history and its corporate identity. (McMillan, 1987; Ramanantsoa et al, 1991).
The organisational longevity as a factor of assurance and reliability has become more important nowadays by fact that merging companies make the history together taking the earliest foundation date of one of the organisations avoiding its further background.
In order to prevent the judgement of inexperience the organisations usually connect themselves with rich culture or cooperate with more stable ones (Vendelø, 1998). For instance,
(For example, McDonald (1991) describes how the Los Angeles 1984 Olympics committee built an organizational culture quickly, asking volunteers coming together for the first time to "play a part in history" and invoking the images of the Olympians coming before them.)
According Hobsbawm and Ranger (1983) it is argued that symbols, rituals, and other pattern have been utilized during the whole history.
Gioia et al (2000) argues the actual durability of the company identity consists of the organisational labels, images and symbols as an indication of stability in order to signify their believes, but the meanings of these symbols might change constantly so the identity modifies.
According to Olins (1989, p.13) various symbols, images and rituals have become important every time. They can be used in order to establish adherence, destroy the old style of doing things and bring the new concept into the organisation.
Originally, the organisational history was attractive only for business historians and outdated database archives where none was interested in particular procedure and technique. But in 1980, the perception of the history has changed by occurrence of corporate culture field.
For such scholars, the very presentation of history contains a paradox: as Ooi and Karmark (1998, pp. 2-3) observe, the ideal of historical research is the objective presentation of the past; yet "purposeful articulation of history is always selectively constructed and is therefore not objective or 'detached'". If objective histories were available, from a fully documented past, such paradoxes would not arise. But such histories do not exist in actuality. However ample the documentation, it is always only partial; some information is preserved only in the memories of individuals and is lost as they leave, retire, or die. Even what has been documented is always subject to deterioration: files are misplaced, forgotten, or even destroyed; and even for those records that are preserved unscathed, the context that created them has inevitably vanished.
A rhetorical-historical perspective sees how history anchors and justifies contemporary action, how it legitimates new organizational claims through old ones, builds modern glory on ancient glory. Rhetorical-historical arguments help those in power within organizations to build and maintain identification among during times of change and uncertainty (Peterson, 1990). Thus, as Lévi-Strauss (1963) succinctly put it, "History is never only history of, it is always history for".
History and identity
Given the cynical view of image management prevalent in our field ("management flavour of the month"), it is useful to think of organizational identity as a "sustainable story" (van Riel, 2001). A sustainable story is unique to the organization that originates it and is not easily imitable by others. To create such a sustainable story, an organization must begin with its existing identity and then strive to create a historical continuity and a coherent past. As Czarniawska-Joerges (1994, p. 198) observes, identity is a narrative - "or more properly, identity-construction [is] a continuous process of narration where both the narrator and the audience formulate, edit, applaud, and refuse various elements of the ever-produced narrative". Viewing organizations not just as story-telling organizations (Barry and Elmes, 1997; Boje, 1991, 1995) but as history-telling organizations allows us to see how history is strategically used.
Organizational identity is easy to articulate when an organization follows what seems to be its natural life trajectory (Kimberly and Bouchiki, 1995). "A few basic decisions are made early, are rarely changed, and set important limitations on the parameters within which subsequent decisions are made" (Kimberly and Rottman, 1987, p. 318). It becomes less easy when events and issues do not unfold as planned. These decisions then overshadow and weigh heavily upon every step made by the organization (Czarniawska, 1997). Like individuals (Ashforth and Fugate, 2001), organizations may be stigmatized by their life histories, leading to role foreclosure. As a result, they may not have the skills or the networks to explore other alternatives because their life trajectory propels them in a particular direction. Over time, an organization's identity narrative may become so narrowly defined that some alternatives may not even be identified as choices.
Organizational history theory (Gioia et al., 2000; McWhinney and Batista, 1988; Paalumäki, 2000), however, suggests that we can also reverse the process in order to expand our possibilities - we can use our images of the future to help reshape the images of the past, to recast the past in more appreciative terms, to reframe the past to highlight images or interpretations that can be just as real, authoritative, and inspirational as the ones we inadvertently use to guide our lives.
Bryan Taylor (University of Colorado, USA) and Brian Freer (University of Washington, USA) critique the political and organizational processes at work within one organization involved in writing their organization's official corporate history. Taylor and Freer were a part of an academic advisory group invited in by members of the Hanford plutonium production facilities to provide feedback on the corporate history-writing process. As a part of this advisory group, the authors were privy to meetings with officials, e-mail exchanges, and draft copies of the history. This gave them insights into such aspects of the history-writing process as what counted as evidence, who the players were, that a number of outside perspectives were not included, and that the narratives were designed to reinforce the views and expectations of those in power.
Martin Parker (University of Keele, UK) illustrates that there are multiple histories operating within organizations. He discusses a study of an English building society that was attempting to change its public image without denigrating its past. Parker investigates how organizational members were divided over the degree to which the organization's past should inform the present and how the organization "changed without changing". Parker's analysis demonstrates the way managers' differing accounts of the past were employed as resources for avoiding extinction.
Can-Seng Ooi (Copenhagen Business School, Denmark) describes the reasons histories are undertaken in the first place. He argues that history is appropriated to proclaim precedence and traditions, to assert intellectual rights, to be commemorative, and to offer a rationale for changing things from the past. Ooi describes representing the past as a dual process in decentering and recentering, and argues that taking audiences' experiences into account in the production of history is crucial.
Denny Gioia (Penn State University, USA), Kevin Corley (University of Illinois, USA) and Tommaso Fabbri (University of Modena and Reggio Emilia, Italy) explore the concept of "future perfect thinking", which involves working backwards from the future - considering how one wants to be remembered in the future and then making decisions today that are consistent with those future images. Change, they argue, requires balancing retrospective sense making with forward looking problem solving. Positive change, they suggest, may involve redefining the past in unfavourable terms.
