Ralph Shrader: Institutions that endure

The Rolling Stones, the Olympics and the Salvation Army are among the world’s most enduring institutions, says Ralph Shrader. Their secret? Being true to their core values –

When a group of young men formed a band in 1962 in London, few would have predicted that they would still be together today, as a rock-and-roll institution. But that’s what Mick Jagger, Keith Richards and their friends – who called themselves the Rolling Stones – are, thanks to their seemingly infinite capacity to reinvent themselves while remaining true to their strong music and character.

And who would have predicted that the company Thomas Edison founded in 1878 with $300,000, a light bulb and the name Edison Electric Light Company would stand today as a beacon for innovation? Edison’s company – now known as General Electric (GE) – thrives in the 21st century, having made innovation the foundation for virtuously every aspect of its business, from production and manufacturing to billing.

On the surface, the Rolling Stones and General Electric don’t appear to have much in common. But they do, as two of the world’s most enduring institutions, according to a study conducted by a distinguished panel of independent scholars and sponsored by consultant firm Booz Allen Hamilton. The panel had expertise across various fields – arts and entertainment, business and commerce, government, non-profits, and academia. We provided them with criteria for endurance based largely on our client work in enterprise resilience. We also drew on our annual global survey on chief executive turnover to explore a related trend – that of enduring leaders.

We discovered that the world’s most enduring institutions have a great deal to teach us: they flourish because they have managed to reinvent themselves again and again, and they continue as market leaders in changing conditions, remaining true to their core values and distinctive qualities.

Back to the future

In studying enduring institutions, we identified these common traits: innovative capabilities; adaptive response; risk structure; information flow; governance and leadership; culture and values; and legitimacy. Essentially, these criteria fall into two main categories – the first four are about creating value and the last three are based on values. Quite simply, those institutions that endure over time are both values-based and value creating.

The 10 organizations selected by the panel differ widely. However, we found in every case that these organizations and their leaders have endured, and have remained focused on the things that last. The lessons of enduring institutions and enduring leaders are particularly relevant in an age when the world seems so captivated with “what’s new”. I believe that we need to pay as much – if not more – attention to permanence in an age of change and to understanding the things that last.

Our panel’s list included the following institutions: Business

»General Electric has clearly mastered innovation by instilling in its employees a keen ability to sense demographic trends and integrate them with population information to create a diversified product line. Indeed, GE has made research and development a foundation for a company-wide culture of innovation. At GE, innovation is expected to permeate all of the group’s business, from production and manufacturing even to billing.

»Sony is also a master of innovation. As a post-war international company synonymous with quality, it has a distinguished record of stretching product development beyond what is immediately required, and extending its innovative capabilities into unique product promotions. For instance, when Sony was developing tape recorders, it wanted to improve the quality of sound from tape. Through testing, refinement and relentless searches for appropriate metals, it produced a tape with ferrite, following a journey that included a detour to a cosmetics factory to learn how to reduce substances to a fine powder for use on tapes. Sony coated its tape with the fine powder and produced a superior tape recorder.

With its flat organizational structure – there is no notion of blue-collar and white-collar employees at Sony – the company encourages innovative ideas, no matter who dreams them up, and aggressively studies consumer trends not just to see how products are used, but to find out about consumers’ ways of life and how they could use products. For example, it developed a list of “999 Ways to Use a Tape Recorder” to demonstrate that everybody could put a recorder to use.

Government and multilateral institutions

»The US Constitution is an ingeniously adaptable institution, crafted to at once reflect and, if necessary, subsequently reject the temperament of the citizenry at any given point in history. It is not only the oldest written national constitution currently in force, but is arguably also the best example of adaptive response in any governmental structure.

»The International Telecommunications Union (ITU) is notable for having fostered effective information flows since its foundation in Paris in 1865 as the International Telegraph Union. Bringing together representatives from national governments and the private sector, the ITU serves as a facilitator of information and communication technologies (ITC) infrastructure. Without its healthy information flow, the ITU would have long ago lost the adaptability that has enabled it to respond effectively to changing political and economic conditions that characterize its environment and the ever-changing technologies it seeks to regulate.

Education

»Dartmouth College has had to fight for survival from its earliest days, time and again emerging as a stronger, more viable institution. The landmark Dartmouth College vs Woodward case, argued successfully before the US Supreme Court, protected the sanctity of a college charter – and by extension protected institutional charters and business contracts in all aspects of American life from arbitrary intrusion. The college later survived an internal threat from misguided leadership. And during a time of polarized politics and demonstrations on many American college campuses in 1970, it organized a letter-writing campaign between students and alumni to increase the understanding of the issues in play. Its mastery of risk structure has enabled and empowered this institution to survive these crises and emerge the stronger and the better for it.

