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Enhancing Organizational Performance

The Organizational Obituary

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“After 80 years of selling sumptuous hand-engraved stationary and other writing accessories, the luxury stationer Mrs. John L. Strong is shutting down.  The venerable Madison Avenue company, whose sturdy note cards and lined envelopes were sold in Barneys New York and used by European royalty, said Thursday it would close its Madison Avenue atelier and its boutiques…Founded by Flora Strong during the Depression, Mrs. John L. Strong was the stationer of choice for well-heeled brides and socialites.” (New York Times, May 22, 2009)   

Why do we age? The easy answer is that time passes and we grow older. We age. Unstated in that answer is the notion that aging at some point brings with it a deterioration of physical and mental abilities. The perception of that deterioration has been the source of ageism and phobias, discriminatory behaviors against older folks and a fear of becoming old, fostering a youth culture where many feel that they must look or behave younger than they are in order to avoid being labeled as “old” and “obsolete”.

What was the oldest company in the world, a construction company located in Osaka, Japan and founded in the year 578 was liquidated in 2007. Four of the next ten oldest companies are either breweries or wineries, two are hotels (hopefully with new mattresses and hot water), one is a restaurant, one produces salt, one is a foundry making bells, and one makes religious artifacts. What do the oldest of the old companies have in common? Many of them are still run by the founding families and some boast of being run by the 40th+ generation. These companies have managed to survive through wars, recessions, depressions, catastrophes, succession issues, changing technology, markets and managements. Detailing what has allowed them to survive those challenges would be the subject of interesting research but it has yet to be done. (If anyone wants to fund this work I would be happy to take it on.)  But those companies are the exception, a tiny sliver of the proportion of the companies out there, the oldest of the old, which is indeed a very small group. If you look up when the 100th oldest company was founded you are already up to the year 1780, practically in modern times.

Organizations clearly go through life-cycles or aging, from startup to middle age, to maturity and old age. And while some are able to survive for the long-term, others pass through these “life stages” rather quickly. The life-stages that an organization experiences might not be as closely tied to the passage of time as human aging, but rather to organizational behaviors that can be occurring at any time after the organization’s founding. One has to wonder if older organizations, those exhibiting signs of later life-stages should be somehow revitalized or allowed to pass away and whether any insight can be gained by comparing what happens to individuals as they age vs. what happens to organizations as they age into more advanced life-stages.

A story in the New York Times (May 22, 2009) describes what may be clues to a lucid human old age, typically enjoyed by only one out of 200 of us. “These are the most successful agers on earth, and they are only just beginning to teach us what’s important, in their genes, in their routines, in their lives,” said Dr. Claudia Kawas a neurologist at University of California at Irvine. “We think, for example, that it is very important to use your brain, to keep challenging your mind, but all mental activity may not be equal. We’re seeing some evidence that a social component may be crucial.” (I can’t help but wonder from that statement whether Facebook, Myspace, LinkedIn or other social networking site heavy users will outlive the rest of us or will that privilege fall only to those who interact in person).

Dr. Osei Darkewas from the University of Illinois at Chicago reviews the predominant biological, and sociological theories of why the deterioration associated with aging occurs.  His findings:

Biological theories include:

  • Wear and tear theory – the body simply wears out from constant use just as a machine would
  • Autoimmune theory – the tendency of the body to reject its own tissues over time
  • Free radical theory – certain chemical compounds accumulate over time causing damage and aging
  • Programmed cellular theory – every organism is programmed to die after a certain number of years, possibly because it adds to reproductive and survival fitness at the species level
  • Somatic mutation theory – an accumulation of mutations eventually results in functional failure and death
  • Homeostatic theory – the inability of the body to maintain stable levels of various chemical elements over the long term.

