Engineers typically work at the heart of the new product development process but rarely get more than a smattering of education about the business of business during their academic career. Even though they start with a significant hole in their education 22 percent of the S&P 500 CEO’s have an engineering degree. This result is rather startling given the vast number of business educated professionals competing for the position. A Bioengineering program concerned with the multiple career paths of their graduates would recognize the implications of this statistic. In this vein I would like to delve into the business world for a few paragraphs and review the implications of a recently published corporate study about the impact of corporate environment on business longevity.
Why would you care about the quality of your corporate environment? The reason is obvious isn’t it? Anyone’s career prospects within the corporation is effected by its environment. According to the article in Bloomberg Businessweek citing an internal Shell study most corporations do not last more than 40 years.
Those that do have the following characteristics.
“1. Long-lived companies were sensitive to their environment. Whether they had built their fortunes on knowledge (such as DuPont’s technological innovations) or on natural resources (such as the Hudson Bay Company’s access to the furs of Canadian forests), they remained in harmony with the world around them. As wars, depressions, technologies, and political changes surged and ebbed around them, they always seemed to excel at keeping their feelers out, tuned to what-ever was going on around them. They did this, it seemed, despite the fact that in the past there were little data available, let alone the communications facilities to give them a global view of the business environment. They sometimes had to rely for information on packets carried over vast distances by portage and ship. Moreover, societal considerations were rarely given prominence in the deliberations of company boards. Yet they managed to react in timely fashion to the conditions of society around them.
2. Long-lived companies were cohesive, with a strong sense of identity. No matter how widely diversified they were, their employees (and even their suppliers, at times) felt they were all part of one entity. One company, Unilever, saw itself as a fleet of ships, each ship independent, yet the whole fleet stronger than the sum of its parts. This sense of belonging to an organization and being able to identify with its achievements can easily be dismissed as a “soft” or abstract feature of change. But case histories repeatedly showed that strong employee links were essential for survival amid change. This cohesion around the idea of “community” meant that managers were typically chosen for advancement from within; they succeeded through the generational flow of members and considered themselves stewards of the longstanding enterprise. Each management generation was only a link in a long chain. Except during conditions of crisis, the management’s top priority and concern was the health of the institution as a whole.
3. Long-lived companies were tolerant. At first, when we wrote our Shell report, we called this point “decentralization.” Long-lived companies, as we pointed out, generally avoided exercising any centralized control over attempts to diversify the company. Later, when I considered our research again, I realized that seventeenth-, eighteenth-, and nineteenth-century managers would never have used the word decentralized; it was a twentieth-century invention. In what terms, then, would they have thought about their own company policies? As I studied the histories, I kept returning to the idea of “tolerance.” These companies were particularly tolerant of activities on the margin: outliers, experiments, and eccentricities within the boundaries of the cohesive firm, which kept stretching their understanding of possibilities.
4. Long-lived companies were conservative in financing. They were frugal and did not risk their capital gratuitously. They understood the meaning of money in an old-fashioned way; they knew the usefulness of having spare cash in the kitty. Having money in hand gave them flexibility and independence of action. They could pursue options that their competitors could not. They could grasp opportunities without first having to convince third-party financiers of their attractiveness.”
So why is this information important in an employment environment in which the vast majority of corporate loyalty to their employees is based on the bottom line? Well it certainly provides insights to those of you who will become future CEO’s. More immediately the information presented gives every employee or potential employee a broader perspective about what to look for or ask about a corporation to determine its longevity and their own prospects. Take a look at the implications of point two and three from an employee’s point of view. The conclusions provide a broad and useful insight that would be difficult to find in business curricula filled with bottom line and technical economic theories and practices. It can help guide an individual’s choices when they have an opportunity to make a career change. Finally as a potential or future manager with a stake in a corporation’s longevity it can help guide decisions to the benefit of the corporation, your team and of course yourself.