Corporate Lifecycles

Stages

Courtship

Infancy

Go-Go

• Opportunities As Priorities
• Reactive Sales Orientation
• Rapid Growth
• Lack Of Consistency and Focus
• The Company Is Organized Around People

Adolescence

• An “us versus them” mentality, old timers against new people
• Inconsistency in organizational goals
• Inconsistency in compensation and incentive systems

Prime

• Functional systems and organizational structure
• Institutionalized vision and creativity
• Results orientation; the organization satisfies customer needs
• The organization makes plans and then follows upon those plans
• The organization predictably excels in performance
• The organization can afford growth in both sales and profitability
• The organization spins off new Infant organizations

Stable

• Has lower expectations for growth
• Has fewer expectations to conquer new markets, technologies, and frontiers
• Starts to focus on past achievements instead of future visions
• Suspicious of change
• Rewards those who do what they are told to do
• More interested in interpersonal relationships than risks

Aristocracy

• Money is spent on control systems, benefits and facilities.
• Emphasis is on how things are done rather than what and why it is done
• There is formality in dress, address and tradition
• Individuals are concerned about the company’s vitality, but as a group, the operating motto is “Don’t make waves.” It’s business as usual.
• There is low internal innovation. The corporation may buy other companies to acquire new products and markets, or in an attempt to buy entrepreneurship.
• The organization is cash rich — a potential takeover target.

Early Bureaucracy

• Emphasis is on who caused the problem, rather than what to do about it (as if solving the who equals solving the what).
• There is much conflict, backstabbing and infighting.
• Paranoia freezes the organization; everyone is lying low.
• Focus is on internal turf wars; the external customer is a nuisance.

Bureaucracy and Death

• It has many systems, with little functional orientation.
• It disassociates from its environment, and focuses mostly on itself.
• There is no sense of control.
• In order to work effectively with the organization, customers must develop elaborate approaches to bypass or break through the system.

Early Bureaucracy

From Chapter 3:

The Witch Hunt

The good old buddy days of the Aristocracy are gone, and the witch hunt begins. People try to find out who caused what to happen. With blades drawn, it’s backstabbing time in the boardroom. … The head of marketing is fired because “We’re in the wrong market with the wrong products.” The corporate strategist or the engineering chief are the next to go: “Our strategy does not work; our products, technology, and advertising are obsolete.” People are fired as if they were the cause of the problems.

People however, do not feel responsible for what is happening. The marketing head has claimed many times that the direction in which the corporation was following had to change. The strategist probably developed an ulcer worrying about the lack of organizational direction. The people complained in private, urged, begged and threatened; but, “it was like pushing wet spaghetti up the hill.” They could not produce change from within. Those who seek to reform an Aristocratic organization from within often do so at the price of their careers. The organization eventually forces them out, even if it benefitted from their efforts. Thus, the creative employees the organization needs most for survival either leave or become useless and discouraged.

There is one main variable that distinguishes the Aristocratic organization from Early Bureaucracy managerial paranoia. In the Aristocratic organization, there is a silence before the storm. People smile, are friendly and handle each other with kid gloves. In Early Bureaucracy, when the bad results are finally evident, instead of fighting competition as they should, managers start fighting each other. There are no gloves anymore, just bare knuckles. A ritual of human sacrifice starts. Someone has to take the blame; someone has to be the sacrificial lamb. So every year or every few quarters, someone is blamed for the adverse conditions of the company and fired. The paranoia stems from the fact that no one really knows who will be blamed next. So they watch each other with suspicion. CYA (Cover Your Ass) strategy dominates behavior.

It is not uncommon for people to circulate far-fetched explanations for what is happening. For instance, if the sales manager decides to give a discount, the other executives do not explain it in rational terms by referring to competitive conditions; rather they attribute it to a Machiavellian strategy on the part of the sales manager to discredit the marketing department and expose the incompetence of the marketing vice president. This behavior accentuates the decline. Managers fight each other, spending most of their time turned inward, building cliques and coalitions which are constantly changing. Their creative abilities are not directed toward creating better products or developing a better marketing strategy, but toward ensuring personal survival by eliminating and discrediting each other. As organizational performance further declines, the people become even more paranoid. Since the better people are feared, they are either fired or leave. This cycle continues until the end result is bankruptcy, or a full Bureaucracy nationalized or subsidized by the government. …

What kind of people are left in such a protective environment? Administrators! Entrepreneurs come and go; administrators accumulate. Since the administrators have only to administer, the company converts itself into a full-blown Bureaucracy, with its sole emphasis on rules and policies, and no obvious orientation toward results or satisfying customer needs.

From Chapter 8:

When liquidity is drying out, all organizational alarm signals are on: it’s an emergency! The organization tries to revive urgently. It cuts prices to encourage sales, but without cutting overhead, the company is selling at a loss. Cutting overhead in a hurry might be slicing not only fat but also flesh; so by firing people and discontinuing activities to reduce cost, the organization might be cutting its capability to deliver. The company is damned no matter what it does in a hurry.

When people in the organization cannot get results outside they turn inward, attacking each other. As the performance level goes down and cannot be easily resuscitated, integration goes down. What stands dominant and looming like a monstrous shadow is Administration.

The situation is bad and people need an explanation why. They must have a solution; they must have hope. The explanation people give to the situation is that new, energetic leadership is necessary. They look for a person to lead the organization out of the trap.

The tendency to believe that changing leadership will change rightfully so, during the growing stages. The argument becomes since it worked then, why not try the same cure now? Changing leadership is easy and expedient. Firing the president and hiring a new one is more easily done than changing the organizational responsibility, structure, information systems and reward systems. So the organization does what is easy and expedient rather than what is difficult and long-drawn. The result is a witch hunt. The first ones fired are those to whom the organization attributes the difficulties. And since the difficulties have been due to lack of adaptation to change (the products are obsolete), the ones to be sacrificed on the altar of organizational ignorance are those who had the responsibility to provide the organizational entrepreneurship. Those are the people in marketing, strategic planning, R&D, and engineering. Erroneously attributing blame to people, rather than to the need to change the system can hasten the death of the organization.

I believe this phenomenon stems from the fact that we continuously confuse causes and effects. In the growing stages, changing leadership would change the behavior of the organization, but this medicine will not work in the aging stages of the Lifecycle. A change in the system is necessary. It is the administrative system, functional in Adolescence, which is stymieing the organization now. Form is now stronger than function. On the margin, form reaches the point where it suffocates the function. If function is to be liberated from form, it has to change. This means the organizational system reflected in the structure of accountability, information flows and rewards has to change.