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How Winning Organizations Last 100 Years

How Winning Organizations Last 100 Years

The average lifespan of a US S&P 500 company has fallen by 80% in the last 80 years (from 67 to 15 years), and 76% of UK FTSE 100 companies have disappeared in the last 30 years. In stark contrast, organizations in other sectors celebrate their 100th birthday and look like they’ll be here forever. How do they do it? And what can business learn from them? A five year-study of several organizations who have been successful for 100 years or more shows that they do two seemingly incongruous things simultaneously.  First, they have a stable core, or an unchanging organizational purpose. As part of this, many of the organizations that last 100 years seek to engage society, especially through reaching out to children. They look for leaders who will last 10 years or more, and their leadership transitions usually involve a one-year overlap between outgoing and incoming leaders. The second step is to have a disruptive edge, which involves bringing in outside expertise and learning from other sectors  (even ones that seem to have nothing to do with yours). Balancing the radical and the traditional helps them stay on top, decade after decade.

The average lifespan of a U.S. S&P 500 company has fallen by 80% in the last 80 years (from 67 to 15 years), and 76% of UK FTSE 100 companies have disappeared in the last 30 years. In stark contrast, organizations in other sectors celebrate their 100th birthday and look like they’ll be here forever. How do they do it? And what can business learn from them?

To answer these questions, we identified seven celebrated Centennials who’ve outperformed their peers over the last 100 years and are admired by everyone. From the arts, we looked at the Royal Academy of Music, the Royal College of Art and the Royal Shakespeare Company (originally the Shakespeare Memorial Theatre). From education, Eton College, from science, NASA (initially part of the US Army), and from sport, the New Zealand All Blacks and British Cycling. Then, we spent five years trying to understand what they do, and how they do it. We got under the skin of each organization, to understand how they live and breathe, by interviewing people who work (or worked) with them, observing them in action and reading everything about them. Surprisingly, we found the Centennials are all very similar to each other, despite their different vocations — and behave in ways that defy conventional wisdom.

As our findings started to emerge, we shared them with 537 leaders from 84 successful businesses — such as 3M, Apple, the BBC, BMW, Cirque du Soleil, Dyson, GE, Google, Hamlins, HSBC, Jaguar Land Rover, Johnson & Johnson, M&C Saatchi, McKinsey, Microsoft, Morgan Stanley, Procter & Gamble, Rolls-Royce Engines, Unilever, Virgin and WPP — to see what they could learn from the Centennials, and we’ve found 12 tests to help organizations sustain success.

Most businesses focus on serving customers, owning resources, being efficient and growing — but the Centennials don’t. Instead, they try to shape society, share experts, create accidents, and focus on getting better not bigger. They’re radically traditional — with a stable core, but a disruptive edge. And that’s what keeps them ahead.

First, we’ll explain how they do this, and then we’ll look at the 12 tests.

The Centennials start by stabilizing their core, to safeguard what they stand for and stay on track.

Stable purpose: shape society, engage kids. They are incredibly strategic, looking 20 to 30 years ahead, to understand how society is evolving, how they can shape it, and how they can get the talent to do this. All the Centennials we studied talked about their impact on society — the beliefs and behaviors they’ve changed — from the minute we met. The All Blacks have always aimed to raise New Zealand’s national profile, Eton to educate 70 disadvantaged children per year, NASA to help mankind, and the RSC to open up the arts to everyone. As the Royal College of Art told us, “We aim to change the world through art and design, and track all our graduates, to check we’re doing this. Currently, our alumni include the Head of Design at every car manufacturer in the world, apart from BMW, 8 of Apple’s 18 product designers and at least one designer in every Paris fashion house.”

Talent is drawn to them, to help them achieve their purpose. But they don’t just wait for talent to turn up. Instead, the Centennials all work with children — sometimes as young as four years of age — to help them learn and use the skills they’ll need in the future. As the RSC explained, “Some of the most important work we do is with schools — it keeps us alive and relevant.” That’s why the All Blacks invented Rippa Rugby to be played in primary schools, the RCA hold a young art competition for 4–18 year olds every year, and NASA runs a 10-week program for school graduates each summer.