»The University of Oxford, with its highly decentralized administrative and academic structure, its legacy of conservatism and its traditions, exudes legitimacy. Oxford’s administrative structure might be baffling to many outsiders, but its strengths are the self-endowed, self-governed member colleges that combine living and learning in a unique scheme of residential undergraduate education. The university’s academic degrees and research have been universally respected for centuries.

Not-for-profit

»The Salvation Army is iconic in its ability to motivate and inspire its workforce – and earns our admiration in creating the culture and expressing the values that make its own endurance possible. As an “army” it broadcasts this culture through simple but effective practices, such as the readily recognizable uniform its volunteers and workers wear, and the familiar bell-ringing and music you hear at holiday time.

Underlying the deep commitment of its staff is an organization that continues to adjust, adapt and diversify its portfolio of services according to the needs of society, while adjusting and adapting to the individual communities where it has a presence.

Today, the Salvation Army is a powerful international agency operating in more than 100 countries. Yet in many ways the main strength of the organization derives from its ability to motivate and inspire its workers. The faith dimension of the Salvation Army means that it has a dedicated workforce that will do whatever it takes to get the job done.

»The Rockefeller Foundation has taken deliberate steps to ensure that its trustees receive fresh and insightful advice about how best to plan the future direction of the organization. The US foundation, which focuses on improving the lives of poor people, has consistently sought out accomplished generalists to lead it. This has been critical in ensuring uncorrupted information flow from the outside world into the organization. While many non-profit organizations toil in the bonds of narrow missions and highly restricted mandates, the foundation operates with a broad calling that stays true to its founding principles but can be interpreted and reinterpreted depending on changing social needs.

Arts and entertainment

»The modern Olympic Games, revived in 1896 by Pierre de Coubertin, are governed by a commitment to longevity, most notably in the form of the International Olympic Committee (IOC). Its broad mission is to ensure continuity of the universal event and, despite threats from over-commercialization and corruption, the IOC has been able to rely on its unique governance structure to navigate through these storms. Because members of the IOC serve as representatives of the Olympic Games in their respective countries, (rather than vice versa), they are granted the independence necessary to ensure that decisions are made in the best interest of the Games, not any individual country.

»The Rolling Stones have demonstrated a remarkable ability to reinvent themselves. In a business that constantly chases the latest star or latest fad, they have adapted to changes in the music scene and their fan base, and have entered the 21st century as a huge concert touring, Internet and marketing machine. As such, the band’s legitimacy as rock-and-roll legends has continued to build – in spite of their own original belief that their time in the spotlight was going to be short.

Enduring institutions have enduring leaders

Beyond the seven criteria outlined for the academic research study, we’ve found that enduring institutions often have another thing in common – enduring leaders. Continuity at the top means stability and assurance for employees, customers and investors. Conversely, leadership turnover – the kind we read about on the business pages of newspapers around the world – typically creates uncertainty for investors, employees and customers alike.

Booz Allen conducts an annual global survey of chief executive turnover and over the past year we found the average tenure of global chief executives to be 7.6 years – the lowest we have seen since 1995. Such turnover is not ideal for companies. Stable, effective, values-based leadership provides a much stronger foundation for success.

Recently, I addressed students at the Wharton School at the University of Pennsylvania on the topic of enduring values, enduring institutions, and enduring leaders. I advised these aspiring leaders to look for an organization where they could create value – where they will have impact, do important work and make a difference. And I told them to look for an organization that is values-based – whose corporate culture and leadership values align with their personal values.

Marian Wright Edelman, the founder of the Children’s Defense Fund, a US children’s rights pressure group, captured the essence of that idea better than anyone: “Never work just for money or power,” she said. “They won’t save your soul or help you sleep at night.”

True, the world’s most enduring institutions have generated sufficient money to sustain their place in the world, and they’ve attained power within their spheres of influence. But the money and power they have earned truly seem to be a by-product of their mission, not the objective. I’m convinced that – for organizations and for individuals – being true to the values we espouse and continually enhancing the value we create is the key to endurance in any age.

Ralph Shrader
Ralph W Shrader is chairman and chief executive officer of Booz Allen Hamilton, a global strategy and technology consulting firm.