Where is Your Business in its Lifecycle?
- All organizations are subject to a lifecycle.
- Prime is the ideal stage to reach for, maintain or seek to regain. It requires a delicate balance of flexibility and control.
- Problems are normal, but can fester and become abnormal or pathological.
- Knowledge of the lifecycle you are in and the one to come is valuable for leaders seeking to guide their organizations to Prime.
All living creatures progress through stages of growth and decline that ends in death. Organizations, however, do not have to decline and age. They can remain at the high point of their vitality (a state called Prime) for a long time, perhaps indefinitely. Professor Ichak Adizes has spent his career studying lifecycles. His work is invaluable to business leaders seeking grow wisely and avoid the pitfalls that can take a company down. The primary objective of his work is to answer, “How can companies use change intelligently to arrive at, or return to, Prime and stay there?” Knowledge regarding the lifecycle you are in and the one to come is valuable for leaders seeking to guide their organizations to Prime. (More about Adizes here: https://adizes.com/dr-ichak-adizes/)
It is normal for leaders to have problems in their organizations. Matter of fact, each stage has problems we expect to see. They are growing pains. However, if those problems are managed poorly or too slowly, these problems will fester and take on abnormal manifestations. Continued mismanagement can lead to pathologies, which are much more difficult to correct. If your organization is struggling, seek help now – the problem is not likely to go away on its own.
Stage 1: Infancy
During this stage, a founder (one person or a small group of people) have become enamored enough with a big dream to take the risk to form an enterprise. Attention shifts from ideas and possibilities to results. In the business world those results take the form of sales. Sales drive this action-oriented, opportunity-driven stage. During this stage, no one pays much attention to paperwork, controls, systems, or procedures. The founder works long hours to keep all the plates spinning. Because a small problem can escalate and turn into a major crisis overnight, the founder maintains control over all decisions. This stage ends when the organization’s cash flow stabilizes and is predictable and positive.
Stage 2: Go-Go
This is a rapid growth stage and sales are king. The founders, seeing their companies flourish, may believe they can do no wrong and their arrogance often leaves their organizations vulnerable mistakes and over-reaching. Too many opportunities can spread the organization dangerously thin as the entrepreneurial spirit is in full swing without anything to function as brakes. The leaders tend to organize their companies around people rather than functions, capable employees can and do wear many hats, but, to the consternation of key employees, the founders nevertheless make every decision. The fledgling infrastructure may lead to quality and delivery problems. What was normal in Infancy is becoming abnormal now. This stage often ends when the business gets into serious trouble by over-reaching and needs to reinvent itself, which leads to the problems that need to be tackled in Adolescence.
Stage 3: Adolescence
During this stage, the company is often experiencing the problems of uncontrolled growth and struggling to get a professional management team in place. A common story is that the founder hires a Chief Operating Officer (COO) or some other senior administrative professional and finds it difficult to hand over the reins. An attitude of us (the old-timers) versus them (the COO and his supporters) can erupt and hamper operations. While the attention turns internally due to lack of adequate infrastructure and other internal battles, the company growth may suffer as there are so many internal conflicts that people have little time left to serve the clients. Sales start to falter and few organizations have the strategic planning or organizational development competency to pull out it. If the company gets its footing in this stage and develops a highly functioning collaborative team with the right infrastructure and controls without losing critical flexibility, it enters Prime. If it doesn’t gain solid ground early enough, it may end up in a Control crisis.
Stage 4: Prime
This is the stage of life when everything comes together. These organizations are able to maintain the delicate balance between control and flexibility. The organization, disciplined yet innovative, consistently meets its customers changing needs. New start-up organizations or products sprout up, and they are decentralized and managed according to their lifecycle, not that of the parent company. The organization is vital, vibrant and thriving. If the organization does not work on staying in prime, it will age or regress to earlier stages. (See more about the criteria for thriving organizations here…)
We find most organizations decline due the interplay of several factors: lack of discipline, lack of entrepreneurialism, abundance of red-tape, apathy to customers and cultural decline.
Stage 5a: Stable Aging (the Fall)
Early on, the organization is still strong and looks great to nearly anyone evaluating it, but without the eagerness of its earlier stages; it is content and complacent. Members of the organization welcome new ideas but lack the degree of excitement that characterize new ideas during the growing stages. The emphasis on marketing and research and development wanes. Little energy is spent innovating for the future holding on to the core/cash cows takes priority. As aging progresses, not making waves becomes a way of life. Outward signs of status (titles, size and placement of office, etc.) become an obsession. The organization acquires companies rather than incubating start up concepts or businesses. It’s culture emphasizes how things are done over what’s being done and why people are doing it.
Stage 5b, Mid Decline (Aristocracy & Recrimination)
The company now visibly appears to be stalling or declining (especially to insiders), and the organization’s leaders rely on the past to carry them into the future. The reach for short-term solutions instead of long-term opportunities. They tend to reward rule followers and reinforce not rocking the boat. Systems receive more investment than R&D. Inaction now means the pace of decline steepens.
As this stage moves into Recrimination, the company conducts witch-hunts to find out who did something wrong rather than trying to discover what went wrong and how to fix it. Cost reductions take precedence over efforts to increase revenues. The reason for this behavior seems to be that it is easier to see how cutting costs improve the bottom line. It is far from certain, however, whether stronger effort – even with unchanged cost structure – will increase revenues and affect the bottom line. Cutting costs becomes an obsession. Backstabbing and infighting rule this stage. Executives fight to protect their turf, isolating themselves from the fellow executives and demonizing the customers. Key talent may be leaving at an alarming rate.
Stage 5c: Bureaucracy
If the organization survives due to being politically protected or regulated, it is inevitable that it will live to serve those who fund it or keep it in power. The critical factor for its survival is not how it satisfies its customers but how it satisfies those who grant its resources and control the predictability of its behavior. The organization’s procedure manuals thicken, paperwork abounds, and rules and policies choke innovation and creativity. When employees question procedures or processes, managements response is, “It’s the policy.” Clients have difficulty getting attention. There are systems for everything. Employees play by the book.
Stage 5d: Death
This final stage may linger for years while the company slowly dies, or it may arrive suddenly with one massive blow: the organization crumbles when it cannot generate the cash needs to cover its payables, when the outflow finally exhausts any inflow.
Determining an Organization’s place on the lifecycle:
Neither chronological age nor size determines the stage an organization occupies on the corporate lifecycle. Where an organization is positioned depends on the level of flexibility and self-control demonstrated in the organization.
For each stage there is a specific set of actions required to bring growing companies to Prime or declining companies back to Prime. If you are unsure how to get to or stay in Prime, call us, we can help you determine the right steps for you.
Corporate Lifecyles, Ichak Adizes, 1988
Managing Corporate Lifecycles, Ichak Adizes, 1999