8/13/2019 _The Living Company_ by Arie de Geus
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The Living Company" by Arie de Geus
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"The Living Company" by Arie de Geusy Stuart Crainer
The Liv ing Company: Habi ts for Survival in a Turbulent Bus
iness Envi ronmentby Arie de Geus (215 Page
arvard Business School Press, 1997)
or Arie de Geus, the corporation is an important institution.
The ultimate corporate man, Mr. de Geus spent 38
ears with the Royal Dutch/Shell Group, eventually becoming group
planning coordinator. Such loyalty runs in
e family Mr. de Geus's father also worked for the company for 26
years. In the era of career management
nd employability, this sort of devotion is decidedly
unfashionable.
nitially, as you read The Living Company, you feel a slight
disappointment at the thought of Mr. de Geus, a highly intelligent,
talented
man, spending his entire career with one company. You feel that
he has been shackled and wonder what might have happened if he
ad been set loose.
urking behind such responses is the now commonplace assumption
that being a corporate man or woman is a bad thing; that
nswerving loyalty diminishes instead of enriches. It is here
that we are wrong. For Mr. de Geus and many thousands of others
yalty is not cheaply bought. He remained curious and questioning
to the end of his corporate career. The thing he questioned mostas
the monolith above him: the corporation.
he more Mr. de Geus examined the body corporate, the more he
became concerned about its life expectancy. Companies may be
gal entities, but they are disturbingly mortal. "The natural
average lifespan of a corporation should be as long as two or
three
enturies," he writes, noting a few prospering relics such as the
Sumitomo Group and the Scandinavian company, Stora. The reality
owever, is that companies do not head off into the Florida
sunset to play bingo. They usually die young.
r. de Geus quotes a Dutch survey of corporate life expectancy in
Japan and Europe that came up with 12.5 years as the average l
xpectancy of all companies. "The average life expectancy of a
multinational corporation Fortune 500 or its equivalent is
betwe
0 and 50 years," he writes, noting that a third of 1970's
Fortune 500 had disappeared by 1983. (The combination of the Royal
Dutch
etroleum Company and the Shell Transport and Trading Company
dates to 1907, though the roots of the individual companies go
b
o the 1800's.)
uch endemic failure is attributed by Mr. de Geus to the focus of
managers on profits and the bottom line rather than the human
ommunity that makes up their organization. In an attempt to get
to the bottom of this mystery, Mr. de Geus and a number of his
She
olleagues carried out some research to identify the
characteristics of corporate longevity.
s you would expect, the onus is on keeping excitement to a
minimum: more Ronald Reagan than James Dean. The average huma
enturion advocates a life of abstinence, caution and moderation,
and so it is with companies. The Royal Dutch/Shell team
identified
our key characteristics. The long-lived were sensitive to their
environment; cohesive, with a strong sense of identity; tolerant,
and
onservative in financing. (These conclusions are echoed by Jerry
Porras and James Collins in their equally thought-provoking
book
uilt to Last, which almost serves as a companion volume.)
ey to Mr. de Geus's entire argument is that there is more to
companies and to longevity than merely making money. "The
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8/13/2019 _The Living Company_ by Arie de Geus
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The Living Company" by Arie de Geus
chotomy between profits and longevity is false," he argues. His
logic is impeccably straightforward. Capital is no longer king; the
sk
apabilities and knowledge of people are. The corollary from this
is that "a successful company is one that can learn
effectively."
earning is tomorrow's capital. In Mr. de Geus's eyes, learning
means being prepared to accept continuous change.
ere, Mr. de Geus provides the new deal: contemporary corporate
man or woman must understand that the corporation will, and mu
hange and it can only change if its community of people change
also. Individuals must change and the way they change is
through
arning. As a result, Mr. de Geus believes that senior executives
must dedicate a great deal of time to nurturing their people. He
rec
pending around a quarter of his time on the development and
placement of people.
ccording to de Geus, all corporate activities are grounded in
two hypotheses: "The company is a living being; and the decisions
for
ction made by this living being result from a learning process."
With its faith in learning, The Living Companyrepresents a careful
aowerful riposte to the corporate nihilism of the early 1990's. In
a throwaway line of revealing honesty, de Geus recalls a meeting
to
scuss job cuts at Shell. "But what about the loss of human
potential, experience and loyalty?" said a single voice. De Geus
was sile
ut his regret can be felt throughout the book.
he Living Companyproposes that the wisdom of the past be
appreciated and utilized rather than cast out in some cultural
revolutio
ontrast this with reengineering that (as practiced, if not
necessarily preached) sought to dismiss the past so that the future
could be
ith a new piece of paper. De Geus suggests that the paper
already exists and notes are constantly being scrawled in the
margins a
ew insights are added.
r. De Geus's arguments are probably at their weakest when he
contemplates why it is that companies deserve to live long lives.
Af
l, the average entrepreneur would probably accept a life
expectancy of 12.5 years. "Like all organisms, the living company
exists
rimarily for its own survival and improvement: to fulfill its
potential and to become as great as it can be," he writes. But life
is littered
ith failed stars. Some fall by the wayside. We cannot all be
great. We cannot all be Shell.
e Geus admits to surprise when asked, "'Why is it so important
that Shell should survive?" Mr. de Geus's response is telling: "To
m
as so natural that companies should seek their own survival. I
had seen nothing else in my life. Companies struggle to keep
going
o grow, for as long as possible." He rightly describes the human
implications of a company's death and says that "people do, in
fact,
mourn when a company dies." The question must be what it is that
they are mourning? Is it the salary, the security of work, the
amaraderie, the power or the work itself? I remain doubtful
whether people really do mourn companies.
evertheless, a sense of the greater good permeates The Living
Company. It is refreshingly honest. It is the testimony of someone
w
racticed the human side of enterprise and who believes that
companies must be fundamentally humane to prosper, whatever the
entury.
uthors
tuart Crainer([email protected]) is a U.K.-based
business journalist and a contributing editor to
strategy+business.Mr. Crainer is author and
ditor of numerous management books, including the Financial
Times Handbook of Management(Financial Times Prentice Hall, 2001)
and The Management
entury: A Critical Review of 20th Century Thought and
Practice(Jossey-Bass, 2000).
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