At least the deaths of J. Edgar Hoover and Gen. Francisco Franco, both once thought important exhibits to the contrary, it is generally agreed that man does not enjoy immortality. There is a life span in which youth and middle-aged vigor give way, eventually, to possible senescence and certain demise. In contrast with this cycle stands the modern corporation, the central furniture of the free enterprise system. It is forever; its vigor remains undiminished however numerous its years. It is like Tennyson's brook. Thus its advantages over mere humans. That corporations have a tendency to age, become senile, is not discussed. It is something that very much needs discussion.
We accept that our older industries are in trouble. Steel, automobiles, railroads, other heav industry, some textiles, along with such earlier basket cases as shipbuilding, are all cases in point. No one should argue that there is a single or simple reason. In all the industrial countries the second-and third-generation labor force deserts these industries; in Europe they have been saved or partly saved by migrant workers from southern Italy, Turkey, Yugoslavia, Portugal and other rural lands as, in equal measure, the industries in Detroit and other northern cities have been saved by migration from the Appalachian plateau and the South.
The modern reliance on monetary policy is also rather precisely designed to punish these older industries. It acts against inflation by high interest rates and astringent credit and is effective only to the extent that it induces idle plant and recession. The hight interest rates discourage investment; and when old plant is idle because of recession, new plant is not added. New plant is almost always more efficient than old.
Were one designing a system for suppressing productivity in the vulnerable parts of the economy one could not do better than to ask for the present emphasis on monetary policy. It's too bad, in a way, that the old notion of left-wing conspiracy has fallen on such evil days. Otherwise one could suggest in a plausible way that some exceptionally subtle Bolshevist had got hold of economic policy in the United States as also in Britain.
But we must now also open our minds to the idea of a definite life span for corporations, one that does not end (perhaps unfortunately) in death but one does lead on to terminal seniltiy. The case, when it is examined, is persuasive.
In the first stage of the development of the modern great corporation there was always an innovative and dominant personality. The names are part of the industrial legend: Rockefeller at Standard Oil, Ford at Ford, Sloan at General Motors, Firestone at Firestone, the first Watson at IBM, Sewell Avery at Montgomery Ward, Julius Rosenwald at Sears, Amadeo Peter Giannini at the Bank of America, Juan Trippe at Pan Am. Such an originating name can be identified with nearly every one of the Fortune 500 or the companion corporations in merchadising, transportation or finance.
At a second stage, sometimes, as in the case of Henry Ford, strongly resisted by the original entrepreneur, organization takes over. The requirements for decision are now too diverse for one man; an important action calls for a large range of specialized knowledge. The myth of leadership and command continues; it is heralded in the press, acknowledged in access to the corporate jet. Obeisance is even accorded a board of directors. In fact, the corporation has become a collective of its top management and its operating and technical staff. Pondering this development some years ago, I called this collective the technostructure.
What did I not then see is the tendency for the technostructure to age. Initially, as it takes over from the original entrepeneur, it can be a thing of initiative and vigor. Men (and extremely few women) are freed from the heavy hand of authority; action is no longer confined to what can be grasped by one by now somewhat stereotyped mind. In the life cycle of the corporation there can be a time of collective innovation, adventure and growth. Thus it was at Ford after Henry Ford when the young men took over after World War II. And at IBM after Watson. And at Chrysler after Walter P. Chrysler. There is danger in easy generalization here. But, clearly, the first manifestations of collective or bureaucratic control of the corporation can be affirmative, not adverse. I come now to the next stage.
Here the corporate organization -- the technostructure -- has a tendency, as does any large organization, public or private, to clone itself. People are promoted who most closely resemble the people who are already there. There is a concern for excellence; excellence is what most resembles those making personnel decisions. This criterion is by no means peculiar to corporations; I long ago noticed its use, including by myself, at Harvard. Top jobs are now achieved by men in their mid- or late-50s. For their few years in senior positions, short-run performance rather than long-run planning and achievement is safest, most comfortable, the most agreeable career choice. This will especially be so in older process-type industry where the disturbing effects of technological change or in consumer taste do not shock the organization men into unwelcome thought.
In consequence, investment becomes cautious; analysis becomes a surrogate for action; innovation has an aspect of danger; the ability to adapt to changing circumstances dwindles; the future is sacrificed to the near present. Performance becomes increasingly mediocre -- or worse. But in accordance with popular custom and obligatory corporate cliche the poor performance is attributed to the heavy hand of government bureaucracy, to inadequate incentives or to unfair competition. "The fault, dear Brutus, is not in ourselves but in the Japanese."
It is easier to affirm the fact of corporate senility than to prescribe for it. Acceptance of the idea of a corporate life cycle would help. Senescence would then be considered normal in the absence of affirmative efforts to prevent it. A convention that no one should achieve senior corporate position after the age of 40 or 45 would be useful. It is not that the young are all that more intelligent. This, naturally, I do not believe. Rather at that age there would be a much greater term of years over which they would have to prove themselves. Longer-range planning and accompanying investment would be obligatory. The present career arrangements for executives are a kindly design for bringing comfort to the aged, one that is in keeping with the whole concept of corporate senescence.
Some congressional hearings on the aging process in large corporations might usefully focus attention on the disorder. And they might have ferret out from firms and business schools some useful thoughts on how to deal with it. The discussion would help end the notion that government bureaucracy is always responsible for the failings of private bureaucracy. This could even be a compassionate thing. Washington management is now being taken over by business executives. Soon they will be blamed for whatever goes wrong in private enterprise. Those terrible Republican bureaucrats! It would be a kindly act to have the blme placed where it belongs