Cameron Ford (University of Central Florida, USA) provides a different perspective on the use of the past and future by conceptualizing how the past and future may play out in a moment where key decisions must be made. Specifically, Ford provides a model of the conditions in which managers might focus more on the past or the future when they reach a "fork in the road" when making decisions about whether continuity or change is more appropriate. Ford argues that futurity influences current interpretations that create self-fulfilling prophecies.
In sum, the authors here represent a diversity of perspectives on how the past and future may be appropriated within organizational life.
1.4 The Topic Researched
The research for this topic will be based on the main explanation of reasons for corporate long time and short time existence. Meanwhile, this paper will examine the nature and the characteristics of long term survival in order to understand this phenomenon. Although these studies will not include empirical research that observes the variables of survivors and non-survivors affecting on company performance.
1.5 Aim of the Research
The project would involve researching the factors that affect the longevity of organisations and critical analyses of them.
- To observe the historical and contemporary tendency of long lasting organisational performance based on the different primary and secondary sources as books, electronic journals, Internet, newspapers and conducted interviews with top manager of the survival companies.
- To explore the material by organising Interviews and questionnaires with the top managers of UK successful and surviving companies for additional information related to the corporate longevity in the period of financial recession.
- To examine the main reasons why some multinationals ends their 'lives' by watching the internal and external influences as well as company lifecycle of birth, growth, maturity and death.
- To inspect the published data of top UK companies for the past 30 years and analyse the dominating industries as well as changes on the ranking happened, disappeared and surviving companies.
- Eventually when the research is done and all the appropriate information has been gathered in full it is planning to be analysed and discussed in order to come up with specific conclusion about the nature of the organisation. By defining the problem and expressing the findings, evaluating the advantages and weaknesses of being long living Company the following recommendations can be given at last.
- It is also important to note why it is top problem nowadays in the time of world financial crisis and why it is valuable knowledge.
2 Chapter II: Literature review
As it was mentioned earlier, the majority of companies die young while others reach the immortality. The average life expectation of the multinational corporations is between forty and fifty years. Some of the top companies will be merged; others will be acquired, absorbed and finally get bankrupt. Less successful companies have shorter life. According to Stratix Consulting Group survey the typical organisation in Japan and Europe is approximately thirteen years. Meanwhile, the companies like Pilkington plc, Britain's largest glass manufacturer, lasts for more than seventeen centuries the same as Japan's giant company Sumitomo lives around for 400 years.
2.2 Immortal companies and strategy of GROWING COMPANIES
There have been discussions in management field about whether the longevity is needed or not. It can be argued that the type of company is important. For instance, fast growing company like Microsoft Corporation is able to make a fortune in few years while others like manufacturing companies require a certain period of time. Moreover, the type of the market also should be considered whether growing markets can affect on the development of the organisation
The main problem of long living companies might be identified not only as a successful business operation on the market but also can be part of survival strategy. According to Gregory N.P. Konz (2000) et al the main reasons for survival of the business entity are:
- the vision
Konz and Katz (1996) suggested that among the big number of brand names and companies the most common to survive was the Roman Catholic religious order. Therefore, they have analyzed 276 male religious orders from life cycle point of view and defined those critical developmental factors affecting the longevity in general. The socialization is the interaction of new members into organization.
Conforming to Katz (2000) the vision is 'the sense of purpose and mission that organizes action'. The vision is very arduous to build at the organisation especially in the time of corporate changes inside the company bringing fresh people in existing culture. Meanwhile, the vision was suggested as something based on the past experience, the history of the organisation. Based on the work of Jim Collins, Jerry Poras (2005) the visionary company can be defined as prime institutions in their own business field, that are highly respected by associates and having an long running remote of their activity influencing the rest of the world. The visionary companies succeed for a long time period because of the diversified product life cycle and numerous generations of leaders operating effectively.
Apparently, along with vision the organisation should have other factors like adaptation. It is the most difficult factor to achieve among the other three points of long living companies. English dictionary describes the word 'adaptation' in biology term as 'an alteration or adjustment in structure or habits, often hereditary, by which a species or individual improves its condition in relationship to its environment.' The adaptation is the capability of the members of organisation to fit to the external and internal environmental alteration. By Konz (2000) it is the manager's responsibility for development of the company in order to respond on changes.
Lastly, the corporations need structure and socialisation as a determinant of conservatism. Basically, most organisations have the certain period of time where they barely able to renew themselves. And, in order to remain on the market until the further refurbishment or decline it needs to depend on the whole structure, roles and principles that the members practice to stay less vulnerable.
On the other hand, Roberts C (2003) suggests own typical features common for survival companies. The author here has analysed the a hundred fastest growing small and medium sized businesses (BRW Fast 100) according to the annual turnover. According to this observation he highlighted the successful combination in these organisations of:
- authorized documentation
- formalised processes
The big number of companies brings structure and formality as a priority to be successful. The basic structure prevents from routine management responsibilities, creates compatibility, reduces the costs on training for new people in the organisation and provides the favourable outcome. The author thinks that some businesses from the top list adopted general meetings for strategy and further achievement discussions. Others tried to provide documentation in order to identify the job, some instructions for new comers to clarify the nature of the work. Roberts C mentions the importance to split the tasks into the parts, divisions and teams to accomplish the work process and build the formal structure. Therefore, management can be more concentrated on the major issues like strategy and on the overall efficiency.
