Various independent studies have suggested that the
sustainability of corporations is a challenge and that the
“life expectancy” of corporations is less than 50 years.
This study solicited input from a broad pool of executives
and managers from around the world, and representing most
industries. The study was based on the corporate health
assessment framework presented in the book Beat the Odds:
Avoid Corporate Death & Build a Resilient Enterprise (BTO).
The study used a significant portion of the BTO diagnostic
survey to draw conclusions about the attention that
management is paying to nine core principles, and also to
draw conclusions about the underlying health of
organizations around the world. Over 700 executives and
managers participated in this study.
Among the main findings of the survey:
- Respondents did not have a good understanding of the
"life expectancy" of corporations in general.
Respondents working for young organizations (e.g. under
25 years of age) typically indicated that the life
expectancy for all organizations was less than 25 years,
while respondents employed by more mature organizations
tended to believe that the life expectancy of all
organizations was much longer. Almost 40% of those from
organizations over 100 years old indicated that they
believe the life expectancy of corporations in general
was over 100 years of age.
- The respondents’ views of their organization’s
performance across all nine BTO principles painted a
rather sobering picture:
- With respect to respondents’ views of their
organization’s attention and follow-through on each of
the nine principles, a cascading pattern emerged:
- More than half of all respondents rated their
organization’s ability to retain employees as Fair or
Not Good, while less than half were in the Excellent or
Very Good categories.
- The study shows a relationship between the overall
BTO score for an organization and respondents’ rating of
their organization’s current Retention of Employees.
- The study shows a relationship between the overall
BTO score for an organization and respondents’ rating of
their organization’s current Employee Morale.
- The study shows a relationship between the overall
BTO score for an organization and the respondent’s view
of that organization’s current industry rank (Top Tier,
Middle of Pack, Struggling).
- The study shows a relationship between the overall
BTO score for an organization and the respondent’s view
of that organization’s current financial performance,
and likely financial performance.
- Participants in the study were provided the
opportunity to "write in" the factor that worries them
most about ensuring their organization’s long-term
viability. Most of the responses related to one or more
of the nine principles. The predominant concerns (in
order of priority based on the number of respondents):
- Creating the Future and Innovation (relates to
Principle 3)
- Leadership effectiveness, Enterprise Vision and
Clear and Consistent Communication from leadership
(relates to Principle 4)
- Competencies (retention and development) – a
portion of Principle 5
- Aligning and Energizing the workforce (relates
to Principle 6).
The study demonstrates a clear relationship between an
organization’s overall BTO score and key corporate longevity
issues such as employee retention and morale, industry rank
and financial performance. The study also suggests a
significant number of organizations possess underlying
health issues relating to the nine principles.
In
Beat the
Odds, it is noted that corporate leaders are
often consumed by managing the day-to-day complexity of
their businesses. In this challenging environment, corporate
executives and Boards endanger the long-term health of their
organizations if they fail to pay continuous attention to
core principles.
Moving from remedial corporate health care to pro-active
health maintenance starts with a comprehensive health
assessment for your organization, and then requires
follow-through on the learnings.
Participant Profile
Invitations to participate in the study were extended to
members of BetterManagement and Iacocca Institute, who count
among their users/clients thousands of professionals and
executives from around the world. BetterManagement and
Iacocca Institute extended the invitation to participate to
their unscreened distribution lists.
More than 700 participants completed the survey. The
respondents come from a wide range of company size (Figure
1).
Figure 1
Industry participation was diverse (Figure 2), and
respondent location also reflected a wide representation
(Figure 3).
Figure 2
Figure 3
Approximately one-third of the respondents are from "top
management" (defined in the survey as the top two levels of
their organization’s management), almost half are "middle
management" (levels three and four in the organization), and
the balance represent lower level supervisory and
non-supervisory employees (Figure 4).
Figure 4
The survey respondents work for organizations that
represent a full spectrum of "corporate lifespan" – from
relatively young organizations (18% were from organizations
in existence less than 10 years) - to very long-lived
organizations (14% were from organizations over 100 years
old) (Figure 5).
