“The Living Company”
by Arie De Geus
Harvard Business Review (March 1997)
Presented By:
Takbir Ahmed Biswas
Lynn Blankenstein
Lexi Gray
Norawit (Travis) Virunkitkoson
Yixiong (Kyle) Zou
What is a corporation?
• Defined as:
“a large company or group of
companies, recognized by law as
a single unit.”
~Oxford Dictionary
What is a living company?
• Described as:
An organization that is viewed as
a “community of human beings
that is in business – any business
– to stay alive.”
~De Geus
Life Expectancy of a corporation
• Average life span is less than 20 years
• Examples that show that a corporation
can be in business for as long as several
hundred years
Why is there such a discrepancy?
• “Living companies produce goods
and services to earn their keep in the
same way that individuals have jobs
in order to live”
~De Geus
Living Companies
• Very good at managing for change in
the marketplace
• Understand:
–Who they are
–How they fit into the world
–The value of new ideas and people
Conservatism in Financing
Why do they survive so long?
• Concern about “Safety” of Capital
• Avoidance of unnecessary expenses
• Belief in the Value of money in Old
fashioned way
• Tendency of saving extra cash as back-up
to avoid investors
Sensitivity to the World Around Them
• Adaptable to changes
• Forecasting of future
• Comparison of Past, Present and
Future
• Reaction to “Whatever was going
on”.
Awareness of Their Identity
• Employees felt like Parts of a Whole
• “Fleet of Ships”
• Managers in the Living Companies
were chosen mostly from within
• The First Priority: To maintain the
company’s health
Tolerance of New Ideas
• The Manager must:
– Understand the values and traditions of
the company
– Keep the company alive
– Let people grow within the community
– Place commitment to people before
assets
Valuing People, Not Assets
• 27 long lived companies changed
business at least once
• Scuttle assets to survive
• Assets and Profits are necessary, but
not purpose of life
Valuing People, Not Assets (2)
• Companies with different model
• Scuttle people to survive
• Purpose: to make profits for
shareholders
• If in trouble, get rid of people
Loosening Steering and Control
Managers must:
• Heed opinions and practices of other
people
• Give people space to develop ideas
• Take risks with people
Loosening Steering and Control (2)
Metaphor of Rose Gardening
• Prune roses: hard or long ?
• Hard: have the biggest roses in
neighbourhood in June (high risk)
• Long: have roses in every June
Organizing for Learning
Why learning is essential
• Circumstances change
• Living companies also change
Organizing for Learning (2)
Conditions of organizational learning
• Numerous individuals
• Some of whom are innovative
• System supports
Organizing for Learning (3)
How living organizations learn
• Birds that flock learn faster
• Developing programs
The Human Element
• It is a choice
• Focus on going from one
generation to the next
• Level of involvement and a sense
of belonging are important
Puddles or Rivers?
• A company must focus on smooth
transitions between generations
• People need to enter and exit the
company with the right understanding
• Need to be able to let go and
understand ‘fit’
Passing the Baton
• Strict exit rules
• Stewardship is important as one
person exits and another comes in
• Important to understand the
nature of the company
Conclusion
• Mobilizing the disposable intelligence
• High levels of tolerance are important
• Important to brain-rich and asset-rich
companies
• Corporate death causes many to feel
a loss
Questions
?