Mr. Arie De Geus, the corporate strategist of Royal Dutch/Shell, defines two types of organisation: "economic companies" and "living companies". First one is less concentrated on human resources but it concentrates on profit maximization in short period of time. 'An economic company is a corporate machine with the sole goal of producing wealth for a small group of managers and investors-a group that maintains its grip through tight controls and rigid hierarchies. The result is a firm that, like IBM in the late 1980s, is unable to learn or adapt.' -says Mr de Geus. Second one is characterized as a great number of companies who aims not to increase the returns but these organisations have four common factors to keep their companies alive for the long period as:
- financial conservatism
The first aspect - financial conservatism is very straightforward but other three are more complicated. Financial conservatism is interrelated with other three points highlighted by De Geus like the factor of sensitivity. The author defines as an adjustment and behaviour to the external environment like the mentioned example of IBM that experienced a failure to adapt losing a market share during 1980s. The author also talks in his book about the cohesion - 'a strong sense of identity (to prevent change from tearing them apart, long-lived firms are adept at infusing each successive generation of employees with a strong corporate culture)'. Therefore, the main issue raised here is the cultural aspects of organisation, where some of them bringing propagandas as a strong foundation to their business like for instance Wal-mart (respect and attention towards workers and building substantial environment inside the whole organisation) or Hewlett Packard (more goal oriented focusing on problem solving). The key finding in this study might not only culture and cohesion but also tolerance defined as "eccentricities within the boundaries of the cohesive firm".
Based on this study, the main problem of the long living companies has become the rigid hierarchies, strong sense of determined culture as well as centralised management structure of the organisation. Regardless to these determinants the companies continue to develop and grow for a long period of time.
In order to criticise the theory of De Geus, it is not necessary for the random company to have those characteristics (sensitivity, cohesion, tolerance and fiscal conservatism) as an exact key in corporate 'mortality', but these points might extend the probability of success.
From another point of view, the research held by Alfred Chandler from the Harvard Business School shows that the successful long living companies are those who invest in distribution and marketing as well as in human resources as a competitive advantage. The investment in product is not that essential, but major profitable long-lasting Corporation were first on the market, the instance, Microsoft and Exxon Mobil that exploit their potential to the full even nowadays.
2.3 ORGANISATIONAL DARWINISM: general systems thinking and survival of the fittest
Organisations, like human beings, are born, grow, become mature and eventually die. From this perspective we can examine the nature of the company. The table 1 describes the differences and parallel between human versus organisational longevity. The ability of individual to adapt and suit to the external environment as it shown on the table is particularly the same for the organisational adaptation system.
Montuori L.A. in 'Organizational longevity - Integrating systems thinking, learning and conceptual complexity' (2000) studies has examined the organisational behaviour from the system of thinking containing continuously interacted elements. Therefore, system-thinking approach provides the complete analysis of the organisation along with external changes in order to be assured that the changes made in the organisation fully match to external environment demand and the pressure. Meanwhile, along with system of thinking Darwinism can be discussed known as an evolutionary process empowering organisations to implement the necessary changes in order to survive. Darwin explains in his theory that the biological species not adapted must disappear where the strongest must live- 'survival of the fittest', this can be applied to companies and their abilities to adjust.
2.4 Organisational change
This notion is the representation of system thinking method mentioned above which include the interaction between organisation and external environment - the vital aspect of long existence. This method pays attention to the need of the feedback as a tool of reflection of external modifications. The author stresses that the feedback as a continuous communication between the organisation (body) and the outside surrounding which dictates the rules and degree of change.
The relationship between the actual multilateral changes and company feedback is represented on the Figure 1. (Montuori L.A., 2000).
The system provides the understanding of dependence on any of these external factors and corporate entity. The failure in any of these parts gives the sign for immediate change but difficult to measure the degree of change.
Reasons to change:
What areas of organization change touches?
Various change theories exist nowadays and some of them are only implemented in the practice. Some of them will be described as an understanding what functions should organisation carry out to get the desirable state in the future and defined what the successful transformation is. One of the fundamental theories here is unfreezing-change-refreezing model presented by Kurt Lewin.
In his studies, the first step in changing organisational behaviour is unfreezing of the current internal environment or pronounced as 'status quo'. This stage is important to cope with personal resistance. Unfreezing contains several steps in accomplishing change. Firstly, the activation and raising the motivation among individuals in order to progress from stability state and prevent from the old way of doing things. Secondly, decrease forces contradicting to progress movement and elimination of negative factors in this process. And finally, the mix both aspects mentioned above. At this stage important to get prepared for change and explain people the importance and impossibility of avoidance. Therefore, continuous motivation, analysis and problem solving in the group as well as total involvement into the transformation help to smooth the unpleasant moments in the whole process.
The second represents the actual development and motion in the organisational behaviour. Here is necessary to move forward the new position of balance and stability. The state of change requires convincing followers in the ineffectiveness to tolerate the old style of management, to look at the current situation from new angle and associate it with the view of well respected, influencing leader of the organisation.
The final step of the change model of corporate behaviour tends to appear as a refreezing stage. Lewin describes that this action happens after the whole change process in order to maintain the present results and maintain every time. Refreezing is necessary in order to prevent individuals in the organisation to come back to the old way of doing things and finish the whole process of transformation. Bringing new values in the value chain of the company and reassessment them. Meanwhile, the third step allows keeping the new equilibrium in steady state and opposes driving force and restrictions. For fully completion of the final stage, it is essential to strengthen new existing norms and positions and to establish them through formal and informal ways touching new regulations and policies.
Lewin's theory can bring the organisation to change as well as cause a major opposition and failure of change. The driving and restraining forces can be very contradictory here and the end result of change implementation will happen only when driving force will be greater than the other one.
The same idea Thomas Diefenbach follows in his work 'The Managerialistic Ideology of Organisational Change Management'. In his research he investigates the nature of new change management in high education systems as well as manageristic change management in large organisations. His findings are quite similar to Lewin's model. Hence, he highlights that in aggressive competitive environment the change becomes crucial and even defenders cannot assume of other way. Here introduced TINA principle - "There is no alternative!" Next point - environment is very hostile and unsafe place that all the enemies outside but they are mainly inside. Management perception is not to inspire people and make people feel comfortable but showing the bad reality and keeping them under the fear and stress of losing everything. Change management requires 'business-like leadership' who highly ranked and have a strong sense of understanding and knowledge. Nevertheless, people are the main problem in changing system not enthusiastic about suiting to the new corporate position. People do not resist transformation process because they propose other ideas of improvements but they simply need frightening leadership and guidance in order to know what to do. Normally they could whether adopt the change or leave the organisation, only organisational transformation bring some losses.