Figure 5
On average, the survey respondents brought a realistic
point of view to the study. Approximately 70% believe that
the "life expectancy" of corporations is 50 years or less
(Figure 6).
Figure 6
However, the current age of the organization appeared to
influence respondents’ answers to the "life expectancy"
topic. For organizations described as either less than 10
years old, or 11 to 25 years old, approximately 60% of the
respondents indicated they believed the life expectancy of
corporations in general was less than 25 years. The opinions
tended to trend with the current age of the organization.
Almost 40% of those from organizations over 100 years old
indicated that they believe the life expectancy of
corporations in
general
was over 100 years of age – a remarkable,
incorrect view!
This raises at least one question: Does historical
success make it more likely that managers and companies
eventually become overconfident and complacent? As Aristotle
once said, "He who the gods want to destroy, they will give
40 years of prosperity."
If so, what is the wakeup call? How
might organizations avoid this fate?
A. General Learnings about the Respondents’
Organizations
Approximately 40% of all respondents characterized their
organization’s current rank in its industry as "middle of
the pack" or "struggling," with the balance falling into the
"top tier" or "most admired company" category.
Approximately half of all respondents described their
organization’s recent financial performance (last 3 to 5
years) as one in which their Return on Equity (ROE) or
Return on Invested Capital (ROIC) exceeded their corporate
cost of capital (Kc).
Approximately 60% of the respondents believe that their
organization’s ROE or ROIC would exceed the corporate cost
of capital in the next 3 to 5 years.
In spite of this optimism regarding near-term financial
performance, more than half of all respondents rated their
organization’s ability to retain its employees as Fair or
Not Good (Figure 7).
Figure 7
There was a noticeable difference in views regarding
retention, based on the job level of the respondent.
Approximately 40% of top management rated their
organization’s ability to retain its employees as Fair or
Not Good. That percentage rose to 60% and higher for the
other three levels of respondent.
With regard to employee morale:
- approximately 40% of all respondents
indicated that their top management’s morale was Fair or
Not Good,
-
approximately 50% of all respondents
indicated that their middle management’s morale was Fair
or Not Good, and
-
approximately 60% of all respondents
indicated that their non-supervisory personnel’s morale
was Fair or Not Good.
Interestingly, when asked to rate employee
morale among top managers, about 70% of those who identified
themselves as top management indicated morale in their
category was Excellent or Very Good.
When asked to rate employee morale among
middle managers, less than 40% of those who identified
themselves as middle management indicated morale in their
category was Excellent or Very Good.
When asked to rate employee morale among
non-supervisory employees, only about 30% of those who
identified themselves as non-supervisory employees indicated
morale in their category was Excellent or Very Good.
B. Basic Analysis
With the exception of the foregoing
“demographic” data, each of the topics included in the
survey was presented as a positive statement and the survey
participant was asked to rate his or her degree of agreement
or disagreement based on the following choices:
Numerical ratings were assigned to each
response, to facilitate analysis. Strongly Agree was
assigned a “5,” Agree a “4,” Neither Agree nor Disagree a
“3,” Disagree a “2,” and Strongly Disagree a “1.” The
results which follow are based on this numerical assignment.
Each respondent’s response profile was
converted to an overall numerical score, representing his or
her characterization of their own organization across ALL
NINE Beat the Odds principles. The results (Figure 8)
suggest an underlying generally unhealthy condition at the
organizations represented by almost half the respondents.
Figure 8
The relationship between the overall BTO
score and current Retention of Employees is highlighted in
Figure 9. For those respondents who described their
organization’s employee retention as Excellent (far left
column in Figure 9), 87% assessed their organization’s
overall BTO score as 3.5 or higher. On the other end of the
spectrum, for those respondents who described their
organization’s employee retention as Not Good (far right
column in Figure 9), 84% assessed their organization’s
overall BTO score as less than 3.5.
Figure 9
The relationship between BTO score and
Retention was further illuminated by examining the scores
for each of the nine principles, for each category of
respondent to the Retention topic. Figure 10 highlights the
differing BTO profiles depending of each Retention category.
