August 23, 2017 by

Isn’t it interesting to think about company longevity?

I remember hearing that if a small firm can make it seven years then it has a good chance of surviving and prospering. I think this is from the Small Business Administration.

On the other hand, one study from the Santa Fe Institute says that public companies live, on average, only about 10 years.

According to a 2012 report, the average lifespan of a S&P 500 Index company has decreased from 67 years in the 1920s to 15 years.

What makes some companies endure and others not? A fascinating article in Inc. by Bo Burlingham, “How to Build a Company That Will Be Around in 2115,“ gives us some insights. Sometimes, it has to do with the founder’s intentions.

Burlingham distinguishes between owners who think about building to sell versus building to last. In firms that are built to sell, the mentality is to get investors, grow as fast as possible, make as much money as possible to pay back the investors and make oneself rich, and then get the heck out of Dodge. It’s all about the money and having
an exit-strategy.

In firms that are built to last, owners and investors think about purpose, people, and culture. Yes, money and profitability are important, but it is just one part of the puzzle, not the only driving force. The real point is being passionate about an idea, spending days working with great people, and building a place to work that elevates employees to do their best for their customers. There is a long-term perspective as described by one entrepreneur when asked about an exit strategy, “My exit strategy is to be rolled out of my office on a gurney.“

When companies are built to last, they focus on enduring values. These values are imbued into the fabric of the organization. They become ingrained in all employees, and guide senior and new employees in their everyday actions. The specific values are not surprising. They are ethical values like honesty, integrity, and fair deals. These values are not merely abstract words on a wall but are used during strategy sessions, in team meetings, and when
making decisions.

Enduring values are those things that are most important to us. They cut across time and place. They tie people together, creating a shared purpose. Leaders use them to grow companies for life.

Beverly Kracher, Ph.D., is the executive director of the Business Ethics Alliance and the Daugherty Chair in Business Ethics and Society at Creighton University.