2.4.1 Cultural aspects of long living companies
Collins (2001) Good to great:
Building a culture can bring reasonably good outcome only when people in the organisation are fully disciplined and motivated for disciplined act. Meanwhile, bureaucratic cultures tend to be less disciplined. He explains that keeping right people and excluding wrong one help organisation to avoid bureaucracy.
2.4.2 Organisational iceberg
Conforming to Mullins (2002) cultural aspect in the organisation is crucial. It can be divided to formal and informal types where formal one consist of formal resources, technology, aims and morale, financial aspects and skills of workforce and other organisational facilities. Here, the author believes that corporate culture can be described by the metaphor of 'organisational iceberg' where formal culture is a part of the above surface and informal culture as a hidden behavioural issues lies below the iceberg surface. Meanwhile, informal culture contains communication aspects, attitudes, informal team processes, conflicts, personal beliefs, political issues and fundamental abilities and other facilities (J.Hyde et al, 2004).
2.4.3 Kottler's eight stage
One more theory in sustaining transformation confirms the same phases and states that changing organisation must go through. Kottler J.P., a professor from the Harvard Business School, comes up his own 'Eight main reasons why transformation efforts fail' as an examination result of more than 100 companies.
1. Creating a sense of shared needs and urgency
At this stage the market is tend to be explored and the main competencies should be defined. The problems and the way of solving them in the work place should be communicated with other staff and make change more desirable. Normally, change is hard to accept for people because it makes them feel uncomfortable and require an additional personal development. Therefore, sometimes the process fails at the early stages. Leadership should be effective and convincing to avoid status quo.
2. Creating and being part of a guiding coalition
In order to make it more persuasive teams and groups of managers are being created representing the driving force to change. This group of managers should practice teamwork and unity. CEO should strongly believe in chosen root and provide a support for senior managers.
3. Developing a vision and strategy
The vision or the final destination of whole transformation should be developed and discussed on all levels constantly controlling and directing people. Establishment of new strategic tools will help to push organisation to unfreezing.
4. Communicating the change vision and mobilising commitment
New incorporated strategy and vision should be shared and communicated on a simple and reasonable way avoiding short single messages. Organisation of multiple meeting with staff will help to define about their problems and worries.
5. Enabling employees to make the change
Elimination barriers coming from structure of organisation, policies and procedures and involvement of people into transformation process, doing things in the new way are the main characteristics of this stage.
6. Generating and celebrating short-term wins
Very important to target for success and to be optimistic about change neither than believe in the better result. When people start making first steps and do their best necessary to give a reward about their work and mention that everything is under the control. Creation of small goals should help to track the progress within 12 months. However, change as a process takes many years so supporting people during this period of time.
7. Consolidating gains and building on success
To implement change more effectively the simple way will be to employ new people from outside to accelerate the process. Worth not announcing good result in advance to keep people motivated for change.
8. Making stick
Make a clear connection between new attitude and overall success. Continuous improvement of management style should demonstrate the actual change behaviour. The final step is to refreeze the new system to operate effectively.
2.5 Five Phases of the Organizational Life Cycle
Professor Michael Porter from the Harvard University Business School has described the industry life cycle as 'the grandfather of concepts for predicting industry evolution'. The fundamental concept is that the industry or any market segment within an industry goes through basic steps of development, each of which has implications for strategy. (Lynch R., 2003)
Initially, organizations have various states of growth. The first and most important issue for manager willing to grow the company is to determine what stage of life cycle the company in (where we are now?) and then to define growth strategy (where do we want to be?). The whole concept of the theory is very basic and simple. Four stages of organizational life cycle are birth, grow, maturity and decline.
According to Murray Johannsen in his article Five stages of the organisational life cycle (2009) the organisation and leadership should behave differently on each of stages. The graph above illustrates product life cycle which is similar to industry life cycle. It represents organisation based on two values like sales and time. Therefore, we can assume that longevity of the organisation dependent on how the organisation cope and survive each stage of life cycle.
The introduction stage characterises the early state of the company where it striving to bring up the product or service to the market. This stage is pronounced as start up stage because normally it requires major investments. As soon as funds received the company can move to the growth stage. However, most of the businesses find it hard to cope with this phase and eventually go broke at the starting point.
In the growth stage the company does well, revenue arises, new product development, high competition and employing more people et al. Growth in sales is not an indicator, it might vary from year to year depending on the market conditions.
Based on the studies of the author, the young organisation is more likely to experience 'dry rot set' (a set of problems occurring at the early stage). This explains fourteen symptoms that might be on the small-medium enterprise. Changing and training small amount of staff is better than changing the whole organisation when it is late. Therefore, each organisation attempts different development and growth.
Next stage is maturity phase where the market is already saturated with the product and becomes well-known, customers are satisfied and market gets mature. At this stage the organisation is at the top of business activity where now it is well established and has permanent, adequate position. This stage is very essential because at this point the organisation could begin its life cycle again or do everything to remain at this phase for a long time. This stage requires new growth as well as R&D and other strategies to stay competitive on the market.
As evidence, the research has been conducted in 2003 by 1900 business professionals who defined the main problems on the industry.
Reasons for Decline
Most of the organizations might start declining when they have no alteration process in leadership. The manager should be able to detect the first indications of decline.
- Declining sales relative to competitors
- Disappearing profit margins
- Debt loads which continue to grow year after year (Johannsen M., 2009)
Kimberley, Miles and associates (1980) in the book 'The organisational life cycle' suggest their own sources of decline. The book discusses the sources of various crises as an objective phenomenon and as underestimation of organisational people. Basing on the studies of Levine, they specify four main reasons like organisational atrophy, political vulnerability, problem depletion and environmental entropy. Organisational atrophy happens as a result of diminishment of 'organisational muscles tone'. Here the author differentiates organisational failure among fast-growing and slow-growing companies as they are facing different problems. Vulnerability is very common at its early stage of life cycle, 'liability of newness', inefficiency due to inexperience. Lack of legitimacy is explained as an important organisational resource and the problem of exaggerating the attainment of economic resources and neglecting to foster of political acceptance. The final factor comes from the decreasing ability of environment to encourage an organisation.
