lifecycle of growing organizations - adizes

7/28/2019 Lifecycle of Growing Organizations - Adizes

1/15

Adizes USA 2815 East Valley Road Santa Barbara, California USA 93108

Phone: 805.565.2901 Fax: 805.565.0741 Email: [email protected] Web: www.adizes.com

The Lifecycle of Growing OrganizationsThis paper is adopted from Managing Corporate Lifecycles

andThe Pursuit of Prime By Dr. Ichak Adizes, Prentice Hall Press

Overview

At the foundation of effective management for anyorganization is the fundamental truth that allorganizations, like any living organisms, have a lifecycle

and undergo very predictable and repetitive patterns ofbehavior as they grow and develop. At each new stageof development an organization is faced with a uniqueset of challenges. How well or poorly managementaddresses these challenges, and leads a healthy transitionfrom one stage to the next, has a significant impact onthe success or failure of their organization.

Leading an organization through lifecycle transitions isnot easy, or obvious. The same methods that producesuccess in one stage can create failure in the next.Fundamental changes in leadership and management areall required, with an approach that delicately balances theamount of control and flexibility needed for each stage.Leaders who fail to understand what is needed (and notneeded) can inhibit the development of their companiesor plunge them into premature aging.

The challenges that every organization must overcome ateach stage of development first manifest themselves as problems that arise from the growth and success of thecompany and from external changes in markets, competitors, technology and the general business and politicalenvironment. This simple, unavoidable reality leads to the following five important insights about the nature of

problems in organizations.

1. Problems are normal and desirable . Problems are the natural result of change. The only place on the lifecyclecurve where there are no problems is the place where there is no change, which is Death. If you think that goodmanagers are those whose organizations have no problems, think again. Your reward for successfully resolving

the problems that confront you today, is a set of new problems tomorrow that will be larger and more complex.If your company faces a high rate of change in your markets, technology or industry, your challenge ismagnified. The faster the rate of change, the faster problems appear and grow.

2. Your role as a leader is not to prevent problems or slow the pace of change . Instead, focus on accelerating yourorganizations ability to recognize and resolve problems. Your ability to work together as a team and quicklytackle any and all situations, or decide not to, is your ultimate competitive advantage.

3. Some of the problems you face are normal and some are abnormal. Normal problems are those that areexpected for a given lifecycle stage. Abnormal problems are those that are not expected (or desirable) in a stageof the lifecycle. Since you will never have enough time or resources to address all the problems you face, focuson abnormal problems. Many normal problems can be ignored since they tend to resolve themselves during thenatural course of growth and development.

4. You can drive your org anization faster when you know the road ahead. Most of the issues you face are commonto all organizations. There is no need for you to reinvent the wheel. You can save a lot of time and effort bythoroughly understanding the nature of all 10 stages in the lifecycle, and knowing what it takes to transitionfrom one stage to the next. If you and your management team share a common understanding of thisknowledge before problems arise, it will also help you attack the problems, instead of attacking each other.

5. Prime is the Fountain of Youth for Organizations . One key difference between the lifecycle for human beingversus organizations is that living things inevitably die, while organizations need not. The age of acompany in terms of its lifecycle is not related to its chronological age, the number of employees, or the size ofits assets. Instead, the lifecycle age is defined by the interrelationship between flexibility and control. There is

Figure 1. The 10 Stages in the Lifecycle of EveryOrganization.

Source: Managing Corporate Lifecycles by I. Adizes.


2/15

The Lifecycle of Growing Organizations 1983-2002, Ichak Adizes and the Adizes Institute. All r ights reserved. Page 2

a fountain of youth for organizations called Prime. An organization that is in Prime has achieved a balancebetween control and flexibility. A Prime organization knows what it is doing, where it is going, and how itwill get there. It also enjoys both high growth and high profitability. Once an organization reaches Prime,leadership must work to sustain that position.

Along with the descriptive insights of the 5 stages of any growing organizations lifecycle, this paper offersprescriptive advice on what leaders and managers must do to accelerate through lifecycle transitions and put theirorganizations on a fast track to Prime. There is another paper for leaders of aging organizations that is entitledTheLifecycles of Aging Organizations.

About the Author

Dr. Ichak Adizes is one of the worlds leading experts on improving the performance of business and governmentorganizations by making fundamental changes without the destructive conflict that plague many major change

efforts. Since 1973 he has been involved with companies that range from the Global 100 to start-ups in more than40 countries serving many different industries. He has also consulted to several heads of state. He is the author ofseven books that have been translated into 22 languages. His work has been featured in Fortune, Forbes,Business Week, Inc. Magazine, Financial Times and the New York Times. Dr. Adizes is the Founder andProfessional Director of the Adizes Institute.

About Adizes

Adizes is a change management organization that specializes in helping CEOs, top management teams, boardsand owners quickly and effectively accelerate through lifecycle transitions. The relationship it forges with itsclients is much like that between the Olympic Training Center and the complete program of support they provide toathletics that want to become world champions. Adizes strives to help its clients dramatically improve theperformance of their organizations, achieve sustainable revenue and profitability targets, and Prime conditionsof operations. Adizes is careful about the companies it selects as clients. It is a small highly specialized

boutique company on purpose. Since 1973, the organization has worked with clients in 48 countries from 75different industries that range in size from the Global 100 to start-ups. All Adizes clients share a common goal ofgetting to Prime on the corporate lifecycle and enjoying both high growth and high profitability.

Prime

Growing Agin

FlexibilityControllabilityHigh

Low

Prime

Growing Agin

FlexibilityControllabilityHigh

Low

Figure 2. Prime is the optimal lifecycle stage where a norganization has achieved a balance between control andlexibility, and enjoys both high growth and highro i ta bi lit .


