Verit View – October 2017
Can Your Company Go the Distance?
Verit Advisors’ view is that companies that endure distinguish themselves by sustaining a vibrant, flexible culture.
As competitors descended on Chicago to run the marathon this past weekend, Verit began to examine the art of endurance. Over 40,000 runners trained for months in order to make it through the grueling 26.2 miles. While this can seem like an eternity to those who run the race, companies are faced with a much longer race: one that can stand the test of time if executed strategically. In today’s rapidly evolving business environment, companies that wish to endure face a decision point: adapt or be left behind. For many companies, leaders hesitate to change with the times as they do not wish to dilute or reinvent their corporate identity. Successful business leaders recognize that adapting merely means taking a strong historical identity and using it as the basis to launch a modern identity that propels a company into the future.
According to Sir Alan Parker, Chairman of Brunswick Group, in an article from the Brunswick Review, Issue 12, 2017, “Beliefs and philosophies… seem to endure as powerful forces that underpin the survival of many organizations. Often they are the bedrock of longevity. But not because they remain immutable, cast in stone. Successful companies tap into their enduring beliefs and sense of purpose, re-expressing them to remain relevant in a changing world.”
Companies face many obstacles to endurance: leadership, capital, competition, strategy, scale, economy, and globalization just to name a few. Those that endure tap into enduring beliefs and re-shape them to meet these challenges head on.
For example, during the Great Recession, Parksite Group, a Batavia, Illinois-based distributor and marketer of building products faced a difficult decision: how to maintain the corporate culture that had become integral to the Company while surviving during time when many competitors were going bankrupt. In mid-2009, as management was considering staff reduction to manage through declining sales, rank-and-file employees stepped forward with a better idea: days off without pay (a “DOWOP”) for everyone to keep staff employed. George Pattee, Parksite’s CEO, happily agreed. At the same time, employees scoured the company for ways to save small amounts, dubbing the effort the “power of $100.” Parksite workers began trimming returned posts down, cutting off the damaged portion and then selling the shorter size. Contracts were rebid (think office cleaning, coffee service, snow removal, and dumpsters). Ron Barthel, chief financial officer, said the $100 ideas contributed to significant annual savings. But more than that, they brought employees together. “We have a great culture,” Barthel says. “Everyone is encouraged to identify ways to do things better.” Self-sacrifice at the economy’s nadir also freed up cash to invest in systems to boost productivity, while many competitors were at best hunkering down.
During a time that saw many of its competitors close their doors, Parksite was resilient. It found a way to tap into historical beliefs and philosophies and adapt them to the current environment while positioning itself for a more productive future. The result was a stronger, more resilient, enduring company.
As Harvard Business Review points out, the average lifespan of S&P 500 companies has shrunk from around 60 years to closer to 18 years over the last 50 years. However, for all of the companies that have failed to endure, there are countless examples of those that have stood the test of time. For example, GKN, a British multinational on the FTSE 100 that makes auto parts and aero-space materials has been around for over 250 years due to a consistent history of diversification. The Company began as an ironworks company and has evolved over time to include everything from coal to pressed steel wheels to front wheel drive technology. Another example is Harris Corporation, founded in 1895. The American telecommunications company exited the printing sector and entered high tech electronics and communications solutions.
Verit consistently works alongside a variety of clients and their advisors as they implement or consider significant strategic changes in response to an evolving business environment. These companies all have the same thing in common, strong leaders who recognize that in order to endure, they will need to adapt to the times with new strategies, talent, technologies or business models. These changes support and enhance culture and create the foundation to endure.
As always, it is Verit’s vision to bring a fresh approach and customized solutions to advise private business owners on ownership transition.