Stable stewardship: 10+ year tenure, 1+ year handover. Most organizations change their leaders every five years, but the Centennials we studied keep them in place for more than 10. Not just at the top of the organization, but two or three levels further down too — where key knowledge and influence often sits. And they carefully manage leadership transitions, so nothing is lost along the way. They typically appoint a successor more than four years before they make a change and spend at least 1 year handing over. For example, Eton appoints its House Masters for 13 years, has a two-year handover between one master and the next, and the old master then stays at Eton for five-plus years to continue offering advice and support. The RSC appoints its Executive and Artistic Directors for more than 10 years, with an 18-month handover between one pair and the next, and the old pair then join the governing board.

Crucially, they don’t employ leaders with large egos — as the All Blacks say, “No dickheads!” Instead, they find humble stewards, who are keen to learn from the previous leader, and who are more concerned about the organization they’ll leave behind than how it looks while they’re there. The All Blacks talk about “legacy” and “leaving the jersey in a better place.” One RSC Executive Director told us, “My biggest challenge when I arrived was joining a highly successful company — I didn’t want to mess up.”

Stable openness: perform in public, help others. The final part of being traditional is performing in public, to raise the organization’s profile and encourage everyone to perform at their best. As a former Eton Headmaster told us, “From the minute I arrived, I knew I was being watched. Not just by people inside the school, but those outside it too. I couldn’t make a mistake without it being noticed. It’s different to anywhere else I’ve worked, before or since.” Some of the Centennials perform in high-profile events, which the whole world watches — such as a moon landing, Olympic Games or world cup. But those who don’t deliberately open themselves up to invite scrutiny and create pressure. Eton is designed like a village with a busy road running through it and teachers are on display as they move between classrooms, the RCA open their studios to the public, and the RAM broadcast their performances. And, like many of the 84 businesses we also studied, they find great things to do and then share them with the world through books, articles and films. NASA engineers publish their work online and the All Blacks asked Amazon Prime to make a documentary to show everyone how they work.

While stabilizing their core, the Centennials keep waves of disruption crashing at their edge — to stay fresh and get better.

Disruptive experts: 70% part-time, world’s best. While most companies strive to own talent and reduce staff turnover, the Centennials do the opposite. They employ up to 70% of staff part-time, deliberately, to stay fresh and create a continuous flow of new ideas. Critical experts, who want to stay at the cutting-edge. That’s why they have hundreds of associates (Eton, RAM, RCA, RSC and NASA), share support staff with other organizations (British Cycling) or only work together for half the year (All Blacks). Not only does this bring in new ideas, but it also gives them access to a greater pool of talent, people who are busy doing brilliant things elsewhere. As the RCA explained, “We don’t want too many “career academics,” who only work with us. We want people who are redefining practice too. That’s why we asked Ford’s Head of Design to work part-time on our Intelligent Mobility Program, while he was still at Ford.” And the RAM explained, “We keep track of our alumni, and ask them to come back, once they’ve done something interesting – to share their knowledge and experience.” They also make sure they aren’t just recycling old ideas. As Eton explained, “We actively search for new and different types of students, to increase the richness and diversity of our community. To help do this, 21% of students received a total of £7M financial support last year. And our vision is to become ‘needs blind‘ — by finding new sources of revenue, so we don’t rely on fees to fund the school in the future.”

As well as seeking fresh input from part-time staff, they also go out looking for new ideas — but not by tracking the completion. After all, they want to stay ahead of them, not emulate them. Instead, they work out who’s the best in the world at something and try to learn from them. The All Blacks have worked with an astonishing array of groups, including the U.S. Marines, ballet dancers, and cage fighters, to learn how to lead, lift and grapple better. British Cycling learned from the Royal Ballet to improve how they tour and McLaren to use technology better. They also recruit from outside their sector to bring in new knowledge and experience. As Eton explained, “Some of our best appointments have come from outside education. So, we try to help people make that switch. The recruitment consultants call them ‘first bouncers’.” The RCA said, “We use a recruitment consultant for every appointment we make — to shake the trees, rather than waiting for people to apply. It costs us an extra £30k per person, but it’s worth every penny.”

