Column

The Problem of Change

Several mass media pundits currently argue that change is accelerating and that technology is mostly responsible. Such change is affecting employees and persons about to enter the job market.

I feel that these changes are due in part to the “creative destruction” of the capitalistic system.

Do commercial firms become less efficient as they increase in size and grow older?

I submit that over time a firm is challenged by both growth and technological change. History shows that only a few firms are able to survive these challenges.

The Fortune 500 is an annual list compiled and published by Fortune magazine that ranks 500 of the largest U.S. firms by total revenue. Compare the Fortune 500 list in 2008 versus the list in 1955. Since 1955, 2,000 firms have appeared and disappeared from the Fortune 500 list, mostly ” because of what they do to themselves” – per Jim Collins USA Today, May 5, 2008. Only 71 (of 500) survived from 1955 to 2008.

In 1956 I was in an executive training program at the Chase Manhattan Bank in New York City. The bank had 5,000 employees in 1956. There were about 40 men in the training program and we toured each bank department in pairs. We were required to write a report describing the purpose of each department. One department drew our attention because several trainees noted that this one department was a duplication of work done by another department. It took the bank two years to eliminate the duplicate work. Today the Chase bank has 240,000 employees.

While technological change is a reality, history and my personal experience supports the argument that the failure of many firms results from poor management and internal conflict.

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