3/15


Courtship

Courtship is the first stage of an organizationsdevelopment. At this stage, the company is not yet

born. It exists as a gleam in the founder(s) eye. Thefocus of Courtship is necessarily on dreams and

possibilities.

The primary goal of this stage is to build the foundersenthusiasm and commitment to his dream. The higherthe risk, the deeper the commitment needed. As ConradHilton said, If you wish to launch big ships, you haveto go where the water is deep.

In Courtship, it is normal to experience fear, uncertaintyand doubts. What exactly are we going to do? How isit going to be done? When should it be done? Who isgoing to buy this and why? Now is the time to windtunnel test the brilliance of the Founders vision.

The goal of the fledgling business should be to addvalue and satisfy market needs. Founders that are in itsolely for the money, often dont have the fortitude to sustain their companies over the rocky road they willencounter in Infancy and Go-Go. A useful definition of a founder is someone with; unreasonable conviction in theface of insufficient evidence. By definition, most will think that the idea for the new business is risky, and

probably wont work. It is not important that everyone else believes it will work. It is crucial that the founder(s)believe it will, and are committed to doing whatever it takes to make the new company succeed.

Problems of Courtship

Normal problems Abnormal problems

Over excitement, possibly unwarranted. Low commitment (try it and see attitude).Fuzzy on many details. Over thinking the details, stalling.Fear, uncertainty and doubts. Lack of fear.Mixed goals. Change the world and make

money.Exclusive focus on making money.

Pathologies of Courtship: The Affair

A Courtship which has no testing of the harsh realities that face any new business can easily degrade into an Affairwhere the founders commitment evaporates at the first sign of difficulty. What is an affair but lots of enthusiasmwith no real commitment?

Prescription for Success

When the founder(s) makes the bold decision to quit their day job, mortgage their house and/or accept the seedcapital, the organization is born and instantly moves into Infancy. With this simple act of faith, the founder(s) castoff on a wonderful, and largely uncontrollable, journey of triumph and tragedy.

Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness, concerning all actsof initiative and creation. There is an elementary truth the ignorance of which kills countless ideas andsplendid plans: that the moment one definitely commits oneself, then providence moves too. All sorts of thingsoccur to help one that would never otherwise have occurred. A whole stream of events issues from the decision,raising in one's favor all manner of unforeseen incidents and meetings and material assistance which no mancould have dreamed would have come his way.

W. H. Murray, The Scottish Himalayan Expedition, 1951.

Whatever you can do or dream you can, begin it.Boldness has genius, power, and magic in it.Begin it now. -Goethe

Infancy

Figure 3. The Courtship StageSource: Managing Corporate Lifecycles by I. Adizes.


4/15


Infancy begins the moment financial risk has been undertakenand the Founder quits her paying job, signs the loandocuments or promises 40% of the company to outsideinvestors.

Infant organizations are necessarily action-oriented andopportunity-driven. The focus instantly changes from ideasto action. The time for talking is over, it is time to get towork and produce results (sales and cash). Like a real baby,Infant organizations need two things to survive: 1) periodicinfusion of milk (operating capital), and 2) the unconditionallove of their parents (Founder(s).

Like a newborn baby learning to walk, performance in Infantorganizations is inconsistent. Unexpected crises appear withlittle notice. Because Infant organizations lack systems, itseasy for them to get into trouble. Moving from one crisisto the next is normal. The Founder and all employeesconstantly test the limits of their endurance for work, stressand confusion. Employees are often attracted to Infantcompanies for reasons that go far beyond money and their loyalty to the team often extends beyond the strugglingInfants ability to pay them. They end up working seven days a week and sleeping under their desks but still thereis not enough time and talent to do everything that must be done.Lack of activity and stress can be a sign of an Infant in trouble.

When you dont know what youre doing, it is difficult to delegate. Most Infant Founders are unable to spread thework effort for critical tasks. This lack of delegation is an important control for the Infant organization. Systemsand information are usually very scarce so the only way a Founder can control many outcomes is to do the workthemselves. Once a task becomes routine, it can them be handed off to others. Being a one-person show makesthe Infant organization highly dependent on its Founder. If the Founder is injured or killed, the company often diestoo.

Like newborn babies that need to be fed every two hours, most Infant organizations consume large amounts of food(cash) with very little to show for it (sales). Cash for Infants come from external sources (investors and bankers)and internally generated sales. Infants that are not properly capitalized from external sources create the cash theyneed by chasing any and all sales opportunities uncovered. This approach to funding can create problems if the

company is repetitively forced into accepting work that distracts them developing their core business. Sometimes itturns out that this distraction really is the core business.

Sales are useful for cash generation purposes, but their real value to the Infant organization is the markets validationof their new product or service. Ideas from demanding prospective beta testers and customers are needed by theInfant to complete the development of their innovative new products or services. Failing to sell to key accounts isan abnormal problem that will quickly lead to cash starvation, lack of continued interest from financial backers andthe emotional collapse of the Founder.

Problems of Infancy


Customers experience problems with the product orservice.

Product or service is rushed into the market before it isready.

Struggle to complete product or service. Caught up an "excess perfection" syndrome makingendless product improvements without marketvalidation.

Chasing sales to generate cash that are not related tocore business.

Unable to close reference accounts and obtain keyfootholds in marketplace.

Initial product or service concept fails and isreplaced by another.

Unable to respond to product failure and develop moresuccessful approach.

Few procedures, rules, policies, or systems. Rigid set procedures, rules, policies and systems.Founder and others make mistakes. No tolerance for error.Management by crisis. Repeating same mistakes over and over.

Figure 4. The Infant StageSource: Managing Corporate Lifecycles by I. Adizes.


5/15


Hands-on leaders deeply involved in day-to-daysales and operations.

Leaders out of touch with day-to-day reality.