Disruptive nervousness: better not bigger, tirelessly tweak. Most organizations proudly tell you how much they grew last year — but not the Centennials we studied. Growth makes them nervous. As the RCA explained, “We need to be big enough to create impact and be financially stable, but not so big that we get distracted or lose control.” A recent study of the all the Centennials in the world found that 89% of them employ fewer than 300 people — and the same was true for those we studied, with the exception of NASA. They’ve stayed small, with fewer than 300 full time staff (All Blacks, British Cycling, Eton, RAM), or fewer than 300 per site (RCA, RSC). Previous research suggests people can only maintain 150 stable social relationships, so trying to stay small makes sense. That’s why the RAM, RCA and Eton turn down at least two-thirds of student applications each year and haven’t opened universities or schools abroad like their competitors. And all the Centennials carefully work out what to take on and how to manage it, so standards don’t slip. The RSC explained, “Panic set in when Matilda suddenly took off. We hadn’t had a success like that before, and it’s quite different to what we normally do. So we set up a separate team, away from the others, to make sure it worked but didn’t damage anything else.”

Just as growth makes them nervous, so does success. Rather than celebrating it, they unpack it — to work out what they’ve missed, and where they could do better. Obsessing over details, scientifically analyzing anything that might affect performance. The RSC told us, “We get nervous if more than 20% of our new ideas succeed — it means they’re not really new!” NASA spend two years debriefing a mission, to really understand what happened. The All Blacks found they’re more like likely to lose after a big win, so they work even harder when this happens. They prefer to make lots of tiny tweaks, rather than looking for large breakthroughs. As they can be more easily corrected if they go wrong, and are more difficult to imitate as they’re harder to see — such as traveling with your own pillow, to get a better night’s sleep. The All Blacks call this “bone deep preparation.” British Cycling sought “marginal gains” — making a thousand 1% tweaks, to get a 1000% improvement.

Disruptive accidents: move and bump, live like a family. And finally, rather than trying to be efficient, by putting similar people together, they make them walk around and work on different projects, to create movement and bumps. So employees from different disciplines continually question each other, and share problems, ideas, and opportunities. That’s why the RCA keep a diverse range of staff and students (by having a wider range of programs than its peers), put their most diverse ones next to each other (such as Fashion and Architecture) and get them to work on cross-program projects (such as the Neurodiversity and London Ambulance projects). Eton requires its staff and students to walk for 10 minutes between classes and work in different house, subject, and non-academic groups each day, and the RAM asks its tutors to review programs outside of their expertise.

The idea for the study came from some work we were doing with UK Sport, the funding body for the British Olympic teams, to understand how they’d improved their performance over the last 20 years. They talked us through their transformation, but questioned its sustainability. We asked them, “Who do you think you could learn from?” They said, “The arts, they’ve been doing this for hundreds of years.” So, we contacted the Royal Academy of Music, the Royal College of Art and the Royal Shakespeare Company – and the research began.

We wanted to understand how organizations from a range of sectors have sustained success over many decades, so we could pass on some practical tips and advice to others. Several studies have looked at this over the last 30 years, but their findings are inconclusive, or focus on financial performance, and are often difficult to implement. For example, initial studies (such as In Search of Excellence and Good to Great) were based on organizations who often fell soon after they were published. Later studies (such as The Four Principles of Enduring Success and Three Rules for Making a Company Truly Great) used financial ratios to more carefully select organizations, but focused on ones who buy and sell other firms (rather than creating value themselves) and offer high-level advice that can be difficult to implement. As one leader told us, “Profit isn’t our only focus. So, I’m not sure how relevant this is to us.” And another said, “We’d all like to be ‘better not cheaper’. But how do you do this?”

