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Some Impressionistic takes from the book of
Mr. Ichak Kalderon Adizes
“Managing Corporate Lifecycles“
by Ramki – ramaddste...
About the Author
 Dr. Adizes is the Founder and CEO of the Adizes Institute, an
international consultancy.
 In 2011, the...
About this Book
 Original Book Written in 1988 By Ichak Adizes
 Several Follow-up Books on this Concept
 Mastering Chan...
Prelude
Managing Corporate Lifecycles, by Dr.Ichak Adizes, is a seminal work on organizational
transformation as it studie...
Business Evolve As They Grow
 Understanding the stages of growth, the requisite structure,
and people’s roles is key to s...
Business Environment is Dynamic
 Market cycles - seasonal, demographic
 Technological developments
 Market scope expans...
Young Companies:
 Highly Flexible
 But Hard to Control
(or Predict)
Prime Companies:
Good Flexibility & Control
Old Comp...
The Corporate Lifecycle
…and Administrators Take Over
Entrepreneurs forced out…
Inability to Develop Admin Systems & Insti...
 Management has to perform four roles:
 Producer
 Administrator
 Entrepreneur
 Integrator
The Management Role
Producer- (P)
 High energy, Active people with knowledge of the chosen field.
 Like to be busy all the time, and their i...
Administrator- (A)
 Quiet, Cautious people who are less concerned with what
we should do than how we should do it.
 Extr...
Entrepreneur- ( E)
 Self-starters & dreamers.
 Energized by novel challenges, exciting opportunities, new
possibilities ...
Integrator- ( I)
 Team-builders.
 Manage the interpersonal, interdepartmental, supplier and
client relationships that al...
PAEI
 Each role is necessary and the four together are sufficient for good
management.
 If any one role is not performed...
PAEI
 In problem solving, each role focuses on different imperatives:
 P: What?
 A: How?
 E: When?
 I: Who?
Style: a ...
Quality Decision-making
Processes Make the Company
More Effective and Efficient in
Both the Short and Long Run
What?
Why?
...
1
Change & Its Repercussions
Change has no Precedents
 Change gives rise to events that can be
opportunities or problems/challenges.
 When we encounter changes, we need
to ma...
 The Fundamental Truth all organizations are Living
Organisms .
 They have a lifecycle & undergo very predictable & repe...
 Fundamental changes in leadership & management are all
required, with an approach that delicately balances the
amount of...
1. Problems are normal and desirable.
 Problems are the natural result of change.
 The only place on the lifecycle curve...
3. Some of the problems you face are normal and some are abnormal.
 Normal problems are those that are expected for a giv...
5. Prime is the Fountain of Youth for Organizations.
 One key difference between the lifecycle for human beings versus
or...
2
Courtship
Courtship
 It is named courtship because the situation is not very
different from the prelude to marriage.
 We are truly...
The emphasis in this stage is
building Commitment—it is
only an idea.
He who has a why to live can
bear almost any how.
(N...
 Courtship is the first stage of an organization's
development. At this stage, the company is not yet
born.
 It exists a...
 In Courtship, it is normal to experience fear, uncertainty and doubts.
 What exactly are we going to do?
 How is it go...
Courtship
Affair
Is it a True Love or an Affair ?
Challenges in Courtship
Pathologies of Courtship: The Affair
A Courtship which has no testing of the harsh realities that ...
 When the Founder(s) makes the bold decision to quit their day job,
mortgage their house and/or accept the seed capital, ...
At this stage the company is not born. It exists as a
gleam in the founder’s eye. The focus is on dreams
& possibilities. ...
3
Infancy
Infancy
Courtship
Affair
Second Stage: Infancy
The emphasis at this stage
is on CASH! The product is
important but selling...
Climate
 Infancy begins the moment financial risk has been undertaken and the
Founder quits his/her paying job, signs the...
Infancy
 The Founder and all employees constantly test the limits of their
endurance for work, stress and confusion.
 Em...
Undercapitalization
 Like newborn babies that need to be fed every two hours, most Infant
organizations consume large amo...
Autocratic Leadership Style
 People criticize that founders of Infant organizations for not delegating, for
working hard ...
Challenges in Infancy
Infant mortality occurs if the
company is unable to continue to
fund its negative cash flow, makes
a mistake that results ...
Suggestions for Infant Success
 Companies in their Infancy require a strong arm to keep them on course. What is
needed is...
 Infant organizations can also benefit from judicious use of people outside the
organization that are capable of accompli...
Infancy begins the moment financial risk has been undertaken & the
founder quits his/her paying job, signs the loan docume...
4
The Wild years – Go-Go
Developing a company is just like planting a tree;
Don’t plant it one day & then pull it up next week &
look at the roots ...