Lack of managerial depth. Cant attract needed talent in key positions.1-person show. No delegation. Control spread over too many people.Fast decision-making, some details missed. Slow decisions, paralysis by over-analysis.Benevolent dictatorship. Dictatorship. Founder not listening; arrogant.Investors look over the shoulder of the Founder and

management team.Unsupportive investors and board.

Founders commitment tested. Founders control is taken away.Work life put stress on family and home life. Non-support ive spouse and family.

Negative cash flow. Unsustainable negative cash flow.Under capitalized, or over-capitalized. Funds spent on non-mission critical marketing,

equipment and facilities.

Pathologies of Infant Organizations: Infant Mortality

Infant mortality occurs if the company is unable to continue to fund its negative cash flow, makes a mistake thatresults in an irreparable loss of liquidity, or if crucial founders lose their commitment and interest in their baby. A

prolonged Infancy can also create mortality when the Founders finally realize that after years of struggle they havevery little to show for all their hard work and suffering, and decide to hang it up.

Prescription For Infant Success

Companies in their Infancy require a strong arm to keep them on course. What is needed is a Founder that cangalvanize and unite the efforts of its employees by providing clarity, certainty and security in the face of

overwhelming uncertainty and lack of clarity. Infant companies do not progress swiftly without leadership that isstrong, decisive, and fair.

Infant companies need more sales, more production, more improvements, more effort and more focus. Everyone inan infant company must be action oriented and driven by an unquenchable thirst for results. The Founder must lead

by example and be involved in the minute details because they often know more about their products, markets, andcustomers than anybody else. Infancy is not a time to work on decentralization of authority or consensus decision-making. It is crucial that Founders make every major decision until the company stabilizes itself with repeat salesto key accounts, positive cash flow, and increasing demand. The Infant needs autocratic, centralized decision-making, however, this same leadership style will inhibit the healthy development of a Go-Go company.

Infant organizations can also benefit from judicious use of people outside the organization that are capable ofaccomplishing crucial tasks such as selling to key customers, raising capital or recruiting key talent. Staffing the

board with friends and relatives is a good idea only if they can also take on meaningful work. Founders who giveaway too much equity in their Infant companies may live to regret their generosity when they get to Adolescenceand lose control or find their ownership positions severely diluted.

Well-intended investors and advisors may counsel Infant organizations to spend more time analyzing and predictingtheir financial needs, improving sales forecasting and projecting staffing requirements. While it is important for aGo-Go organization to develop these skills, attempts to transform an Infant organization into a more structured and

predictable organization are premature and often harmful.

When an Infant company finally establishes its products or services with key reference accounts in themarketplace, and begins to enjoy strong demand, consistent sales growth and a healthy cash flow from sales, theorganization transitions into the next stage of its lifecycle: Go-Go.


6/15


Go-Go: The Wild Years

A Go-Go organization is a company that has a successfulproduct or service, rapidly growing sales and strong cashflow. The company is not only surviving, its flourishing. Key customers are raving about the products and orderingmore. Even the investors are starting to get excited.With this success, everyone quickly forgets about the trialsand tribulations of Infancy. Continued success quicklytransforms this confidence into arrogance, with a capital A.

Go-Go companies are like babies that have just learned towalk. They can move quickly and everything looksinteresting. Fueled by their initial success, Go-Gos feelthat they can succeed at almost anything that comes theirway. Accordingly, they try to eat everything they touch.On Friday night the founder of a Go-Go retail shoe

business goes away for the weekend. On Monday morning,he walks into the office and announces, I just bought ashopping center. This does not surprise the employees.It has happened before. The success of the Go-Go is therealization of the founders dreams, and if one dream can

be realized, why not other dreams too? What we did for shoes we can do for a whole mall. This arrogance is amajor asset of the Go-Go, but when taken to an extreme, it is also how they get into trouble.

Go-Gos are prone to rapid diversification and spreading themselves too thin. They have so many irons in the firethey cannot give the necessary attention to each one. They make decisions and commitments they should neverhave made, and they get involved in ventures that they know very little about. Go-Gos inevitably get burned andlose more money overnight on a shopping center, than they made in a whole year selling shoes.

Go-Go Companies Share These Characteristics

Sales Drive the Ship. The Go-Go company is sales driven and has an insatiable appetite for growth. More is

better. Every opportunity uncovered in the marketplace must be pursued. This sales orientation is addictive. Thecompany is opportunity-driven rather than opportunity-driving. It reacts rather than proacts to opportunities. In therush to close the deal, agreements are sometimes signed before the company really understands if it can do the work.

When profit measurement systems are later put in place, it often turns out that the Go-Go company increased salesby accepting new business that was unprofitable. Uncontrolled growth can become an abnormal problem that willjeopardize the continued development of the company. On the other hand, a premature focus on profitability caninhibit the long-term potential of the company.

Everything is apriority . Strategically important tasks that are not urgent often get deferred to pursue the latest

hot new project.

Crisis by Management. Its insatiable appetite for growth drives the Go-Go company. Their leaders often dont

listen to criticism or warnings about difficulties of implementation. They do not listen because their single-mindedness is what made them successful in the Infancy stage. To make matters worse, the entrepreneurial typeswho lead Go-Gos often have difficulty articulating their ideas clearly. One listens and wonders, What in the worlddoes he want me to do? The few who can interpret the Founders ideas become the people who get the businessrolling. They become critically important insiders and trusted confidants.

Management is Often Ineffective (and Frustrated). With their personal involvement in the day-to-day work of the

company, Go-Go leaders often have little time to manage. Work is hastily assigned with scant attention to detail.When pressed for clearer assignments, the response is often you figure it out, I dont need to be involved in thosedetails. As a result, well-meaning, hard working employees enthusiastically pursue their uncertain assignments,often making mistakes and errors. Some Founders view these screw-ups as further evidence that if I wantsomething done right I have to do it myself. They tend to fix these problems by taking personal control. If

perpetuated, this inability to effectively delegate will plunge the Go-Go into a premature aging syndrome known asthe Founders Trap.