We tried to take the best bits from both sets of studies. First, we selected organizations who’ve performed a similar set of activities for more than 100 years, have outperformed their peers for most of this time and are admired by everyone. Celebrated Centennials who’ve continually improved what they do, do it better than anyone else and everyone can see this. This led us to study arts, education, science and sports organizations to see if, and what, business could learn from them.

We spent five years interviewing thousands of people, making thousands of observations and reading hundreds of documents. Although we conducted most of the research, we were helped along the way by twelve other academics, consultants and practitioners, who’d often studied or worked with one of the Centennials for many years, to test our ideas and sharpen our insights. It was an exploratory process, with data collected in a slightly different way in each organization depending on how easily we could observe them, who had already studied them, and what had already been written about them. But we kept on going until we found hard, conclusive evidence showing how each organization had sustained its success and identified the common behaviors across all seven of them.

As our ideas started to emerge, we shared them with other organizations also trying to sustain success to see how useful they were, and if they could be applied elsewhere. This list included 3M, Apple, the BBC, BMW, Cirque du Soleil, Dyson, GE, Google, Hamlins, HSBC, Jaguar Land Rover, Johnson & Johnson, M&C Saatchi, McKinsey, Microsoft, Morgan Stanley, Procter & Gamble, Rolls-Royce Engines, Unilever, Virgin and WPP.

While a skeptic might say that the kinds of organizations we studied are very different from for-profit enterprises, interestingly, none of the for-profit leaders we spoke with raised this point. If they had, then we’d have said the Centennials are more similar to business than you’d think. They have revenue and profit targets to hit, with annual incomes of $30M+ (apart from British Cycling). They also have clear social targets too, as do many businesses in today’s “beyond CSR” world. One big difference is that they take a longer term perspective than business, which helps them attract the funds and talent they need to sustain success. The business leaders we spoke to started using these insights to challenge the short-term, profit focus in their organization — which they said instinctively felt wrong and unsustainable.

Through thousands of discussions with hundreds of leaders, we identified six behaviors that defy conventional wisdom, 12 questions to help others develop these habits, and 50 illustrations of how this can be done, in practice.

They also help people learn from the movement and bumps, by getting them to eat together for at least one hour every day, living like a family. The RCA explained, “We spent ages explaining how important the restaurant was to the architects for our new building. They kept trying to put a small one in the corner, saying it was an inefficient use of space, but we wanted a big one, in the middle, to bring everyone together.” Similarly, British Cycling told us, “People often ask what they can learn from cycling and I tell them, take your team away, get to know each other and find new things to do. Our biggest improvements always happen when we do this.”

As one business leader asked us, “This is all very interesting — but what should I do?” Well, after sharing our findings with 537 leaders from 84 businesses, we’ve found 12 tests to help sustain success. These questions can’t always be answered today, but create the right discussion for tomorrow. Try them, and see what you find.

Test 1. What beliefs or behaviors can you change? How can you shape society? First, identify the beliefs or behaviors you want to create through the work you do and through the people who work for you. For example, Apple, Facebook and Google changed how their customers live and Tesla continues to accelerate the use of sustainable energy.

Test 2. How can you engage kids, tomorrow’s employees? Identify the skills you need in the future and find ways to help kids learn and use them today. For example, Apple and Microsoft developed lessons, guides, and apps to help kids write and use computer code and the BBC holds an annual writing competition for 5–13 year olds.

Test 3. Who has critical influence and knowledge? Identify your critical leaders (20 to 30% of employees in the Centennials) and keep them in place for 10+ years, to stabilize knowledge, experience and decision making. And encourage these leaders to look 20 to 30 years ahead. For example, 80% of the 100 most successful CEOs in the world have been in office for 10+ years and 3M believes it takes 10–15 years to change a company’s DNA.

Test 4. How can you manage handovers? Can you bring in a successor 4+ years beforehand, and spend 1+ years handing over? GE and Rolls-Royce Engines usually do this for their CEOs, 80% of the 100 most successful CEOs in the world were internally appointed, and HSBC has only appointed 1 external CEO in the last 150 years.