In the actual life cycle theory decline phase may not last for long time. Meanwhile, in order to anticipate the death of the company necessary to obtain organisational development through various staff trainings, changing the corporate culture and focus on improvement of leadership as a key to success.
The final stage of life existence is death. Author emphasizes that 80 per cent of declining industries are suffering from wrong leadership style and illustrates that on the Chrysler Corporation example.
However, every theory has defenders as well as opposes. This model have been criticised because it is difficult to determine the duration between phases and identify the exact stage where company operates. A number of companies pass over some stages and cannot define themselves in the actual phases, mainly as an effect of technological advance. Another point was made by Lynch (2003) that company can stimulate transformation and therefore change the shape of the life cycle curve. For instance, technological advance in camera industry extended corporate life by reducing size of the product adding value and electronic storage in place of film (Lynch, 2003). And finally, the competition is vastly different and varies from one industry to another so competition is not taken into account while deciding the position of company in the life cycle.
2.6 Defining the learning organisations
Learning organisation is more likely to adapt and react for a change. Therefore, learning is seen as a main factor of organisational survival.
According to Peter Senge (1990: 3) learning organizations are:
...organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together.
Senge in his work also describes learning from experience adds more value to decision making and develops a feedback subsequently. The provision of feedback let Fortune 500 companies to alter the future behaviour and learn on their mistakes as 'an error correction mechanism' for the organisational longevity. (Montuori L.A., 2000)
Single loop learning or adaptive learning takes place when the error has been defined and corrected with no serious consequences for the life of the organisation. Learning here is self-regulating adaptation to newly accepted information.
Double loop learning or generative learning occurs when the error actually has been defined and fixed but with the following organisational changes in structures, procedures and policies. According to the author, this type of learning develops the notion about its environment which allows detecting different ways to obtain change mission. At the same time, Miles and Snow (1994) suggest that double loop learning and the actual change process start from new way of thinking about how organisation operates.
Many organisations like General Motors, IBM and Sears went through long transformation process but they had to experience difficulties in cultural aspects, structure reorganisation. (Luthans, 1995) Those organisations failed on the stage of adaptive learning therefore it was essential for them to go through generative learning (double loop learning).
Meanwhile, Morgan in 'Images of Organisation' (1986) published book clams that sometimes double loop learning is ambiguous and creates barriers in achieving that. The first major problem is bureaucratic structure that influence on system of thought of people and de-motivates them to take their own decisions and deflecting the attention of managers. So the organisational design is very essential when it comes to learning. Another difficulty in double loop learning is the big hole between what people does and what they say. (Morgan, 1986) The connection between the actual activity and theory is favourable that will bring the values and norms adapted in the theory to the reality of the work done. Prevention of these barriers simplifies the process of double loop learning.
Chris Argyris, the Professor from the Business School at Harvard University, argues in the article 'Good communication that blocks learning' that the common techniques of communication like observation can cause restrictions for the learning process ( Argyris, 1994). The author believes caused resistant behaviour among employees fosters the attitude which criticises the management and points on major disadvantages where management should be aware and be ready to correct mistakes. In addition, it might de-motivate from double loop learning process which, in words of Argyris, stimulates people to analyze their own behaviour and be responsible for taken actions. Also organisations tend to establish fixed position preventing from implementing the guidance and advice of experts and transformation agents (Cors, 2003). Normally, people overcome these problems individually or within groups by bringing to life recommendations made by experts and working on weaknesses. The author suggests for managers to motivate and encourage people to participate in determination what organisation needs. Observation of individual or group performance is developing need in continuous organisational learning and implementation. (Cors, 2003)
Luthans (1995) describes 'knowing organisations' as successful, old and well-known companies. Successful organisation is adaptive and can remain until they stay stable and mature. In the words of the author, the real learning require the constant control from the manager, the efficiency and predictability and organisational preparedness for analyses of past experience.
Brown and Packham (1999) in their research differentiate terms 'learning organisation' and 'organisational learning' where first concentrates on ideal types of learning process and the second one is rational and does not require the actual change. The paper observes existing literature and setting the aim to debate the critical issues of organisational learning process. They define two main types of the process. Prescriptive approach stands for the notion 'how organisation should learn' and descriptive approaches describes 'how does organisation actually learn'. Criticism of this approach can find a place in being very theoretically oriented as in reality such theories barely could be implemented on practice.
Peter Senge (1990) in his bestselling book 'The Fifth Discipline' describes the main features of learning organisation and perceives it as a competitive advantage among others. He derived five main disciplines that learning organisation follows as system thinking, personal mastery, mental models, shared vision and team learning. (Senge, 1990)
The learning stage starts from personal change says Senge and Kleiner et al (1994) in 'The Fifth Discipline Fieldbook'. People are willing to share the knowledge and direct other people but they have no opportunity to listen causing problems, therefore, people should opt to change their own attitudes. This book demonstrates ideas presented by various companies about self acquaintance and practices exercises to develop the notion.
As long as the process of self transformation completed it is time to move to system of thinking stage, the notion explaining how organisation should work. Next step would create the overall understanding and sharing the vision about future plan and work on accomplishing the vision through effective team learning.
2.6.1 Kolb learning cycle
Kolb has developed the experimental learning cycle providing a learning technique and developing reflective practice. The framework represents four basic stages that can be entered any time but must follow the right sequence of particular stages. He suggests that learning from experience is not enough but important to reflect the knowledge gained and to develop a concept that can be useful for a new situation. Therefore, this concept should be experimented on the new situation bridging the gap between theory and practice by planning, acting and reflecting. One of the models represents four-stage cycle as shown on the diagram below.