Figure 5. The Go-Go StageSource: Managing Corporate Lifecycles by I. Adizes.


7/15


Information and Accounting Systems Are Weak. The limited systems that do commonly exist in a Go-GO only

support the basic needs of production/operations, customer service and accounting. Accounting typically has itshands full just trying to properly account for revenue, expenses and cash flow. Useful cost accounting and accuratereporting of individual product profitability is a distant dream. Management reports are often published so late (30days after the end of the month) that they are of little use for day-to-day operations. The best information is oftenwordof-mouth.

The Company Is Organized Around People and Projects. Responsibilities are assigned based on who can do the

work on a project-by-project basis. New tasks often conflict with previous assignments. If there is an organization

chart, it is primarily for the benefit of investors and the board. It probably does not accurately reflect the way workreally gets done in the organization. The real organization chart looks like a piece of paper that a chicken haswalked on. Dotted lines, straight lines, and broken lines run in every direction. If you ask a Go-Go employee, oreven an executive, To whom do you report? You usually get a complex and confusing answer. I mostly reportto Sam, but sometimes I report to Lee. However, whenever there is a quality problem, I report to Jane. Come tothink of it, I report to Al as well.

Employees Are Frustrated. In the face of an overwhelming workload, unclear responsibilities and fuzzy goals,

employees find it increasing difficult to be productive. New people are hired and thrown into their jobs with littletraining or preparation. Physical space and proper equipment can be scarce because growth is difficult to predict.Promotions can occur on the spur of the moment. Later in Adolescence it often turns out that people promoted intosenior management positions during Go-Go do not have the skills and experience needed to succeed in that

position. Good people may leave when they are invited to join other compelling opportunities.

Infrastructure is a Hou se of Cards. As the company continues to succeed, work processes, procedures and systemsexpand accordingly. The development of this infrastructure usually occurs in response to emerging opportunitiesor unexpected problems, rather than according to a long-term plan. As things become more complex, it takes longerto fix mistakes and some fixes create new problems because of unexpected side effects. Addicted to growth, thecompany cannot or will not slow down and take time to properly design and implement replacement systems.Instead, they make do by enhancing or patching what is already in place. Miraculously, things still work, but just

barely. Success increases the load on this house of cards. Instead of just hoping for a miracle, the people incharge of the infrastructure now begin to rely on that miracle.

A Major Crisis Happens. Inevitably disaster strikes the Go-Go. Success finally put enough load on the system that

a fairly catastrophic disaster happens that threatens the loyalty of major clients, or jeopardizes the entire business.When disaster does strike, no one takes responsibility. With weak control systems, accountability is very unclear.

Nobody (except the Founder) owns the decision that created the disaster. Everyone claims inadequate information,lack of authority, and feels they are the victims of decisions made by other people. Fingers point in all directions.

This frustrates Go-Go leaders. They feel betrayed. No one warned them of the tricky dangers ahead. Everyone justwatched them fail. No one survives unscathed.

A Love/Hate Relationship Exists Between the Company and the Founder. When disaster does strike a Go-go and it

loses more money in a week than it made in the previous year, the typical reaction to such calamities is toimplement controls. The founder announces, We need to get organized. We need better controls around here.The Go-Go then creates rules and policies, but the Founder is the first to violate them. Go-Go Founders also tendto struggle with delegation and decentralization. Workable decentralization requires an effective system of control.In the absence of such a system, Founders attempt to delegation by establishing rules such as, Before you makeany big decisions come ask me first. And dont make any decisions I wouldnt make. This approach usually failswhich causes the frustrated Founder to retake the reins of control. The relationship between Founders and their Go-Go companies is like a yo-yo. You are in charge. No, I am in charge. The founder needs to escape day-to-daydetails so that they can focus on the big picture, so they delegate authority and take off. What happens when theyreturn? They inevitably find something that displeases them and all hell breaks loose. In a matter of hours the

founder has re-centralized power, only to again disappear. After several repetitions of this cycle nobody knows whatto do, or not do, and everyone grows increasingly anxious. When the peripatetic leader makes their nextappearance, the accusations and frustrations begin anew. With repetition, subordinates are unwilling or unable to actdecisively and paralysis reigns. Employees often have deep feeling of affection and respect for the Founder, but atthe same time he is driving them crazy and they wish she would change. For their part Founders feel betrayed andunfulfilled. They want to handoff the details, but they feel they cant since no one has demonstrated the ability toreplace them. Entrepreneurial leaders are often a bit paranoid so even if there is a capable replacement, they may fearthat this new leader will hijack the company and steal their dreams.


8/15


Problems of Go-Go


Self-confidence, eagerness. Blind arrogance.Everything is a priority? Everything IS a priority! Sustained lack of focus.

Sales drive the ship. Continued pursuit of non-core or unprofitable business.Some sales accepted that we cannot deliver. Consistent inability to deliver quality.Sales more important than profits. Premature emphasis on profitability.

Unclear communications. No one but the founder knows what is going on.Unannounced, unruly and unproductive meetings. No meetings or consistently unproductive meetings.Insufficient cost controls, adhoc budgeting. No cost controls, no budgeting.Ineffective management from key leaders. Key leaders avoid managing in favor of doing.Founder indispensable. Founder unwilling or unable to hire people who are

better than him.Leadership is frustrated. Increasingly remote leadership.

No consistent human resources management. Consistently poor recruiting, training and compensationpractices.

Confusion in roles and responsibilities. Leadership cannot or will not delegate effectively.Employees are frustrated. Key people are leaving.Company subject to criticism. Company subject to legal action.Infrastructure is a house of cards. Collapsing infrastructure.Hope for miracles. Reliance on miracles.

A major crisis occurs. The crisis maims the company in the marketplace or kills it.