Social theories of aging include:

  • Disengagement theory  – a gradual disengagement of the individual from society increasing the rate of aging
  • Role theory – loss of identity and self-esteem associated with role loss
  • Activity theory – the more active the more satisfaction with life the elderly have
  • Political economy theory – states that programs aimed at servicing the elderly are more beneficial to capitalist interests than the elderly
  • Continuity theory – the substitution of new roles for lost ones slows aging
  • Age stratification – unique aging issues associated with a cohort (a generation) because of environmental and historical experiences
  • Modernization theory – role of elderly tends to diminish as the level of industrialization of the society increases
  • Exchange theory – aged have less power due to having less resources, resulting in their isolation and deterioration
  • Life course perspective – the accumulation of biological, sociological and psychological issues resulting in aging 

The reasons as to why we age are most likely not simply one of the theories posited above but rather it is most likely to be a combination of factors that cause the human body to deteriorate over time.

Jim Collins has a new book out called “How the Mighty Fall”. He states that he has come to see institutional decline as a “staged disease”, harder to detect but easier to cure in the early stages. He lists 5 stages of organizational decline that in his view lead to organization death including:

  1. Hubris Born of Success
  2. Undisciplined Pursuit of More
  3. Denial of Risk and Peril
  4. Grasping for Salvation
  5. Capitulation to Irrelevance or Death.

But these stages of organizational decline seem to be the emergent characteristics of perhaps underlying etiology. Let’s speculate a bit on how the theories used to describe human aging might be used to describe organizational aging.

  • Wear and tear theory – The equivalent notion for organizations would be to just keep doing what the organization has done before and been successful at, not re-examining assumptions or approaches to the business. Over time the tried and true might just wear out as it become more and more obsolete. However, countervailing this effect would be organizations that are constantly renewing staffing, products, processes and assets. However, if an organization did not emphasize renewal of customers by attracting new ones and renewal of its product line to keep it up-to-date this could be a contributing factor to organizational aging. 
  • Autoimmune theory – I once heard a joke that the definition of a consultant is someone who comes from more than 50 miles away. The notion being that some organizations reject the advice given by internal staff because they are too familiar. So a heavy dependence on external consultants while disregarding internal staff could be a contributing factor to organizational aging.
  • Free radical theory – this would be the notion that organizations continue to put band aids on their problems rather than fixing the legacy issues and systems that are the root cause. Over time the buildup of band aids can cause the entire system to collapse and certainly opens the door to competitors not encumbered with the legacy systems. 
  • Programmed cellular theory – to me this is one of the more interesting notions. We die because it is in the best interests of the species that we die so that more fit off-spring potentially with adaptations better suited to the current environment can take our place. If we were to live forever there would be slower reproduction and slower evolutionary changes making the species more vulnerable to extinction should the environment change. If this is correct you could draw the conclusion that organizations that have “run-their-course” should be allowed to fold so that more evolutionary fit versions can arise to take their place.
  • Somatic mutation theory – organizations that continually mutate, trying new things in an effort to always grow, perhaps Jim Collins’ “undisciplined pursuit of more”, will eventually build up enough unsuccessful components that organizational death will occur.
  • Homeostatic theory – the inability of the organization to maintain stable levels of various needed elements over the long term, for example innovation, risk-taking, entrepreneurial, meritocracy, integrity etc.

One vaccination that organizations seem to be trying to slow or prevent aging is sustainability. In one ad that ExxonMobil has running they tout their approach to “citizenship for the long term” or sustainability which in their terms means balancing economic, environmental and social goals. Similar to what many other organizations have called the “triple bottom-line”. They list in the ad those things they are doing in support of this notion, including: investing to deliver new energy supplies, developing energy efficient technologies, hiring and developing local employees and talent, reducing  emissions, helping consumer use energy more efficiently, supporting social, health and education initiatives, increasing safety and reducing spills. The ad states that in turbulent times a long-term approach is vital to organizational survival. I think that many of these initiatives, if more than words in an ad, could in fact help slow down the aging process of an organization as well, if coupled with a systematic internal refreshing of how they are executing on their work. But on the other hand, in another section of the same paper is a story about how Exxon-Mobil is being sued by villagers in Aceh Providence for hiring soldiers who carried out human rights abuses while guarding a pipeline, a sure sign of difficulty in executing on their noble aspirations.