The whole idea of learning process goes through the cycle. First stage would involve experience when some event has happened or implemented plans and ideas into practice. Next step is observation of gained experience and revision of what and how the action was done in the past. After analysis and reflection to the problem we are moving to abstract concepts containing the understanding and generating new ideas about the development of our actions in the future. And finally, application derived ideas and feedback to the new coming situation. And the cycle repeats all over again with new action made.
2.6.2 Learning as a key for organisational improvement and innovation and community building
Many experts support an idea that system of thinking creates a correlation of main factors between each other neither than concentrating on single factor itself. System of thinking requires intense and comprehensive analysis of organisation including change concept as it was made with association of environment, demand and constraints.
According to.... general systems theory (GST) and cybernetics are weighty in terms of corporate longevity. Explaining 'cybernetics as a "system" theory, based upon the translocation of information between systems and their internal and external environments and the feedback on the system's purpose in relation to its environment'. Meanwhile, organisational learning is another projection of general systems theory. The core idea of systems thinking is an indication of organisational activity and structural change are able to stimulate long-lasting development that affect on longevity factor. And on the other hand, these missing elements can cause the direct organisational decline says .....
The learning organization organizational learning, system of thinking
Montuory L.A. in the article 'organizational longevity' (2000) explains organizational learning through system of thinking approach. Nature shows examples when some organism starts behave differently meaning that learning process has taken place. Therefore, for living species as well as companies learning process and receiving a feedback becomes a key for survival.
Montuory mentions three elements of learning process like single loop learning, double loop learning and deutero-learning. First two elements were discussed earlier.
The capability of company to generate new knowledge and spread it throughout company to workers encouraging people for decision making is the core idea of learning organization.
Learning organization implies a generation new knowledge or 'insights' effecting on the future behavior of workers. 'Insights' derived from particular organizational situations presented and the reaction of workers in compare with results from past experience. This approach permits to define the need in organization change as a main condition for organizational longevity.
When organization members have the capability, through internal change mechanisms and/or external reviews, to understand the logic of their current approaches and test them against meaningful alternatives, the organization then has the capacity to "learn" - to reshape structures, systems, and procedures either to allow existing competencies to flourish or to accommodate new competencies. (Miles and Snow, 1994, p. 176)
Miles and Snow (1994, p. 170) discover the term of 'teaching organization' as a main component of learning model. Basically, not an organisation that learns to make the right decisions based on the past experience but people in it.
Main barriers to learning
- Internal control systems
- Feedback systems
Common tools for developing a learning organisation
- Total quality management
- Focus on customer service
The success and survival of the organisation depend on how organization:
- Learn faster than the accelerating demands of the environment it serves
- Learn faster than its competitors
- Orchestrate the learning to implement its chosen strategy
2.7 Types of strategies implemented in companies
According to Konz and Katz (2000) in their management journal describing the main characteristics of hyperlongevity they discuss strategic aspect of an organization as a reaction to external environmental and internal changes. They suggest the success of survival strategies is determined by how well they fit the environmental context in which the organization operates (Konz et al, 2000). Basic strategies normally establish thought long period of time and they tend to be incorporated and remain as apart of organizational history. In order to define organizational strategy for survival, the authors suggest, necessary to examine organizational evolution first.
In words of authors, it is very easy to observe corporate history than defining the actual strategies for long survival as well as its implementation. Organization has a very complex interaction between corporate history, driving forces and the environment. Different organizational groups are interested in their own purposes while having various strategies. The notion of environmental also varies as well as its implementation ways.
On the other hand, Ingrid Bonn from Griffith University in the article 'Staying on top characteristic of long term survival' talks about importance of formalized planning system within an organization while some critiques claiming this planning system blocks strategic thinking. This emphasizes the significance of analyses for strategic development and its implementation. Leaders should establish the planning system which provides a structure and analysis for strategic negotiations and fostering management liability to this process. This framework demonstrates functional style of organization by using planning system to obtain the value. Meanwhile, applying of formalized planning system boosts the strategic creativity.
In addition to a carefully designed strategic planning system, managers need to make sure that their companies have a clear corporate direction for the future. This includes the development of a vision as well as a mission statement for the organization as a whole. A clear articulation of these issues helps to ensure that all senior managers have a shared strategic perspective of the organization. In addition, they provide strategic guidance and clarify the focus for all the organization's efforts.
Strategic clarity alone, however, is not sufficient. Long-term success does not result from formulating and articulating vision, mission and strategies, but from their implementation. Proficient strategy implementation is dependent upon competent people, effective internal organization and superior functional competencies. The results from this research have demonstrated that a significant area for survival was research and development. Organizations need to develop a strong technological base which can be used to establish a distinctive technical competency. This requires corporate commitment to innovation and implies that technology decisions should not be left to R&D specialists alone, but should be taken within the context of the organization's overall strategic plan. In addition, managers need to shape the organizational context through well-designed socialization and training programmes and to develop a culture which is conducive to entrepreneurship and innovation.
This research has also shown that size contributed significantly to company survival between 1982 and 1993. It was argued that companies need to cross a certain threshold to take full advantage of size effects such as economies of scale and at the same time to minimise disadvantages associated with large size such as bureaucracy and inflexibility. Consequently, senior management needs to pay particular attention to possible disadvantages caused by size and to undertake early measures to overcome them. This might include reducing the number of layers in the organization, facilitating communication between the individual divisions or business units, developing policies which value flexibility and designing a reward system which values non-bureaucratic behaviour at the various levels within the organization.
Finally, the finding that foreign owned subsidiaries were more likely to survive than Australian owned companies indicates that managers in domestic owned companies must be aware of the greater vulnerability of their organizations. Managers need to design and implement a competitive analysis system that helps them to understand the forces of competition in the industry and provides reliable and timely data on their competitors' strategies, capabilities and intended moves. Such a competitive analysis system should have an international focus and enable radical scenarios, such as potentially revolutionary changes undertaken by the competitors, to be explored. Managers need to pay particular attention to the funding and staffing of the competitive analysis unit and to position it close to senior executives and business unit leaders. The competitive analysis system should become an integral part of senior executives' decision making processes, enabling managers to gain a better understanding of both domestic and foreign competitors and promoting the development of more effective strategic moves.
