Here is an excerpt from an article written by Alex Hill, Liz Mellon, and Jules Goddard for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.
* * *
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 Stable Core: Purpose, stewardship, openness
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.”
* * *
Here is a direct link to the complete article.