What can an organization do to prevent their own organizational obituary, especially in these trying times? The data suggests the following:

  • Improve on the way you conduct business

–        Use the current situation as a window of opportunity to improve internal processes/relationships, tackle issues that will increase effectiveness, but perhaps have been put off, and do so in a visible/communicative fashion.

  • Reinvigorate the organization’s competitiveness

–        Insure that your services/products are competitive, current and better than the competition. Understand the current market and demand for your product/services and deliver a product that will be meet those current needs.

  • Provide current reassurance

–        Assure that organizational members can thrive in the current environment, providing reassurance where possible and communicating extensively. Create an environment of fairness and equality.

  • Provide longer-term alternatives

–        Provide mechanisms (e.g. experiences, training) where individuals feel equipped to thrive/prosper in alternative environments to the current organization. The value proposition to employees is to provide skills and experience that equips them for life and a meaningful career, not for a specific job. 

© 2010 by Jeffrey M. Saltzman. All rights reserved.

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Written by Jeffrey M. Saltzman

October 19, 2009 at 2:24 am

5 Responses

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  1. Brilliant and thought provoking. Having read it Im now aware of how much I’ve deteriorated in the past five minutes

    I think a more practical question than “why do we age” is “how can we regain the sense of play that we lose while aging?”

    Daniel Baitch

    March 30, 2010 at 11:01 am

  2. Nice post! I would add one more thing organizations can do to head off their own obituary in combination with the ones already suggested. Call it ‘existential reflection and action’ or if you prefer variations on developmental psychology, call it ‘generativity without decline’. Organizations should engage their membership in the following questions:

    Who am I and who are we as a firm?
    What is our real value to society in addition to our value to financial stakeholders?
    What is the story of our firm, not just past to present, but from present to future? How could that story capture the hearts and minds of employees, customers and the community at large?
    What shall be our legacy to the next 3 generations that will work here or acquire products/services from our firm?

    Coupled with Jeffrey’s questions on effectiveness, efficiency and competitiveness we now also have a set of questions that provide a sense of meaning to the enterprise, and with that a desire to do what is necessary to forestall the organizational grim reaper.

    Marc Sokol

    March 30, 2010 at 2:09 pm

  3. Jeffrey:

    As I read through your remarks, another thought came to mind. Actually it is a thought I have had for a long time based on actual experience.

    When a company is founded and becomes successful, it is driven by leaders focused on the company and on success. They have a passion for the organization to succeed. However, as time passes successive generations of leadership take control of the company. These successive leaders typically come from within the organizations, have relatively long years of service and in many ways ascend the corporate ladder based in a large part on relationships. My point now is the following:

    First successive leaders have an increasing tendency to be focused more on their careers and what is in their own personal best interest thus putting the organization second. This is where corporate politics set in and begins to rule the organization. These leaders tend to avoid making difficult decisions that are best for the organization in an effort to avoid personal career risk. They will actually put at risk organizational survival for personal success.

    Second, because each successive leadership is promoted by the outgoing leadership, and organizational relationships play a significant role in determining who ascends the corporate ladder each generation of leadership becomes increasingly self focused.

    In the end organizations self-destruct because leadership is self-focused versus being organizationally focused. I don’t know how many times I have heard leadership individuals say, “I don’t want to say anything because I don’t want to risk my career”. There are of course many similar related comments I have heard over the years, but I think the point is understood.

    When leadership loses sight of their true responsibilities and places themselves ahead of the organization, it becomes only a matter of time before the organization suffers to the point it can no longer survive.

    I know this may sound harsh, and am not suggesting this is universal in every organization, but I simply feel it plays a significant role in organization failure.

    Tim Garrett

    March 30, 2010 at 11:10 pm

  4. I’d add one additional suggestion for organizations to prevent their own obituary – don’t focus on growth. Organizations that focus too much on growth often fail. The biological anology is that one way to kill weeds is to overstimulat their growth. Better to focus on improving the way you conduct business and meet your customer’s needs.

    James Mitchel

    March 31, 2010 at 8:16 am

  5. Reblogged this on Jeffrey Saltzman's Blog and commented:

    Reviewing some past favorites.

    Jeffrey M. Saltzman

    May 19, 2015 at 12:22 pm

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