Pathologies of Go-Go: The Founders or Family Trap

The Founders Trap occurs when a Go-go company is unable to relieve itself from its dependency on the Founder.The company is trapped by the capabilities and limitations of the bottleneck that is its Founder. This can occur

because the organization is unable to develop the abilities needed to replace the unique skills of the Founder. Theslide into the Trap can also occur because the Founder himself is either unwilling or unable to delegate effectivelyand decentralize control. If a company is caught in a Founders Trap it means that when the founder dies, thecompany might also die. A variation of the Founders Trap can occur when owners insist on staying activelyinvolved in decision making and daily management of the company, even when it is clear that they must step asideand let more competent and capable executives outside the ownership group assume these roles.

The Family Trap occurs in business that are owned by a family where control remains in the hands of familymembers, and the family is unwilling or unable to place its trust in outsiders. In the Family Trap, leadership isdetermined on the basis of basis of ownership and bloodlines rather than competence and experience. In thesesituations, the company has again failed to separate ownership from management. Companies caught in a FamilyTrap are particularly vulnerable when control is transferred to an incompetent family member.

Prescription for Go-Go Success

Most Go-Go organizations fiercely embrace the proposition that strategy and flexibility are their keys to success.Everyone loves to discuss new directions the company should take. However, these same people find discussionsabout introducing controls, discipline, and structure to be both threatening and alien to them. Flexibility is crucialfor the success of a Go-Go, but adding structure and control is crucial for the transition to Adolescence. Puttingstructure into a Go-Go stage company begins with a conversion of the attitudes and behaviors of the Founder andkey managers of the company. Usually this change in attitude occurs only when company grows beyond its

capability to effectively support that growth and there are serious problems. By trial and error, Go-Go leaderseventually learn that without proper structure, proper systems and discipline, products fail, supplies do not arrive ontime, inventory gets out of control, costs cannot be easily controlled and customer support is haphazard.

Go-Gos spread themselves too thin, tackling too many frontiers at once. Reining in activities and getting theenterprise to focus is important for a Go-Go. Identifying the organizations priorities is not as important asidentifying what is NOT a priority. The company must also develop the discipline to marshal its resources andignore issues that are not a strategic priority.


9/15


Go-Gos need continuous restructuring. They are like children who keep outgrowing their clothes. Many Go-Goleaders however, attribute little important to structure, managerial processes or systems. They are focused externallyon the wild world acquisitions, joint ventures, strategic alliances and sales, sales and more sales. Organizationalstructures, roles, responsibilities, budgets and rewards all require attention to detail, discipline and self-restraint.These qualities are quite alien to the entrepreneur who knows that his success came directly from ignoring

boundaries and being fast and flexible.

Developing the skills, systems, trust and respect needed to support delegation and eventually decentralization is alsoa crucial task for a Go-Go. The process starts with delegation from the Founder, which involves transferringresponsibility for important tasks down into organization and creating the commitment needed to achieve thedesired results. In the beginning of this process, Founders are often as incompetent at delegating, as theirsubordinates appear to be at making decisions. Support systems must be put in place before this importanttransition can occur. Forcing this transition before it can be effectively supported will foster mistrust and animosity

between the Founder and the senior management team, and exacerbate the Founders Trap pathology.

Delegating to a team of people, rather than to a single individual, works best. The development of effectiveteamwork among the senior management group becomes critical in Adolescence, so it is a good time to beginforging a strong team during Go-Go. When delegation is successful, the Founder and the management team cantackle decentralization, which is a much more challenging transition that involves transferring the responsibility forstrategic decision making from the Founder to other key managers.

For a Go-Go to preserve its hard-won gains, it must begin to make the transition from management-by-intuition andmanagement-by-the-seat-of-the-pants to a more professional approach. The deep emotional and behavioral

commitment to this difficult transition usually occurs only after the company finally experiences a truly major crisis(without killing the company). The newly humbled leadership team becomes thoroughly committed to propersystems and controls, real decentralization, and a more professional approach to management and thus begins thetransition to the next stage of the lifecycle, Adolescence.


10/15

The Lifecycle of Growing Organizations 1983-2002, Ichak Adizes and the Adizes Institute. All rights reserved. Page 10

Adolescence: Second Birth and the Coming of Age

During the Adolescent stage of the organizationallifecycle, the company is reborn. This second birth is anemotional time where the company must find a life apartfrom that provided by its founder. This criticaltransition is much like the rebirth a teenager goesthrough to establish independence from their parents.

The Adolescent company teeters on the brink of bothsuccess and disaster. So long as the Adolescentcompany does well, investors and the Board regard theFounder as a genius with a golden touch. However,when the infrastructure collapses, sales slow down, costsmushroom or profits decline, the finger pointing beginsin earnest. The Founder, accustomed to the magic ofadoration, is instantly transformed into a goat who is nolonger up to the task of leadership.

Adolescence is an especially stormy time characterizedby internal conflicts and turf wars. Everyone seems atodds with everything. Sales fall short or exceed

productions estimates, quality is not up to customer expectations, and old timers plot against the new hires.Emotions are volatile and organizational morale traces a jagged line: ecstasy in one quarter, depression and dejectionin another. Throughout the organization, people are busy tracking the real and imagined injustices they havesuffered, which they nurse with great care. The Founders safe conduct through this tempest is by no meansguaranteed. If these conflicts are not resolved, Adolescent companies can find themselves in Premature Aging thatcan lead to the early departure of entrepreneurial leadership, or the professional managers leading to pathologiescalled Divorce or Premature Aging.

Why is the transition from Go-Go to Adolescence so difficult? There are three principal challenges:

1. Decentralization of authority.2. Change in leadership from entrepreneurship to professional management.3. Goal displacement.

