Why most companies do not survive their 40's

In his ground breaking book, The Living Company, Arie de Geus points out that the average corporation does not survive its 40's. Why does this happen?

In many ways the same dynamics that correspond to the infamous mid-life crisis, that occur in the first half of the 40's also affect corporations. The timing and the sequence is remarkably similar.

For people, that crisis has to do with whether or not an individual has maintained their connection and integrity with their core, or whether they have adapted to others to such a degree that they have lost their integrity, freedom and aliveness. It is to regain what they have lost, to reconnect inside, that people often break patterns of established behavior or act impulsively. It is for many a real crisis, but without understanding the core issues involved, many people suffer or make serious errors of judgment. People tend to survive these errors, but corporations on the other hand often do not..

After most companies turn 40, they enter a major crisis.

The corporate mid life crisis is actually a three stage process. The first stage begins around 40 years and brings disenchantment. There is a sense that things should be better, or that they are no longer ideal. Perhaps the direction of the company is altered in some way. There may be attempts to change the image of the company.

However, the disenchantment must not be ignored, because it lets the corporation know that it has wandered off course, and that the solution is internal and not external. The solution is to re-examine its core principles and direction from the ground up.

It would be a mistake to do this top down or impose a new mission statement. What is being presented as a challenge at this time is a renewal that begins from every employee, a renewal that is in effect a shared vision of how to move forward that must start outside of management and that management will be asked to refine. In a very real way what is being asked of the corporation is the renewal of a tribe, where each member is equally valued, where each member's contribution and opinion is honored. This is soul searching time. If the process is successful and not interfered with, then it brings the reward of greater integrity and cohesion within the corporation.

If it is interfered with, then the corporation risks moving in directions that may seem imaginative, but may lack practicality or deplete cash flow. If this change is not allowed to occur at the grass roots, then there may be considerable confusion between management and the work force, and then serious errors are less likely to be caught in time.

The next stage: trying to gain back the spark.

The next stage begins within a year or two of the disenchantment, and is usually a stage of action and changes. The company may re-organize, move, alter its branding or restructure. There may be a sense of being trapped in a niche. Often there is a desperation for change at some level. Again, the change must be a grass roots movement that management refines.

If the changes come from the top down, it is likely to create friction, resistance and even confrontation. It is at this time that management makes the mistake of having secret meetings to plan and implement changes. It is also at this time that management may misinterpret a need for changes coming from the grass roots as confrontation or a loss of power or authority. If it does so at this time, it will only add fuel to discontent and it will miss the vital opportunity for renewal and community that is seeking its time. The company may miss its opportunity to become alive and to regain its integrity.

Eventually the reality check.

About a year later, by the mid 40's the consequence of the changes, growth or confrontation will be felt in the decreased cash flow and in reduced productivity. This is the third stage, that pays for the mistakes, excesses or overreactions that have occurred from the first two stages. This is a time in which the company pays for its previous lack of practicality or reality checking. It faces taking a hard look at itself, but if it succeeds in addressing its challenges responsibly, with the honoring of all sides, it can come through these challenges stronger and more solid that it was before.

I have outlined the basic patterns that companies experience during their forth decade. These are real challenges that that lead most companies to their demise. The issues that reveal themselves at that time are an opportunity to reconnect to the meaning, vision and enthusiasm that originated the company. It is an opportunity for revival and an opportunity to extend partnership to everyone working within the company. On the other hand it can be a time of confrontation and greater separation between workers and management. The choices determine the very existence and lifespan of that company or corporation.

Originally Published 2010, in companiesalive.com
Copyright © 2010-2012 by Roman Oleh Yaworsky
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