Organizational Longevity and Technnological Change

Terence C. Krell

Boler School of Business
John Carroll University
University Heights, Ohio, USA

Keywords: Change, Longevity, Organizations, Technology

ABSTRACT: This article serves as an introduction to the JOCM Special Issue on Organizational Longevity. The issues of researching and writing about Organizational Longevity are described and the content of the Special Issue is related to a theory that focuses on the nature of technological, environmental and cultural change.

An Introduction to Organizational Longevity

In the United States, and generally elsewhere, a corporation is a form of organization that is legally an entity, having the same status as an individual with regard to property rights and legal responsibility. Although there are some differences in the laws as they apply to the various kinds of organizational entities; from publicly-traded, privately-held, and non-profit corporations, to governmental; it is usually the nature and intent of these organizational entities to outlast their founders and individual members. If they can, and so intend to, do so.

Sometimes, however, there is no intention for the organization to last. Lena Porsander’s article “Translating a Dream of Immortality in a (Con)temporary Order” describes an organization which was planned and intended to live for a short time only, in order to perpetuate a greater need. The City of Stockholm established a company in May, 1994, to handle the process leading up to the events in 1998: The organization responsible for “Stockholm — Cultural Capital of Europe 1998” was to dissolve in the summer of 1999.

As soon as we use the term “Organizational Longevity” we imply two things about these organizations; that we are extending the notion of entity using a metaphor of a living thing and that we are concerned with what makes that thing live or last longer. What is the nature of that thing? Is it metaphorically an individual, a collective, a hive, a population, a species? Is an organization a culture, a society, an economic unit, a state of mind?

Regardless of the metaphor used, all are amenable to the same two approaches to analysis and understanding: (1) the internal workings of the organization, and (2) the organization’s interaction with the environment. What makes organizational longevity problematic is management failure in one of these two areas: a failure in managing the internal processes or a failure to adjust interaction in the face of change in the environment.

What do we mean by “longevity”? Organizations cannot die in an individual, biological sense; from that perspective they should be immortal. So what causes them to cease to exist? Is an organization still in existence if it no longer engages in the same business or purpose, if it merges with another organization, if it changes it’s name, if the founders have left? What if the organization retains the same name but is taken over by new owners, changes its business, and moves it’s location? Gib Aiken’s piece “How Long Do Things Last?” raises this provocative question of identity very nicely and sets the stage for the difficulty of researching this topic.

Regardless of the operational definition used to determine the end of an organization, what remains constant is the notion of elapsed time from the inception of an organization until either the present time or the end of its existence. Combining these notions generates an approach to understanding Organizational Longevity: Examining the relationship between the internal workings of an organization and appropriate interaction with the environment such that the organization continues to exist over time.

Different types of organizations are required to deal with different types of environments, with the result that as environments change, so must the organization. The more rapidly changing the environment, the more dynamic and flexible the organization must be. One of the main forces for change in today’s environment is the rapid development, dissemination and adoption of new technology.

Fortune Magazine, October 25, 1999, contained a story which summarizes nicely the nature of the problem:

“The quirky tale of Helsinki's Nokia is destined to become as familiar as the cell phone itself: A small Finnish conglomerate sustaining huge losses reinvents itself as a telecom company and in a few years dominates the world market for mobile phones.... Growth has come so fast for the Finns that half of Nokia's 51,000 employees have been with the company for less than two years. But look more closely and you'll see that this rosy picture starts to get very hazy around 2001. By then a series of fundamental changes in the world of wireless will have radically challenged Nokia's safe little nest. ...In about two years data speeds on wireless networks will be so fast that a slew of new devices, from hand-held videoconferencers to ultrafast mobile Internet browsers, will be possible. ‘We have to change the whole way we look at the market,’ says Pekka Ala-Pietilae, Nokia's president and chief strategic thinker. "There are so many changes happening at the same time,’ agrees Sari Baldauf, Nokia's senior vice president for network equipment. ‘We need to be extremely aware and extremely agile.’” (Guyon, 1999)

Nokia is an example of a company that increased its longevity by changing the nature of its interaction with the environment, and is intentionally planning to do so again soon in response to the effects of technological change. The result of rapid technological change is that the social and economic environment also changes at an ever-increasing rate. Consequently, many of these changes take place at a rate faster than many individuals or organizations can adequately cope.

Impact of Technological Change

When speaking of technological change and its effects on workers and the longevity of organizations, the common view emphasizes automation and other capital-intensive production devices. Such technological change transforms the nature of human interaction with work in a fairly straight-forward way. Less obvious is the transformation in work and markets created by the plethora of newly designed technology-based products. For example, the development of inexpensive integrated circuits for electronic calculators in 1972 virtually bankrupted the manufacturers of electric-mechanical adding machines, throwing large numbers of semi-skilled workers into the labor pool. These workers skills were, for the most part non-transferable to other products. Twenty-five years later, the Internet threatened to have a similar impact on the computer and communications industries, the direct-sales industry and, perhaps by the millennium, the very nature of work.

Technological change transforms the nature of the marketplace by changing the relative cost, features and availability of products. Rapid technological change leads to rapid product introduction and hence to rapid product obsolescence. To describe this phenomenon the term “Product Life Cycle” was coined. A product life cycle refers to the sales of a product in units or dollars plotted on a graph over time. A full life cycle runs from introduction, through growth, to stability and finally decline in sales of a product. In 1920, the length of the average product life cycle of a new product was 25 years. In 1970, the length of the average life cycle was 2 years (Scheuing, 1974.) As we move into the new millennium, the implications of new technology promise to increase this pace dramatically.