Decentralization of Authority

In moving to Adolescence, a Go-Go must transform itself from an absolute monarchy to a constitutional monarchy.It is rare that a king voluntarily yields his absolute powers. Such changes are (usually) accompanied by revolutions.The revolution erupts not just because the king loves power and does not want to relinquish it, but also because thehe has developed behaviors that are no longer be relevant, and he has trouble changing his behavior to fit the newenvironment.

Founders generally know that they need help managing their Adolescent organizations. They, and their families,are painfully aware that there is not enough hours in the day for them to still manage their organization as a one-

person show. They want to decentralize, but fear loss of control and/or major mistakes. It is also often true thatthe people already in-place lack some of the skills and experience needed to succeed with their decentralizedresponsibilities. One careful step at a time, the leaders of Adolescent organizations must learn to develop their

people and decentralize control. Often Founders dole out new levels of responsibility only to re-centralize authority

at the first sign of trouble. This tendency can quickly become abnormal if the behavior persists despite havingcapable employees.

Most founders struggle to make this difficult leadership transition. In despair, they often bring in professionalmanagers from the outside to take over the responsibility for decentralization, so that they can return to work theyenjoy. Struggling Founders who do not do this voluntary may find themselves pressured to bring in a replacementthat is better suited to the new leadership role. If the Founder still owns enough stock, they can survive by getting

promoted to CEO and Chairman, while a more professional manager comes in to run the company. Founderssometimes bring in new leaders only to then sabotage the new regime by refusing to relinquish meaningful control.It also does not work for the Founder to turn their back on the company and abdicate control to the new regime.

Figure 6. The Adolescent StageSource: Managing Corporate Lifecycles by I. Adizes.


11/15


Change in Leadership-From Entrepreneurship to Professional Management

Bringing in a professional manager changes the leadership of the company. The new manager must be a real leader,not another gofer brought in to carry out the founder's instructions. Their job is to take over from the founder anddrive the company to become more thoughtful and less intuitive in the way it manages itself. The Adolescentcompany must become opportunity-driving rather than opportunity-driven. The new leaders most critical job is toensure that the processes, procedures, policies, structures, systems, goals and compensation needed to support long-term growth and allow effective decentralization are put in place. This new leadership requires a careful touch. Anover emphasis on control can bring the Adolescent organization to its knees and stagnate growth. The organizationmust learn how to balance control while continuing to nourish its entrepreneurial spirit.

The new leader says "No! No! No!" to a company used to hearing only "Go! Go! Go!" from its Founder. It doesn'ttake long for the Founder and everyone else to discover that the new "hired guns" are not like them. The commonreaction from a Founder is This guy is not like me. If I had run the company the way he does, we never wouldhave gotten this far." Such logic can start a revolving-door syndrome where the professional managers get fired

because they "don't fit in." The founder searches and searches for "someone like me," who at the same time can dothe things I cannot do. They are looking for in vain for someone that does not exist: a pilot who can fly asubmarine. What they must realize is that for this critical transition, Adolescent companies don't need leaders liketheir founders; they need new people that are different and can complement the founders' style.

When the new professional managers come in they usually inherit a situation that is somewhat chaotic anddisorganized. Everyone and his brother report to the founder for one reason or another. The compensation system

is a patchwork of special deals. Important processes, procedures and policies are poorly documented. In the absenceof documents, this key information exists in the brains of the people that have been with the company the longest.These old-timers therefore have substantial power. Into this environment, enter the new managers charged with"professionalizing" the organization. Their efforts to introduce change are seen as direct attacks on the existing seatsof power. New incentive systems that remove personal bias in favor of objective rewards based strictly on

performance arouse opposition from the old-timers who risk losing their special deals. In defense, the old powerstructure bypasses the new chain of command, going directly to the founder to complain about the new bosses.

"They are ruining morale.""She doesn't understand how this company works.""He is going to destroy this company."And the ultimate blow: "He doesn't do it as well as you do."

The new managers face opposition everywhere they turn. Whom does the founder support? Probably not the new

guys. Instead, they stick with the old-timers who carry the same scars and are loyal to the Founder. If thishappens, the new guys are forced to resort to bringing in their own supporters to outflank the "old boys". Sides arechosen and guerrilla wars prevail, creating a we-versus-they culture. Often, the board of directors gets caught in themiddle.

The power struggles are exacerbated by the behavior of the Founder who is the first to violate the new policies andprocedures. The old-timers watch this game." When the founder sets the example with the first violation, theyassume that all the new rules are subject to violation. Guess who gets called on the carpet to explain why the new

budgets, rules, and policies are not being followed? Of course it's the professional manager. Such treatment isenough to cause the new leaders to develop a strong persecution complex, as well as intense dislike for the Founderand her buddies. The professional manager sees herself in a no-win situation and begins to wonder why she acceptedthe job in the first place. She feels impotent, exhausted, disliked, and completely unrecognized for hercontributions.

In some companies, the opposite leadership situation exists. The Founder, the Board and most key employeesagree that a transfer of leadership is absolutely necessary. The new leaders come in and immediately take overcomplete control. The Founder is forced to abdicate the throne and is relegated to the back seat. BecauseAdolescent companies usually have no systematic way to make decisions or make course corrections, this can leadto a dangerous situation where the new managers go on shopping sprees: buying new people, hardware, software,and consultants all in the name of "professionalizing" the organization. While some controls are undoubtedlyneeded, the revenues of the Adolescent may not support such profligate spending. If this happens, the founders feelthe pain of having their company hijacked and headed for disaster. They are prevented from getting involved andforced to just sit in the back seat and watch their companies get ruined.


12/15


The pain of raising an organization in Adolescence is very real and often prolonged.

