Companies should always focus on getting better, not bigger: Alex Hill

Alex Hill, author and professor at Kingston University London, highlights the perks of looking beyond the short term and immediate shareholder value

By Anitha Moosath

Published: Nov 22, 2023 10:44:38 AM IST

Updated: Nov 22, 2023 10:53:08 AM IST

Alex
Hill, co-founder and director of the Centre for High Performance, a
professor at Kingston University London Alex Hill, co-founder and director of the Centre for High Performance, a professor at Kingston University London

What sets apart organisations that have thrived for more than hundred years, outperforming their peers throughout? Alex Hill, co-founder and director of the Centre for High Performance, a professor at Kingston University London, and an educator at Duke Corporate Education, unveils their longevity secret in Centennials: The 12 Habits of Great, Enduring Organisations.

Q. Why a book on centennials now? How does it fit into the present-day business context?

Businesses are dying earlier and earlier each year. Particularly in the UK and the US, where most startups don’t make it to their second birthday, and even established firms now only live for 15 years.

Some would argue this is a good thing. As when a company fails, so they say, its resources can be reallocated to a better concern. However, this view ignores the friction and wastage that corporate death involves, that the long-term success of any economy or society depends on the stability of its core institutions, and that the long-term challenges that we all face—such as education, health, immigration and climate change—are less likely to be addressed, if we only focus on the here and now.

A recent McKinsey study, for example, showed that if more US companies had taken a long-term perspective over the last 15 years, then they would have performed better for longer, and the US’s GDP would have increased by over $1 trillion, and there would have been five million more jobs.

Q. How do centennials balance a ‘disruptive edge’ with a stable core?

When you spend time in a centennial, you notice that some parts of the organisation are constantly changing, whilst other parts never change, and always stay still. In the book, I have described this as being ‘radically traditional’. The centennials have both a ‘stable core’ to guide them forward—their purpose, stewardship, and openness—and a ‘disruptive edge’ to move them forward too—their experts, nervousness, and accidents.

To develop this edge, they work extremely hard to find the best people they can, and then ask them to work on several projects at once, in different teams, and to constantly question what they do, and how they do it, so they’re always moving forward.

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Q. Sharing. Openness. Trust. What does the Pixar story tell us about their correlation?

The centennials know that they need to show others what they’re doing, and why, if they want them to trust them, and continue to support them in the future.

When Pixar started out, for example, they had a choice. They were in a race to make the first computer-animated film and they could either hold their secrets close to their chest, or share them with the world and ask others to help them. They chose the latter, and published their findings in articles and books, shared them at conferences, and reviewed other people’s work too—behaving more like academics than businesspeople. And they found that, as a result, more money and talent came to them, and they got there first.

Q. How do great organisations go about attracting and nurturing talent?

They know that they are only as good as the people they recruit. So they work incredibly hard to try to find the best people they can. They do this by drawing from the largest and most diverse pool they can—by, for example, creating open challenges and asking everyone to apply. And they develop puzzles and tests too, to help them find the people they need, and normally work with a person part-time, for at least six months to see how they work, before they offer them a full-time job.

Once a new person enters the organisation, they never stay still. As they have to work in different projects, in different teams, and walk around the office several times each day, so they are always bumping into new people.

Q. What’s key to diligent succession planning?

The centennials always try to create a six-year overlap between one ‘stable steward’ and the next—who are roughly a quarter of each team, and guide them forward. By identifying the next steward four years before they are appointed, and asking the old one to stay on for at least two years after they step down. So everyone keeps learning, and nothing gets lots along the way.

Just look at Andy Jassy at Amazon, Satya Nadella at Microsoft, and Tim Cook at Apple, for example. They all worked in the organisation for at least four years before they became CEO, and then the previous CEO, or chair, stayed on for at least two years after they stepped down, to help guide the new CEO forward.

Q. Do you feel leadership transitions are tough in family businesses?

It can be hard for an old leader to step back, especially if they are emotionally attached to the business, and it has become their life. However, they need to work out how to do this, if the business is to survive.

The trick, the centennials have found, is to ensure that the new leader has as much experience and responsibility as possible before they take over. And that the old leader is given an important and interesting job afterwards, so they want to stay on and help. Every organisation is vulnerable when a significant leader changes. But this shouldn’t be a problem, if the new leader is sufficiently prepared and the old one stays on to help. However, the new leader must find new ways to keep innovating too, if they want to maintain their success. They can’t just rely on established ideas and practices.

A great way to do this, the centennials have found, is to bring in an outsider to watch them work, and then ask them: How would you kill our business? What would you do differently, if you wanted to set up a new company to take us out?

As you need to work out how to find the next thing, that will keep you successful for the next 20 to 30 years, before someone else does, and then destroys you.

Q. Growing bigger too fast has brought the downfall of startups in India too. What are the perils involved?

A recent study of 3,000 startups found that the most common reason that they failed was that they grew too fast. It found that companies fail when they get the wrong investors, launch the wrong products, recruit the wrong people, or attract the wrong customers. And all of these things are more likely to go wrong, when you grow too fast.

‘Taking venture capital is like putting a rocket engine on the back of a car’, as one entrepreneur put it. And if you’re too hasty, and you do it too early, then your business will explode.

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Q. Where should the focus lie instead?

Companies should always try to focus on getting better, not bigger. And only grow when they really have to—if they have to become more financially stable or want to create more impact.

But they must remember that they are at their most vulnerable, when they are growing. So they must do it very slowly and carefully. So they always recruit the right people, attract the right customers, and grow by adding lots of small units together—communities of 50 people, in sites of less than 300—rather than by simply creating one large one.

Q. “Be porous”. What’s the message here for CEOs?

Find the best people you can, from all walks of life, ask them to work with you part-time, or on several projects at once, so they are always learning, and make them work with lots of different outsiders to continually disrupt their thinking.

Q. Three ways to nurture a centennial mindset…

Set a clear, ambitious long-term purpose, a North Star to guide you forward. Make sure you have enough stewards in place to guide you. And work with lots of different outsiders, to find new and innovative ways to move forward.