Thus, rapid technological change demands at the same time that a work force be highly skilled, sometimes in specialized areas, and yet highly flexible, if an organization is to continue to use the same workers. Corporate America has responded to this challenge by developing and implementing on-the-job training and retraining in the particular technical skills needed. For those who perform the actual labor of production, the long-term trend is for corporate technical training to replace the public educational system. Simultaneously, however, the need for flexibility in management thinking is causing a greater reliance on education rather than on-the-job experience in the training of managers. The goal is managers who make decisions based on the demands of the marketplace, rather than the demands of the organization culture (Bennis, 1966.) The expectation is that such managers will function in, and ultimately help maintain a more responsive organization culture.

The Evolution of Organization Culture

The curious paradox exists that organizations can influence the behavior and values of the individual, while the organization itself is constructed or composed of these same individuals. Individuals respond to an organizational environment as a result of a combination of positive and negative rewards. Similarly, organizations develop in response to their environments. Over time these phenomena lead to a tendency toward uniformity of individuals within an organization and similarly to a tendency toward uniformity of organizations within the greater environment.

Each organization is a society unto itself, hence each organization has its own internal culture or social system. In this context an organization’s culture is no different than the culture of a small tribe in primitive times or areas. Indeed, some of the principles and methods used to study the culture of small tribes can be applied to different kinds of social systems, such as organizations. An organization adopts values that reflect the people in charge and the environment with which it had to cope. People working in the organization become aware of the value system, either consciously or unconsciously, and guide their actions accordingly. These actions can manifest themselves as company policy or informal customs and mores.

The culture of an organization comes about through the development of norms and values that help it to survive given the environment in which it was created and in which it exists. At any given point in time the environment will be somewhat different than it was at a previous point in time. The degree to which it is different and the directions of the change cannot be determined on a day-to-day level. Economists try to predict these changes using a variety of cycles, historical data and forecasting. In making such forecasts, economists are attempting to make projections about the future based upon data from the past. Economists naturally tend to focus on economic, rather than cultural data, yet cultures change over time in the same way as economies.

In practice, economy and culture are very much related. A broader view of change over time would suggest that the best way to examine today’s environment for courses of action is to look at responses to similar environments at previous times in history. This logic is very similar to the logic used by economists in predicting stock market and industry trends. In particular, by examining how cultures develop; how the broad environmental culture develops over time; how smaller cultures respond to those broader environments; and how business organizations respond to those environments, some predictions can be made about the appropriate responses to today’s environment.

Ingrid Bonn’s article “Staying on Top: Characteristics of Long-Term Survival” examines four broad categories of variables of such response, that might affect organizational longevity: environmental variables, organizational variables, company strategies and ownership characteristics. The variables were derived from empirical research which studied the relationship between various variables and company performance.

The culture inside an organization evolves in response to the pressures of the outside society, or the social context in which that organization was created and in which it exists: Cultures evolve over time and organization cultures evolve over time. The social or cultural environment in which that organization exists also evolves over time. Thus the mechanism by which cultures evolve is similar to the way members of a species evolve.

Konz and Katz, in their article “Metapopulation Analysis: A Technique for Studying Hyperlongevity,” use a modeling technique borrowed from biology to construct a model of an organization's development from the historical record of what the organization did. The strategies actually pursued by the managers of the organization are studied from the perspective of the model.

Darwin, in his description of biological evolution is often quoted as having said that animals evolve in response to their environment. The animal form that survived was the fittest for existence in that environment. It is the form best suited to the environment that survives, not necessarily the strongest.

Similarly there is a social Darwinism. The evolution of a culture comes about through those traits within the culture that enable it to survive best in its environment; those cultural traits will be perpetuated. Thus an organization’s culture evolves over over time in response to the general culture or environment in which it exists, and it continues to perpetuate those cultural traits that enable its continued existence.

L.A. Montuori’s article “Organizational Longevity: Integrating Systems Thinking, Learning, and Conceptual Complexity” addresses social Darwinism and discusses the importance of a learning organization and describes the kinds of leaders necessary to pilot organizations through uncertain environments fraught with turbulence. Such environmental changes include the revolutionization of information, fast-paced technological change, the dissolution of national boundaries and cultural barriers to communication, and changing values.

While cultures may change over time to adapt to changing environments, environments change constantly. Frequently environments change faster than culture, resulting the demise or replacement of the culture which does not keep pace. Hence the current interest in Organizational Longevity.

Since an organization is composed of individuals, one might expect that in order to change the organization one need only change the attitudes and behavior of the individuals. However, experience, as well and group and social-psychological theory, show that individuals will tend to allow a group to make decisions they would not make as individuals through the diffusion of responsibility to a number of members. Hence, in order to effect change in an organization one would need to change the social system, culture and each individual at or at about the same time. Frequently, this will mean environmental, technical, and structural change as well.

Individuals, however, represent a necessary starting point. It is up to you.


Editorial Note:

This article serves as an introduction to the “Journal of Organizational Change Management, Special Issue on Organizational Longevity.” The editors wish to thank the authors for their submissions, their diligent rewrites, and above all , their patience: Here it is, published at last.

October, 1999
Terence C. Krell
Cleveland OH, U.S.A.

References:

Bennis, E., Beyond Bureaucracy, New York, NY: McGraw-Hill Book Co., 1966.

Guyon, J., “Next Up for Cell Phones: Weaving a Wireless Web,” Fortune , Vol. 140, No. 8, October 25, 1999.

Scheuing, E., New Product Development, Hinsdale, IL: Dryden Press, 1974.