Ingrid Bonn, Griffith University Staying on top characteristic of long term survival
Business immortality techniques:
- Organizational Redesign
- Management Succession
- Company Life cycle
- Business Reinvention
- Corporate culture
Business strategy for organizational survival:
2.8 Critical successful factors (CSF's)
2.8.1 Leadership as a key factor of success
Leadership become one of the important aspect mentioned by different authors earlier. In words of Senge (1990) leaders are change agents, guider and designer in a learning organisation. (Senge, 1990) The leader should be inspired by examining various points of view on some problem from different angles using meetings and conversation. Primary function of leadership is to manage the organisational development and evolution, having responsibility for organisational mission, politics and overall structure. Meanwhile, transformational leaders should have a vision who "build theory, articulate principles, examine assumptions that fit with the demands complex problem-solving ability on the part of leaders" (Tichy and Devanna, 1976, p.32)
One of the most popular published books 'Built to Last: successful habits of visionary companies' by Jim Collins Jerry Poras (2005) contradicts to the previous theory. Authors say that an organisation has no need in charismatic and great leader illustrating it on performance of HP, Walt Disney and Wal-Mart....... The visionary company does not have to decline because their leader dies but not when it influence on organisational strength to become visionary organisation only for few decades. So the book concludes that charismatic leader is not necessary for a visionary company like 3M, P&G, Sony, Boeing, HP, and Merck.
Every good-to-great company should have five levelled leadership suggests Collins (2001) in the bestseller 'Good to great'. Hence, five levelled leadership requires during the transformational period. The ranking derives from the executive abilities of leaders on particular organisation citing as the main determinant of surviving.
Opposite point concerning leadership was made by L.A.Montuory (2000). As it was mentioned earlier, in order to be successful and flourishing on the market company need to be a learning organisation and be reluctant to change. Therefore, effective leadership should encourage labour for contribution in double loop learning process as well as cultivate system of thinking and dynamic systems to promote individual and organisational development. In words of L.A.Montuory, effective and reliable leaders should be dedicated to the bigger organisational mission.
He explains 'If we define an organization's mission as its reason for being, a vision clear to all members of the organization provides a sense of direction necessary for progress at best, survival at least.'
In unpredictable changing environment organisation requires a proper guidance and clear orientation where leader should be able identify barriers and predict them. Difficulties in leadership can be mentioning external environmental significant changes but cannot bring significant changes in the internal environment of an organisation. Very hard to define the degree of change that environment requires and to what extent organisation adapted to this change. Relatively small environmental changes can bring to colossal transformations in organisation.
A big number of companies are going through turbulent state that requires analysis of situation from different angles providing way for adjustment to change. The responsibility of leader is to foster the action plan for dynamic adaptation for change.
Nowadays modern companies demand leaders who have enough abilities to handle transformation and manage learning organisation. Decision making process primarily based on the mode of how the information was accepted; in what angle it was understood. Leaders concerning about longevity of a company able to differentiate and select appropriate information of external environment from unrelated and therefore can give people the right direction for change.
Relatively similar point was made by Miles and Snow (1994, p. 170) towards leadership role. Learning organisation management, in words of authors, should be like teachers to assist to workers in reforming old style of thinking and advancing double loop learning.
'If management recognizes that the organization is a "teaching machine", its task becomes making certain that the machine is programmed to reinforce desired outcomes and behaviors. A savvy management will be careful in designing the organization's teaching program.' Miles and Snow (1994, p. 170)
Ref: What kind of leadership? Organizational longevity, system of thinking
2.8.2 Human resources
2.8.3 Technology transfer
Collins (2001) mentions technology and technological change as an aspect of longevity. In words of the author, good-to-great companies should perceive technological change differently. The main reason for this idea is that goo-to-great companies exploit technology as a catalyst of driving force but not generating it. Most of the successful organisations do not start their change process with advanced latest technology but they are innovators in terms of applying this technology as they make a progress says Collins (2001).
He argues that responding to technological change can be a good indicator of the organisational ambitions for rapid great development than normal common ones. Good-to-great companies react to change using creativity and consideration, motivated by realisation of potential objectives to great outcomes but common organisations usually forced by the tension to remain farther back from others.
Basing on the research made by author interviewing eighty four companies where eighty percent of them do not consider technology as a primary factor in changing process. He considers that 'Crawl, walk, run' is an effective way during rapid technological transformations.
On the other hand, Terence C. Krell from the John Carroll University defines this problem of organisational longevity and also connects primary with technological change. Technology in the industry perceived as an automotive process of production that involves directly the labour of the company. He believes technological change at workplace can be caused by oversaturation of the market with latest advanced technological devices. For instance, electronic manufacturers who could not adapt and develop technology have got destroyed by more advanced devices like electronic calculators. Meanwhile, those advanced machines required limited skilled workforce and these skills cannot be applied for manufacturing of different products. The same dilemma happened when Internet was invented and started being applied in various industries affecting to computer and other fields like online sales. Technological transformation influences on market conditions by manipulating costs and accessibility to products. Product development and its introduction on the market depend on speed of technological change. This is how the author explains product life cycle fro the technological point. Terence C. Krell describes the term of product life cycle having the same stages as business life cycle. Hence, the average product had existence for no more than 25 years in early 1920 and nowadays it reduced to two years overall. Therefore, technology development here plays a huge role in words of author.
Superior technology needs multi-skilled labour especially in certain industries in order to use the same staff for different tasks. In order to remain updated in technological and face the rapidness of the process labour should be trained continually to gain necessary technological knowledge and skills. Nonetheless, managers are more concentrated on the demand of the market than the demand of the organisational culture. Those managers can support and maintain and build receptive organisational culture.
