Characteristics of Life
There is a concept known as corporate personhood, that is, the legal notion that a corporation, separate from human beings that run and operate it, have legal rights and responsibilities that are typically only enjoyed by natural persons. The United States Constitution protects corporations under the Fourteenth Amendment (Trustees of Dartmouth College v. Woodward– 17 U.S. 518 (1819)). The law in the United States holds that a legal entity(corporations and non-profit organizations) under 1 U.S.C. §1 (United States Code), and states:
In determining the meaning of any Act of Congress, unless the context indicates otherwise—the words “person” and “whoever” include corporations, companies, associations, firms, partnerships, societies, and joint-stock companies, as well as individuals;
Besides being protected under the law, there are some surprising similarities between businesses and other “living organisms,” which you might find incredibly exciting.
In a speech by Rob Ferguson given at a recent M&A forum entitled “Deathbed Dilemma,” Rob noted some of the uncanny similarities between what we typically see in humans and those found in businesses. To fully capture these similarities, it is imperative that we examine the definition of life and what constitutes a living being. Then, based upon these comparisons, we can further investigate how, just as with other living people, corporations, and organizations can be cared for and nurtured to flourish. To do so, we must first delve into the biological aspects of life.
Biology, the study of living organisms, examines the structure, growth, function, origin, distribution, and evolution of living things. In this discipline, four unifying principles form the foundations of modern biology. These are cell theory, development, genetics, and homeostasis. There are a plethora of disciplines under the umbrella of these four topics and include sciences such as biochemistry, microbiology, genetics, botany, ecology, Zoology, etc… While not all scientists agree about what makes up life, there are specific characteristics of classification that are typically agreed upon by the scientific community as a whole concerning the traits that comprise a living organism. A living organism should;
- respond to their environment;
- grow and change;
- reproduce and have offspring;
- have complex chemistry;
- maintain homeostasis;
- be built of structures called cells and;
- pass their traits onto their offspring.
Responding to the Environment
All living organisms respond to their environment. Living organisms react to changes and adapt, becoming adjusted to an environment to survive in the conditions surrounding it. It is through the process of adaptation that the organism might develop structural, physiological, and behavioral traits that improve the chances of survival and lead to reproduction.
Similarly, businesses and other organizations must adapt to their environments to survive and thrive. There are several different theories of what is called change movement that have varying degrees of complexity and yet all point to the need for businesses to adapt (Lewin’s Model, Beer’s Model, and Kotte’s Model). Companies can adapt to change can ensures their survival.
Growth and Change
In biological organisms, there must be an ability to grow and change. Take, for example, a seed. A seed looks nothing like the plant that comes from it, yet, in the right conditions, the plant springs forth from the ground and grows and changes to the point of full maturity unless adversely impacted by its environment or a lack of ability to adapt to its environment (see adaptations above).
Like living organisms, businesses must, likewise, have the ability to grow and change. Business, regardless of the inspiration that births them, must grow and change as they continue to become more and more profitable. Stagnation generally leads to atrophy and atrophy to demise. A business that is not increasing and improving cannot compete and is limited to its effectiveness in the marketplace.
Every living organism can reproduce, whether we are talking about mammals, plants, or even bacteria. If a species cannot reproduce and carry on the next generation, the species will become extinct.
Similarly, businesses must also be able to reproduce. Perhaps this does not equate to multiple locations but to, at the very least, processes, structure, employees, and business units. This kind of generational reproduction might look like succession in ownership and leadership, or it could be reproduction by way of sale into the competent hands of a new generation of leaders.
Have Complex Chemistry
Every living organism, including single-cell organism, have complex chemistry that allows them to live. Something as simple as a flower may appear to be a relatively simple structure. Yet, it boasts a myriad of complicated chemical reactions and functions that make it both beautiful and practical as it attracts wildlife and propagates. These fantastic biochemical transactions are all a part of what we call metabolism.
Businesses also have a form of metabolism. They bring in and utilize assets and generate waste. Just as metabolism works in human beings, what we put into our bodies affects our health, so do the things we bring into our businesses. Where a healthy human might focus on things like grains, lean proteins, fruits, and vegetables, a company may rely on things like funding, talent, buildings, and equipment.
As with human metabolism, factors such as age, exercise, and other factors contribute to how well a metabolism works; the same holds for businesses. When you consider that multi-generational companies have a less chance of survival from generation to generation, it is plain to see how age may influence corporate metabolism. For example, only 40% of businesses survive to the 2nd generation, 12% survive 3rd generation, and only 1% of companies make it to the 5th generation.
Furthermore, by being diligent about what you bring into your business and keeping a handle on waste, your business can run more effectively and efficiently. In human beings, the thyroid helps regulate metabolism; wheras, in business, your board of directors, managers, and employees all play a vital role in regulating your business metabolism.
Homeostasis is defined as the tendency toward a relatively stable equilibrium between interdependent elements, especially as maintained by physiological processes. In humans, this would be akin to how your body regulates itself to adjust to freezing temperatures. The human body will not freeze by merely stepping out into freezing weather. For homeostasis in humans to respond to cold weather, the brain signals the body to begin shivering to compensate. When you are hungry, you eat food; it supplies your body with the energy to continue functioning in controlled internal conditions.
Business must also maintain a kind of homeostasis to keep their internal environments within a specific range to maintain a stable environment despite external changes such as stock prices and other economic factors, advances in technology, political climates, and (as in recent news– Corona Virus) external factors such as illness and extreme weather. The key here is how well your company maintains stability despite external conditions.
Built of Cells
When you look closely under a microscope at any living organism, you find that they all have cellular level makeup. The cell is the basic unit of structure in all living organisms. Some living creatures have more cells than others. For example, a giraffe will have more cells than simple bacteria.
When you examine an organization under a “microscope,” you find that they mimic the structure of biological organisms. There has been much work on the topics of cellular organization structures (a.k.a. cellular organization, cellular systems, nodal organization, nodal structure, etc..), which elaborate on this concept. A simple balance sheet will give you an idea down to a “cellular-level” of the things that make up a business.
And so, just as atoms combine to make molecules, and molecules make macromolecules, and these combine to make up organelles which form cells, and then go on to creat tissue, organs, organ systems, and ultimately an organism, businesses are very similar. From an idea to employees to working groups, business units, management teams, leadership, etc., all of these “cells” create the company (organism), and these companies combine to build industries.
When examining your business in this manner, you can see how important it is that you nurture and care for your business. Staying healthy in business involves physical well-being, as well as the psychological well-being of your company. When companies are not fulfilling the needs of the corporate organization, atrophy and system failures can be the result.
Preventing corporate illness is imperative and requires leaders of organizations to have regular checkups.
Before your business finds itself in need of “physician,” consider contacting Rob Ferguson. Rob specializes in helping organizations become healthy and productive through business assessments, leadership development, and M&A capital restructuring consulting.