Is Your Firm Alive?

I recently read a great book called The Living Company by Arie de Geus (Harvard Business Review Press; 1st Edition, June 4, 2002) who worked at Royal/Dutch Shell. Shell did a study on thirty companies that had been around for at least 100 years to see what they might have in common. Why do some companies stick around for so long, while most die well before their “life expectancy?”

The study revealed four common personality traits that could explain their longevity.

  1. Financial conservatism. Long-lived companies do not risk their capital gratuitously and they keep out of debt with cash in the bank.
  2. Sensitivity to the world around them. Long-lived companies are good at adapting to changes in the market.
  3. Awareness of their identity. Employees of long-lived companies feel a sense of community and like they are an important part of a whole. These companies have a unique, defined culture.
  4. Tolerance of new ideas. Long-lived companies stretch their understanding by trying new things – they encourage experimentation.

These four traits form the essential character of what the author calls a living company. A manager of a living company “must allow their people to grow within a community that is held together by clearly stated values,” and must place commitment to people before assets, respect innovation before devotion to policy, tolerate the messiness of learning, and place perpetuation of the community before all other concerns. For a good summary of the study, see the Harvard Business Review article here.

Another concept that was studied was something called flocking. Any organization is bound to have at least a couple of members curious enough to poke their way into new places or to have innovative ideas. If these thought leaders have a chance to interact with the rest of the organization – by flocking together - people will learn from each other. Organizations that are encouraged to flock learn faster. Management development programs, regular meetings, and company outings are all great opportunities to flock.

An analogy in the book that has stayed with me is the puddle versus the river. A company that produces wealth for an inner circle of members is like a puddle – a collection of raindrops in a hollow. When it rains, the pool grows away from the middle, but a puddle cannot stand the heat. When a puddle starts to evaporate, the drops in the center remain, but are in danger of drying up completely. It is a closed system that can be vulnerable.

A living company is more like a river – a permanent part of the landscape. Rain may swell the river, and drought may shrink it, but in will probably never disappear. Rain drops never stay in one place for long, and new drops succeed old ones. The river is self-perpetuating and is constantly in motion.

Is your firm a living company?

KPFF has been around for nearly sixty years. We have grown from a small, local structural engineering firm in Seattle to a major national consulting engineering firm with more than 1,200 employees. KPFF’s culture fits well with the four traits for longevity, and we are a living company for sure. I may not be around forever, but I know for certain that KPFF will be.

For more information about the author, visit his website.

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