Opportunities as Problems
 A Go-Go organization is a company that has a successful product or
service, rapidly growing sa...
 This does not surprise the employees. It has
happened before.
 The success of the Go-Go is the realization of
the Found...
Characteristics of Go Go Companies
 The Go-Go company is sales driven and has an insatiable appetite for
growth.
 More i...
Climate
Crisis Management
 Its insatiable appetite for growth drives the Go-Go company.
 Their leaders often don't liste...
Climate
Information & Accounting Systems are weak
 The limited systems that do commonly exist in a Go-Go only support the...
Climate
Employees Are Frustrated
 In the face of an overwhelming workload, unclear responsibilities and fuzzy goals, empl...
Climate
A Major Crisis Happens.
 Inevitably disaster strikes the Go-Go. Success finally put enough load on the system tha...
 The Founder needs to escape day-to-day details so that they can focus on the big
picture, so they delegate authority and...
Challenges in Go-Go
A Go-Go organization is company that has a successful product or
service, rapidly growing in sales and cash flows. The com...
5
The II Birth & The Coming of Age -
Adolescence
Fourth Stage –Adolescence
 During the Adolescent stage of the organizational lifecycle, the
company is reborn.
 This sec...
Fourth Stage –Adolescence
 The Adolescent company teeters on the brink of both success and disaster.
 So long as the Ado...
 The shift from management by intuition to a more
professional orientation occurs it’s the shift from
entrepreneurship to...
Fourth Stage –Adolescence
 During the Adolescent stage of the organizational lifecycle,
the company is reborn.
 The rebi...
Delegation of Authority
 Part of the reason the organizations survived the Go-Go phase is because
they had some awareness...
 The founder is the president, salesperson, financier, and
innovator.
 For the organization to change, he needs to chang...
 Entrepreneurs have a unique set of skills, talents and
characteristics that are needed to take risks, follow through
wit...
Change in Leadership
 This has the potential to interfere with the process of bringing
on board a senior manager that has...
Planner/Manager
Systems, Policies &
Admin Oriented“
Doer
Visionary & Results
Oriented
Risk & Results Oriented
Leadership N...
Displacement of Goals
 A further complication is the need to transition to a new set of
goals.
 In early Adolescence, co...
Displacement of Goals
 Growth and new sales are desired only to the extent that they
also have higher profitability.
 Ad...
I think it’s time we established new guidelines for Corporate behavior
Challenges in Adolescence
Pathological Challenges
 There are two solutions that will allow this transition to avoid pathological
problems.
 First,...
Pathological Challenges
 They bring with them the system from where they worked before
that may have had positive qualiti...
Suggestions for Success
 To get to the next level requires the establishment of sufficient
controls.
 The implementation...
During this stage of the organization lifecycle, the company is reborn.
This second birth is an emotional time where the c...
6
Prime
Prime
 Prime is the optimal position on the lifecycle, where the
organization finally achieves a balance between control ...
Early Prime
 Characteristics
 Vision & values- they “ Walk their talk”
 Institutional governance process
 Controlled &...
Simply having vision & values does not make for a Prime Organization
“ Honesty is the best policy, “ Ok.! Now, What is the...
 These are the characteristics of an organization in Prime:
 The organization is guided by the vision of its reason for ...
Characteristics of Prime
 These are the characteristics of an organization in Prime:
 Organizational structures work wel...
Challenges of Prime
 Senior management of companies in Prime engages in a continuous
struggle to maintain the delicate ba...
Normal problems
 Insufficient managerial depth.
Abnormal problems
 Insufficient decentralization.
 Desire to maintain t...
Prescription for Success
 The slide into aging is subtle. The emergence of an attitude of complacency is the first step
i...
Prime is the optimal position on the lifecycle, where the organization
finally achieves a balance between control & flexib...
Politics without Principle
Pleasure without Conscience
Wealth without Work
Knowledge without Character
Business without Mo...
Growing Vs. Ageing
 From Risk taking to Risk Avoidance
 From Expectations exceed results to Results exceed expectations
 From Cash poor to...
Interests and Focus Over the Lifecycle
As Companies Grow Management, Organization, and
Capital Begin to Require Greater Fo...
Start Up Capital
External Capital,
Services, & Variable Resources
External Needs Over the Lifecycle
As Companies Grow, Ext...
Deterministic Vs. Constraint goals over lifecycle
Stable is positioned at the top of the Lifecycle curve,
but it is not the place to be. Companies that are in
stable phase ...
8
The Aging Organizations : Aristocracy
“Through the hoop, Bob! Through the hoop!
Aging Organization – Stable
 Still growing but losing flexibility, sticks to what
worked in past, sense of urgency disapp...