Displacement of Goals

A further complication is the need to transition to a new set of goals. In early Adolescence, company goals aswell as the management information and compensation systems all generally reinforce the Go-Gos emphasis ongrowth and sales. In Adolescence, the company must change from the Go-Gos more-is-better goals to better-is-more goals. Profitability emerges as the most important goal for the organization. Instead of working harder, theAdolescent company must learn to working smarter. Growth and new sales are desired only to the extent that theyalso have higher profitability. Adolescent companies can end up reducing revenues for a period of time as thecompany pulls back from low margin business.

This significant switch in goals must be implemented through a complete overhaul of the structures, managementinformation, resource allocation and reward systems of the Adolescent organization. This transition looks easy on

paper, but in reality it is very difficult. Almost everyone in an Adolescent company wants the business to run moresmoothly, but they do not see the problem as their own department. "My department's fine. Go work on sales,that's where the problems are."

Problems of Adolescence


Heated conflicts. Low morale.We-They infighting between newcomers and old timers.Temporary loss of vision and confusion of goals.

Founders acceptance of organizational sovereignty.Incentive systems rewarding wrong behavior.Yo-yo delegation of authority.Board of directors attempt to exert controls.Love-hate relationship between the organization and its

entrepreneurial leadership.Founder struggles to change leadership style.Entrepreneuring roles monopolized by Founder.Infrastructure under upgrades and reconstruction.Insufficient delegation and decentralization.Lack of profit-based scheme.Rising profits, flat sales.Reduced emphasis on sales.

Permanent loss of trust or respect.Loss of key personnel.Internal issues cause consistent loss of market focus.

Founders removal.Inability to migrate compensation to profit-based system.Organizational paralysis during endless power shifts.

Boards dismissal of the entrepreneurial leader.Founders refusal to change, or delegate control to others

better suited to the task.Unchanging, dysfunctional leadership style.Inability to decentralize to others.Imposition of excessive and expensive controls.Profit responsibility delegated without capability to

manage it.Excessive salaries to retain employees.Rising profits, falling sales.Reduced investment in entrepreneurial development.

Pathologies of Adolescence: Divorce or Premature Aging

The major Adolescent changes in decentralization and the need for a new leadership and new goals, collectivelyresults in conflict, with a capital "C. This conflict exists between;

Old-timers and newcomers. Founders, Professional Manager(s) and the Board. Founders and their long time employees. What is best for the company versus what some individuals see is best for them.

To deal with this conflict, the energy that used to be focused externally is now turned almost totally inward and isconsumed by endless turf wars and in fighting. Both management and employees gravitate into factions for, andfactions against, almost every important project, system, or person. Over time this pain will result in unwantedturnover;

"It's not fun anymore." "We've forgotten why we're here. We're only fighting." "I wish I was back working with clients and products."

Adolescent pathologies occur when the fighting gets so bad that one party suffers irreparable damage to their trustand respect and can no longer effectively serve the company. The other parties finally decide that the only way tomove forward is to eliminate the opposition. The most painful pathologies occur when the breakups involvefamilyspouses, parents, children, and other relatives. When the lawyers are called in, close families break up, and

people stop talking to each other.


13/15


If the founder regains control, they sack the professional managers. This is called a Divorce and generally causes thecompany to slip back into the Go-Go stage and Founders Trap or become an Unfilled Entrepreneur. If the more

powerful, better-organized faction turns out to be the Professional Managers (often in alliance with the board ofdirectors), the Founder is squeezed out. When the entrepreneurs leave (many of them will leave with the Founder)and the numbers people take over, the company usually becomes more efficient, but less effective. After awhile,growth stalls and the company degrades into Premature Aging. The optimal solution is for both parties to resolvetheir differences and work together. Intervention by an external consultant to precipitate this reconciliation processis often needed.

Prescription for Adolescent Success

To succeed in Infancy and Go-Go, companies must remain loose and flexible, ready to change direction and graspemerging opportunities at a moments notice. To succeed in Adolescence, companies must improve their controls.The house-of-cards infrastructure must be replaced with a scalable solution that can support the current and futuregrowth of the company. The challenge is to implement these controls in a way that does not smother theentrepreneurial spirit. This is a delicate balancing act because too much flexibility will also prevent the Adolescentcompany from reaching Prime. To speed up the development of their infrastructure, many Adolescent companiesopt to automate their processes, procedures and controls. Although automation can be great, it can also get theAdolescent company into more trouble if the effort is focused on automating what is, instead ofwhat should be.Many times, we have had to insist that our clients delay their automation projects because they were heading downa path that was simply going to allow them to make mistakes faster. If this happens it will institutionalize thewrong power structure and make it more difficult to achieve the goals of the future. These systems can make it verydifficult to change the Adolescent organizational structure. Like a badly set broken arm; the automation needs to be

broken again before it can be fixed properly.

Throughout the Infant and Go-Go stage, most Founders monopolize the Entrepreneuring and Integrating functionsin the company including marketing, new product development, business development, capitalization, and therecruiting of key employees. In the Adolescent stage, the organization must institutionalize these functions andrelieve itself from over-dependency on the Founder. Creating a structure that is organized around these functions,instead of people, is an important first step. It is also crucial that a company constitution is created thatinstitutionalizes the governance functions for the company and clearly articulates the roles, responsibilities anddecision making authorities of the Board, the Senior Management Team and any other decision making bodies.

Next is the tricky task of building the Founders trust and respect for the new structure and the ability of the peopleto properly execute their responsibilities. If people with the needed abilities and experience cannot be found insidethe company, new talent must be brought in. The best approach is to have the Founder, the board, and theemployees experience quick successes that clearly demonstrate their ability to make good decisions together. Thisapproach helps the Founder realize that they can relinquish some of the reins of control. At the same time, these

successes show the employees that they are not dependent on the Founder.

Articulating a clear and compelling mission that is understood and shared by all is also crucial. Up to this point,only the Founder understands the companys mission. If he has bothered to write it down, it probably exists ascryptic notes on the back of an envelope. To succeed, the rest of the Adolescent organization needs to understandand share that dream.