Test 5. Who should study you? Invite people in to see what you do, how you do it, and the impact it has. Not only will this encourage everyone to perform at their best, it will also build trust. For example, Jaguar Land Rover invites customers to see their car being built. Harley-Davidson and Toyota invite everyone to visit their facilities to see what they do.

Test 6. How can you help others? It’s not possible for everyone to visit you, to see what you do, so find great things to do and then share them with the world. For example, Berkshire Hathaway, Nike and Starbucks have published books explaining their successes, failures and recoveries. British Airways, Steinway and Wedgewood asked the BBC to show how they work and Southwest Airlines ask customers to share their experiences through their blog.

Test 7. How can you bring outside expertise in? Once you’ve stabilized your core, then you need to disrupt your edge. You might do this by employing a certain number of freelancers or consultants to help keep things fresh, or by encouraging your full-time staff to get outside the building (or both). Identify your critical experts (50 to 70% of staff in the Centennials we studied) and work out how to keep them at the top of their game, maybe by asking them to work with people redefining practice outside your organization, or on their own projects. For example, Duke CE and McKinsey use consultants part-time, Cirque du Soleil gives creative teams a sabbatical after they produce a new show, and 3M, Apple, Hewlett-Packard, Linkedin and Microsoft ask staff to spend 15 to 20% of their time working on their own projects.

Test 8. Who is the best in the world? Find great experts, rather than just managing the ones you’ve got. For example, Cirque du Soleil recruits Olympic athletes (physically and mentally strong) and teach them to perform, and ING Direct recruits artists, jazz musicians, and dancers (creative and open) and teach them to bank.

Test 9. How can you get better every day? Rather than asking “How big can we get?” ask “How good can we be?” Find ways to increase your impact and revenue, without growing your headcount. For example, the National Theatre and RSC screen live performances to cinemas around the world, so they don’t have to tour as much and Apple helps people develop apps for their products, so they don’t have to. And manage growth by adding together small organizations, rather than creating a large one. For example, Virgin keeps to 150 people in an office, and ING Direct fewer than 200 people in a call centre.

Test 10. How do you unpick success and failure? Try to make lots of tiny tweaks, rather than a big shift — as they’re less risky, and more difficult to imitate. For example, 3M, GE, and Toyota constantly pull apart their products, systems, and processes to find ways to improve them. Amazon and LinkedIn get people to read a 6-page report before a meeting, and don’t use fixed agenda, to better explore problems, and find solutions.

Test 11. How can you create “bumps”? It’s more important to find new ideas and practices, than squeeze every last drop out of the ones you’ve already got. Put different people together, rather than similar ones and design your offices so they have to move around, and bump into each other. For example, BMW designed its head office so people have to walk around and Dyson continually rotate designers and engineers between different teams.

Test 12. How can you get people to live like a family? Work out how to get employees to hang out together, for 1+ hours every day, sharing problems, ideas and experiences. For example, Google give employees three free meals a day and have 170 cafes in their New York office. Facebook have an ‘epic cafe’, 1,500 apartments, and a grocery store in their new head office.

As you answer these questions, remember you’re trying to create a balance across all twelve areas, not a particular strength in one. You don’t want to become so traditional that you stop moving forwards, or so radical that you go off track. And when things do go wrong, as they inevitably will, go back to your core first to make sure you’re stable and on track, before disrupting your edge to start moving forwards again.

Alex Hill is a Co-Founder and Director of The Centre for High Performance, an Associate Professor at Kingston University and a Visiting Professor at a number of universities around the world. He previously worked at the University of Oxford and spent ten years in various divisions of the Smiths Group, a large engineering multinational. Twitter: @cfhperformance

Liz Mellon is the Founder and Chair of the Editorial Board for the Duke Corporate Education journal, Dialogue. She was previously the Indian Regional Managing Director at Duke CE, a Professor of Organisational Behaviour at London Business School and spent twelve years in the Department of Trade and Industry. Twitter: @lizmellonduke

Jules Goddard is a Fellow of London Business School and formerly Gresham Professor of Commerce at City University.

How Winning Organizations Last 100 Years

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