Tuesday, March 29, 2011

Oldest US City - Oldest US Company?

I just returned from a trip to Florida which included an interesting day in St. Augustine. Most people have heard St. Augustine's claims to being the oldest city in the U.S. but how many know what the oldest company is in the U.S.? It could be the King Arthur Flour Company, established in Boston in 1790 and now an employee-owned company out of Vermont. Or - depending on how one counts - it could be Ziljian (the musical cymbal company) which was established by Avedis Ziljian in 1623 in Constantinople and moved to the U.S. by Avedis III in 1929. Run by the 15th generation of Ziljian heirs, it is generally considered the oldest family-owned business in the U.S. I'd love to hear from people who know of other candidates for oldest U.S. company!

Saturday, March 19, 2011

Profits: Goal or Fuel?

There seems to be two schools of thought regarding the purpose of a business and the pursuit of profits. The traditional financial management approach teaches that the primary goal of a business is to make money. Many, if not most, business leaders unapologetically state this as their purpose. After all, if you're not profitable you won't stay in business for very long.

Most of the 100-year-old companies, however, appear to have another view regarding the role of profits in their business: they see profits as the fuel that keeps their company running rather than as their purpose or reason for being in business. As Max DePree, former CEO of Herman Miller, Inc. writes in his book Leadership Is An Art, profits are the result of the company achieving its goals. Companies that have survived longer than most tend to define their purpose in terms of what they do and how they do it; and they often admit to making decisions that sub-optimize profits in the short term. But make no mistake, these companies are astute managers of their financial resources. In fact, being conservative in their financial management (evidenced by practices such as maintaining low debt levels and building cash reserves) is one of the common traits that has enabled these companies' long-term survival.

My study of old companies indicates that in these organizations profits are seen as the fuel that enables "living" a long corporate life; core purpose is described more broadly as the value they add to society, not simply the money they make for investors or owners.

Sunday, March 6, 2011

Public vs. Private Ownership of Old Companies

When it comes to companies over 100 years old, private ownership beats publicly-held two-to-one: Two-thirds of the companies are private, often family-owned companies passed from generation to generation. Though this seems like a significant statistic, in fact the majority of all U.S. companies are privately-owned - far more than two-thirds - so it's hard to draw any conclusions regarding private vs. public ownership relative to survival.

This doesn't seem to change the opinion of the old private companies we have interviewed, however: when asked what they believe have been the most important factors in their survival, they almost universally indicate that staying private was key. They see this as a matter of being able to maintain control of their policies and practices with company values and purpose in mind rather than having to respond to the short-term demands of the financial market. An interesting question to pursue with those old companies that are publicly-owned is how successive management teams have been able to keep their decisions driven by company values and purpose without being unduly influenced by reaction of the stock market and financial investors to short-term financial performance.

Friday, March 4, 2011

How Rare Is It To Reach 100 Years?

It is difficult to accurately calculate the percentage of U.S. firms that are over 100 years old, but I will try. The U.S. census data for 2006 lists the number of U.S. firms at 6,022,000; our data base of companies over 100 years old is now at 540. This would indicate that only .00897 percent of U.S. firms are over 100 years old. We know our data base is incomplete and we add more firms every week, however it appears unlikely that the percentage of companies over 100 years old would approach even half a percent. (Even if the number of firms in our database doubles, the percentage is still just .0179.) Firms that do reach 100 should truly celebrate!