To help ensure rapid and healthy transitions through Adolescence, most founders bring in a new professionalmanager. When is the right time to pass the baton? Do it when the company is doing well, dont wait untilthings turn for the worse. For the transition in leadership to be most effective, founders must be prepared toinvest substantial time. To do it right takes time and lots of thinking and talking away from the firing line. To bemost effective the process must also follow the correct sequence of events.

Good management is not a marathon race. It is a relay race.

When a company implements the infrastructure that it needs to support its current and projected growth, and hasinstitutionalized its entrepreneurial activities and is no longer dependent on its Founder for success, it enters Prime.


14/15


Prime: The Place to Be

Prime is the optimal position on the lifecycle, where the

organization finally achieves a balance between control and

flexibility. Prime is actually not a single point on the lifecycle

curve. Instead, it is best represented by a segment of the curve

that includes both growing and aging conditions. This is

because flexibility and self-control are incompatible and there is

no stable equilibrium. Sometimes the Prime organization is

more flexible than controllable, and sometimes it's not flexible

enough.

These are the characteristics of an organization in Prime:

The organization is guided by then vision of its reasonfor being. There is a clear purpose and people knowwhat they will do, and will not do, they walk theirtalk".

The company operates in a focused, energized and predictable manner. Stretch goals are set, aligned and consistently achieved. There is an enterprise-wide focus on customers and earning their long-term satisfaction. There is a high

degree of customer loyalty. At the same time, the organization knows when and how to say no to themarket. It is disciplined enough to protect itself.

Priorities are clear. The organization knows what to do, and what not to do. It enjoys a certain composureand peace of mind when making tough decisions.

The entrepreneurial spirit is fully institutionalized. Evidence of organizational fertility abound. Thiscreativity repetitively produces controlled, profitable innovation.

Organizational structures works well. Opposing forces are balanced. There is alignment between vision,strategy, structure, information, resource allocation and rewards. A company in Prime is continuouslyrealigning these subsystems.

The infrastructure provides reliable support. The governance process is institutionalized. People know and understand where and how decisions are made. Decision-making is done is an environment of healthy, constructive conflict. Points of view are considered,

but there are no hard feelings if ones recommendations are not heeded. Differences of opinion rarelydeteriorate into personality clashes or turf wars.

There is intra- and inter-organizational integration and cohesion with clients, suppliers, investors, and thecommunity. This internal cohesion enables the Prime organization to devote much of its energy externally.

People enjoy working at the company. Few willingly leave and there is a backlog of people applying forpositions at all levels.

They embrace change. Prime companies work hard to adapt to changes in markets and technology so thatthey can gain share from weaker competitors.

They enjoy consistent, above average growth in both sales and profits.Problems of Prime

Senior management of companies in Prime engages in a continuous struggle to maintain the delicate balancebetween flexibility and control. It takes very little to push a company in either direction. When administrators gainthe upper hand, the companys balance swings in the direction of excessive control, and the company sacrificesflexibility. When entrepreneurs gain the upper hand, the company grows more flexible but loses control.

Prime companies often dont have enough good people to run all their business units.The other key issue they faceis complacency. Prime is a temporary condition, not a permanent destination. Once you get there, the principalleadership challenge is to stay there. Since everything is fine, why change? This attitude is the first step intodecline.

Figure 7. The Prime StageSource: Managing Corporate Lifecycles by I. Adizes.


15/15


The greatest problem of Prime is staying in Prime.

A company cannot simply reach Prime, sit back, and rest. Management must proactively work to promote activitiesthat retard aging and sustain the vitality of Prime. Vladimir Horowitz, one of the world's best-known pianists, oncesaid: "If I do not practice a day, I notice the difference in my playing. If I do not practice a week, my wife noticesthe difference, and if I do not practice a month, the audience notices the difference."


Insufficient managerial depth. Insufficient decentralization.Desire to maintain the status quo.

Signs of disintegration.Signs of decreased entrepreneurial activity.Reliance on what has worked in the past.Sense of security, no sense of urgency.Order for the sake of order.Increasing time spend in the office, behind the desk.

Pathologies of Prime

Any sign of aging is a pathology in a Prime organization. This aging will naturally occur unless managementactively and continuously works to keep the organization young. There are also no normal problems in aging,every problem is pathologic and if allowed to continue will accelerate the decline of the organization.

Prescription for Success

The slide into aging is subtle. The emergence of an attitude of complacency is the first step into decline. Sincethe company is doing so well, it is easy to slip into a mindset to maintain the status quo. To remain in Prime,management must be proactively work to refuel momentum by nurturing a portfolio of Infant, Go-Go andAdolescent business units ensuring that entrepreneurship thrives. When a Prime organization loses its ability toembrace change and nourish new growth, organizational vitality levels off and aging begins.

On the lifecycle curve, Prime is not at the top of the curve. This is because the curve depicts the vitality of anorganization. When a company first starts to age, it is still produces the desired results as measured by short-termsales and profitability. Aging is having a negative effect on the company, but this effect is not yet reflected in salesor profitability. Therefore, the lifecycle curve is still rising, however the rate of change is slowing so the risingcurve is starting to level off. If Prime organizations don't refuel their momentum, if they keep harvesting theirmomentum rather than nourishing it, the curve will reverse direction and the company moves into aging.

After Prime, movement along the lifecycle is a gradual process of deterioration. Unlike the growing side of thecurve, there are no major transitional events in aging companies. The only differences between the lifecycle

positions of Stable, Aristocracy, Recrimination and Bureaucracy is a question of the degree to which agingproblems pervade the organization. For more information about the aging side of the lifecycle, please read the Adizes paper entitled The Lifecycles ofAging Organizations.

lifecycle of growing organizations - adizes

Documents