Ref: The evolution of organization culture
2.9 Critique analysis of literature review
The information provided was very specific and contributory to the research. The impact of authors varies from one to another in examining the quest for corporate immortality and its impact on the reality of companies. While examimg the existing literature and business journals the authors come up with different perception of longevity of company and various ideas how to achieve and sustain this state.
From the literature review the expression 'corporate immortality' became more realistic and possible to attain. According to scientists, organisations require considering plenty of factors starting from the basic size, culture of company and ending with corporate strategy to remain successful and for long period of time on the market. But throughout whole literature review experts are having different viewpoints on various aspects of organisational life; therefore, there is no obvious answer what is right or wrong. Different companies can achieve success in different ways depending on the environmental conditions, the corporate 'health' and stability of the company and industry operated. Meanwhile, authors differentiate between terms of 'longevity', 'survival' and 'success' as unlike independent concepts that should be taken into account. Company do not have to be successful to survive on the market. The performance of long living companies cannot necessarily be excellent as it might last with medium or small turnover and continue to operate constantly. While best players of the market can blast and take a top places on the ranking of successfulness but they can end up declining very soon. This might be applied especially for dot.com companies where the cutting edge technology and strategy adoption accelerates the process of product and organisational life cycle. Such dot.com companies can make huge profits but then when technology moves on those who do not change and match to environmental conditions are more likely to descent.
Hence, if we discuss organisational longevity we need to talk about the ability of company to learn and to receive a feedback from the past experience that should be reflected decision making in the future. Companies were described from the organism and mechanism angles where the first one allows the company to develop its knowledge and apply it in the real situation but for organisation-mechanism is impossible to do so.
Corporate immortality is directly corelated to organisational life cycle theory where organisation goes through particular life stages. These stages are common for all types of organisations as well as cannot be avoidable. There are a lot of disadvantages of this theory. As it was mentioned above, there are no exact borders between the stages and organisation should feel when to move to next stage. This affects on future strategy first of all and future performance.
A big number of scientific journals and books are trying to answer the big question in business industry, what features and factors permit organisation to remain 'alive' for long term. This question is critical especially in turbulent period of time like we see nowadays, economic slowdowns and oil wars in Iraq and Palestine/Israel.
Previous empirical research shows a foundation for future findings and as time changes some certain things remain the same. Therefore, these studies provide overall picture of the longevity problem.
How do your suggestions compare with the following?
- Who are the principal commentators and theorists in the subject you researched?
- How was the previous research conducted and how does it differ from other studies and my own proposed research?
- What were the findings and how do they differ from other studies, and what I expect to find?
- How relevant are these conclusions today generally and for your own research?
- What were the limitations and weaknesses of these previous studies?
- What are the major issues and debates about the research topic?
- How has previous research influenced your own proposed research methodology and methods?
3.1. Comparison of the top UK companies for the past 40 years
The population of the research consist of the 50 largest companies operating in the UK in 1969 and 2007. In order to be part of the research the companies should be on the top positions of the ranking provided by Times 1000 magazine. The rankings were published according to turnover characteristics which involve 1000 companies. In the table of Britain's 1000 biggest companies, the rankings are assessed primary in terms of sales with subsidiary rankings in capital employed and pre-tax profits.
The main purpose of the research was to observe and analyze the evolution of first 50 companies between 1969 and 2007 and define whether they were still on the top 50 positions of the ranking by 2007.
Companies observed were allocated as survivors according to several variables like:
- If the companies remained in the top position for past 40 years
- If they have been acquired or merged with other companies in this period of time and still remained on the top 50 companies by 2007 and had not changed the name and structure of an organization
And companies were categorized as declining according to criteria like:
- If they have been merged or acquired in 1969 and 2007 and changed the name and a structure of an organization
- If they have been liquidated
In general, after applying these criteria only 13 companies out of 50 in 1969 stayed in the ranking and the rest 37 companies were defined as declined ones even if they are down in the list of top 1000 UK companies.
Ingrid Bonn, Griffith University staying on top characteristic of long term survival
Meanwhile, industrial analysis takes place. For instance, back in 1969 the oil, chemical and tobacco industries were dominating but service and retail fields like banking and supermarkets are prevailing in 2007 and nowadays.
This chapter examines the method of research for the study and data gathering process and procedures as well as tools used for data analysis.
The research is based on use of quantitative and qualitative approach of gathering information for this study. The qualitative records were taken from information,
Data obtained from two main sources: the primarily (practical information from the representatives of business industry, experts and proficients of particular companies) and secondary research (academic information from the books and business journals and published materials).
Data generated through focus group discussion in order to get information from the industry professionals and skilled managers of the business area to acquire their opinion concerning corporate longevity.
The research that was held consists of interviews conducted with managers of the companies in Bradford, Chester and Almaty (Kazakhstan). The aim of the research was to confirm the finding in literature review and find out some new aspects of corporate longevity. I tried to answer the question: Corporate immortality is a myth that cannot be achieved or a reality that attracts people doing business.
In this paper the case study approach used in order to investigate the longevity factor and the creation of additional data for the research. The use of case studies is also important to illustrate
Types of interview:
- Morgan Gareth, Images of Organisation, 1986, Sage Publication, Inc, printed in Great Britain by J.W.Arrowsmith Ltd, Bristol
- Luthans Fred, Organisational Behaviour, 1995, 7th edition, McGraw-Hill, Inc. , USA
- Senge, P., 1990, The Fifth Discipline. New York, Doubleday
- Senge, P, Kleiner A., Roberts C., Ross R. B., Smith B.J., 1994, The Fifth Discipline Fieldbook, London, Great Britain
- Kolb David, Experiental Learning: Experience as a resource of learning and development, 1984, Prentice Hall, Inc, New Jersey, USA
- Ingrid Bonn, 2000, Staying on top characteristic of long term survival, Griffith University, USA