How to Face Your Company's Mortality

Posted on Harvard Business Review: February 22, 2010 9:30 AM

One corporate drama playing out in the news is the fate of Saab—a now-orphan division of General Motors that appears will narrowly escape extinction by last-minute buyer Spyker. For owners, employees, dealers, and suppliers of Saab, the potential death of such an iconic brand was probably hard to fathom. After all, the Swedish version of Saab, with its roots in the aircraft industry, existed for more than 50 years before becoming part of General Motors for another 10. Its products have always had a reputation for quality and safety, along with a somewhat quirky design. So how could a company with this kind of heritage almost go out of business?

The reality is organizations—just like people and products—have life cycles and life spans. And very few live forever. My first realization of this little-spoken fact was many years ago when Eastern Airlines gave up the ghost and left me holding a lifetime membership in the Ionosphere Club. It was a shock to realize that my life was going to last longer than a company considered a leader in its industry.

Since then I've seen hundreds of seemingly invincible firms bite the dust or cease to exist independently. In fact, 2009 saw the demise of organizations such as Schering Plough, Wyeth, Nortel, Circuit City, Max Factor, Perot Systems, Marvel Enterprises, BusinessWeek, and Linen N'Things. And both the Saturn and Pontiac brands are set to expire in 2010.

While the final days of some companies are dramatic and garner top news coverage, most companies deteriorate over a period of years due to competitive issues, financial weakness, or strategic missteps. For example, Saab's growth and expansion in the 1980s created a need for capital that brought it into the arms of General Motors, which purchased 50 percent of the automotive division in 1989, and the remainder in 2000. From that point, Saab became a casualty of GM's inability to rein in costs, prune products and platforms, and compete on quality.

In other words, companies don't usually die of sudden heart attacks, but rather have protracted illnesses that kill them over time.

Clearly the end of a company—whether through bankruptcy, merger, restructuring, or shutdown—is often painful and traumatic for those involved. Most people emotionally identify with their employer so even when their job continues with a new entity, or they get a financial payout, there is still a sense of loss. And of course, the loss is more acute when there is neither a job nor a payout.

Organizational failure, like death, is one of those subjects many of us avoid and deny, which makes it all the more shocking when it happens. But given the reality—it might be worth considering in advance how you would handle the impending death of your company or division. Is there anything you could do to prevent it based on your position and influence? If not, think about your own future. Ask yourself the following questions:

Are there skills that you need to develop to become more portable?
Are there experiences that will position you for an important role in a successor company or with another business in the same industry?
Do you have a clear sense of what you would want to do if you had to exit your company? Would you want to reinvent yourself, go off on your own, or continue the same work with another organization?

After all, your company might not have an afterlife, but your career will. Now is the time to get ready.

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