Across all nine principles, respondents who indicated their
organization had Excellent employee retention assessed their
organization’s BTO score higher than the Very Good retention
category; which in turn assessed their organization’s BTO
score higher than the next retention category (Fair
retention), and so forth.
Figure 10 also highlights a general trend
downward from early principles to later principles –
consistent with the idea that later principles are built
upon (and can only be as good as) the underlying foundation
that has been established.
Figure 10
Figure 11 shows the relationship between BTO
scores on all nine principles, and the categorization of the
organization’s current industry rank by the respondents.
Figure 11
Figure 12 shows the relationship between BTO
scores on all nine principles, and the recent financial
performance of the respondent’s organization.
Figure 12
Figure 13 shows the relationship between BTO
scores on all nine principles, and the respondent’s view
regarding the LIKELY financial performance of their
organization.
Figure 13
Morale was another interesting topic to
evaluate. As one example of a pattern that emerged, Figure
14 shows the relationship between BTO scores on all nine
principles, and the respondent’s view regarding the morale
of middle management in their organization.
Figure 14
As a final observation, there was a
difference in the perspective of top management, compared to
the perspectives of the other three levels in the study
(Figure 15), across all principles.
Figure 15
On an individual company basis,
understanding the differences in perspectives, and the
underlying reasons for those differences, can be valuable in
constructing a plan of action and communication.
C. Analysis by Principle
The average score for each principle –
across all respondents - offers a fascinating view of where
the respondents believe their organizations are strong, and
where they are weak (see the red numbers in Figure 16).
Figure 16
The respondent pool viewed Purpose and Core
Values (which are foundation Principles 1 and 2) to be the
strongest of the nine principles. In the next category of
relative strength – but by no means strong - are Principle 3
(Acquire a World View, and Create the Future), and Principle
5 (Strategies, Business Model, and Competencies). All other
principles (Leadership and Vision, Aligning and Energizing,
Measurements, Action) were quite weak, with the weakest
being Principle 9 (Common Sense and Decision Making).
Respondents were asked to write in their
response to the following open-ended statement:
The single most important factor that
worries me about ensuring our organization's long-term
viability is...
Over 90% of the respondents provided an
answer to that statement. The responses were evaluated to
determine whether they applied to any of the nine principles
(and, if so, which ones), or if they related to other
factors. Examples of “other factors” include cash flow,
budgets and liquidity. More than 75% of the respondents
identified their primary concern as one which could be
mapped to one or more of the nine principles.
The predominant concerns (in order of
priority based on the number of respondents):
Creating the Future (Principle 3)
-
Leadership effectiveness, Enterprise
Vision and Clear and Consistent Communication from
leadership (Principle 4)
-
Competencies (retention and development)
– a portion of Principle 5
-
Aligning and Energizing the workforce
(Principle 6).
In retrospect, this is not surprising, since
Principles 1 and 2 were assessed as being fairly strong, as
noted above. Thus, logic would suggest that the next
priorities would be principles 3, 4, etc. in the BTO
“pyramid” of principles.
Implications for Corporate Leadership
In spite of the respondents’ general
optimism about the near-term financial performance of their
organizations, their responses indicate that they are
generally concerned about some of the fundamental
underpinnings of their organizations’ health.
The study’s results are a “wake up call” to
organization leaders regarding the importance of continual
diagnosis and attention to core principles. In the current,
dynamic business environment, it is easy to become consumed
with daily emergencies and managing complexity. Senior
leadership of organizations must set aside time to focus on
periodic and comprehensive health checkups for their
organizations, and also pay attention to core principles on
an ongoing basis. It is not a matter of choosing between the
short-term and the long-term. Managing complexity, and
leading into the future, both deserve attention and
resources.
Ensuring a long-term future for your
organization requires being pro-active, candidly assessing
the underlying health of the organization, and then acting
on the diagnosis.
For more information about, or help in,
conducting a comprehensive corporate health assessment for
your organization, visit
www.BeatTheOddsBook.com, or follow the recommendations
in the book Beat the Odds: Avoid Corporate Death & Build
a Resilient Enterprise.
