Why Do Corporations Die?
By Rajendra K. Aneja, HBS AMP, Contributing Writer
Issue date: 10/6/08 Section: Viewpoints
Absence of strategies to deal with changes in the operating environment, i.e. political, economic, consumer and above all, technology, can also decimate a company. In the West, power has shifted from manufacturers to retailers, ince the latter were faster to hook onto information technology, logistics, supply-chain management, and micro management of customer-requirements. Manufacturers had bloated, obsessed with internal bickering. They lost control over the shoppers' basket.
Financial engineering to buoy profits, rather than real volume growth, is also a nail in the coffin of a corporation. A business is hard work. Money, is not made at a picnic. It requires labor, long hours, hard thought. Businesses, which get fat, and begin to enjoy the boons, of the efforts of yesteryears, without investing in the future, are doomed to disaster. The elementary formula, of spending less than you earn, which a housewife applies in her home, applies to a corporation too. When corporate executives start giving more importance to the cars they travel in, than volume growth, the corporation is headed for disaster. Saving for a rainy day, is vital for a company.
As corporations get bigger, and frequently bureaucratized, they sometimes become an end, in themselves. The basic rationale for their formation and existence- to meet societal goals, consumer needs and thereby earn a profit, is bypassed. They get obsessed with form than content i.e. meeting-schedules than meeting customers, meeting short-term quarterly objectives, at the cost of a vision. Short sighted pursuits become paramount, to sub serve personal bonuses and career goals.
Finally, corporations die, because some leaders are weak, lazy, or, just incompetent. Unfit CEOs are the biggest cancer that any corporation can have. They rise to the top, for reasons other than performance or merit. They corrode systems and morale, like a locust they destroy the foundations, built over decades, through labor and sacrifice. Such businesses are characterized by demotivated staff, and inhuman/arbitrary management.
Financial engineering to buoy profits, rather than real volume growth, is also a nail in the coffin of a corporation. A business is hard work. Money, is not made at a picnic. It requires labor, long hours, hard thought. Businesses, which get fat, and begin to enjoy the boons, of the efforts of yesteryears, without investing in the future, are doomed to disaster. The elementary formula, of spending less than you earn, which a housewife applies in her home, applies to a corporation too. When corporate executives start giving more importance to the cars they travel in, than volume growth, the corporation is headed for disaster. Saving for a rainy day, is vital for a company.
As corporations get bigger, and frequently bureaucratized, they sometimes become an end, in themselves. The basic rationale for their formation and existence- to meet societal goals, consumer needs and thereby earn a profit, is bypassed. They get obsessed with form than content i.e. meeting-schedules than meeting customers, meeting short-term quarterly objectives, at the cost of a vision. Short sighted pursuits become paramount, to sub serve personal bonuses and career goals.
Finally, corporations die, because some leaders are weak, lazy, or, just incompetent. Unfit CEOs are the biggest cancer that any corporation can have. They rise to the top, for reasons other than performance or merit. They corrode systems and morale, like a locust they destroy the foundations, built over decades, through labor and sacrifice. Such businesses are characterized by demotivated staff, and inhuman/arbitrary management.
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Paul Shafer
posted 10/06/08 @ 9:49 PM EST
As a systems and process design engineer who has worked across industries since HBS, I have repeatedly found that companies die due to clinically diagnosable narcissistic executive managers build monuments to their own diseased egos and crush anyone who may oppose them. (Continued…)
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