Aging Organization – Aristocracy
 Organization places an emphasis on how things
are done rather than what and why it is d...
Aristocracy – Its Characters
As organizations enter Aristocracy they characteristically:
 Are cash rich and have very str...
Aristocracy – Its Characters ( Continued..)
 Value uniformity, consistency and formality in dress, decorum, and
behavior....
Aristocracy – Its Characters ( Continued..)
 Aristocratic organizations exhibit a very characteristic set of behaviors. H...
The effect steady decline in flexibility,
which began in prime, start to
become more obvious in aristocracy.
Because it ha...
9
Early Bureaucracy
Early Bureaucracy
 When an Aristocracy is unable to reverse its downward spiral
and the artificial repairs finally stop w...
The Witch Hunt
 Everyone is busy trying to find out who caused the disaster.
 With blades drawn, it's backstabbing time ...
The Witch Hunt
 " The heads of Strategic Planning, Business Development and
Engineering are the next to find themselves o...
The Witch Hunt
 In the Aristocratic organization, silence precedes the storm. People
smile.
 They are friendly, handling...
The Witch Hunt
 Instead, they attribute the move to the sales manager's
Machiavellian strategy to discredit the marketing...
When the Aristocracy is unable to
reverse its download spiral & the
artificial repairs finally stop working.
Managements m...
9
Bureaucracy
Bureaucracy- The Final Decay
 Although it should be dead, the company in Bureaucracy is kept alive by
artificial life sup...
 Bureaucratic organizations accomplish very little of any value.
 Focus on control for the sake of control.
 No inclina...
 Bureaucratic companies are internally disintegrated.
 Individual responsibility for a particular task, but no one colle...
 In a Bureaucracy, the left hand does not know what the right hand is doing.
 One department rejects what another one re...
paEi
Paei
PaEi
pAEi
PAEI
PA-I
-A-I
-A--
-A--
Although it should be dead, the
company in Bureaucracy is kept alive
artifici...
Death
Death occurs when no one remains committed to sustaining
the organization.
Monopolies and government agencies that a...
paEi
Paei
PaEi
pAEi
PAEI
PA-I
-A-I
-A--
-A--
----
Death occurs when no one is
committed to sustaining the
organization. Mo...
Key Lifecycle Questions
 How do the management needs of a company change as it
grows?
 What particular challenges occur ...
Take Away
 Organizations can and do progress through these phases with varying
degrees of success and discomfort. Underst...
Take Away
Take Away
To Sum up…Two Questions to Answer …
Conclusions
 Organizations can and do progress through these phases with varying
degrees of success & discomfort.
 Under...
Mail your comments to ramaddster&gmail.com
Managing Corporate life cycle
Managing Corporate life cycle
Managing Corporate life cycle
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Managing Corporate life cycle

A unique approach to change management is based on the principle that organizations – like living organisms – have a life cycle and that they exhibit repetitive patterns of behavior as well as predictable problems as they grow and age. At each stage of an organization’s development, it is faced with a unique set of challenges. How well or poorly leadership addresses these issues, and makes the changes that are necessary for a healthy transition from one stage to the next will determine the ultimate success or failure of that organization.

Corporate Lifecycles has developed powerful tools that enable organizations to navigate these difficulties and reach PRIME – the optimal lifecycle stage. Since 1989, we have partnered with Founders, CEOs, Presidents and their leadership teams to implement our core change management platform – Pathway to PRIME © – to accelerate the achievement of their growth, profit and other business goals.

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Managing Corporate life cycle

  1. 1. Some Impressionistic takes from the book of Mr. Ichak Kalderon Adizes “Managing Corporate Lifecycles“ by Ramki – ramaddster@gmail.com
  2. 2. About the Author  Dr. Adizes is the Founder and CEO of the Adizes Institute, an international consultancy.  In 2011, the Adizes Institute was ranked as one of the top ten consulting organizations in the United States by Leadership Excellence Journal.  Dr. Adizes has worked with a wide variety of companies ranging from the Global 100 to middle market companies and startups. He has also consulted to Presidents, Prime Ministers and Cabinet-Level Officers in several countries . In addition to his work transforming organizations, Dr. Adizes is a highly sought after speaker who consistently receives high acclaim from CEOs, Presidents, and Board Members worldwide for the relevance and value of his compelling talks.  is theories and methods are documented in 15 books that have been translated into 24 languages.  His book, Corporate Lifecycles: How Organizations Grow and Die and What to Do About It was named one of the Ten Best Business Books by Library Journal.  The Leadership Excellence Journal named Dr. Adizes one of the Top 30 Thought Leaders in the United States. In recognition of his contributions to management theory and practice.  Dr. Adizes has been awarded 15 honorary doctorates from institutions in 10 countries and two honorary citizenships. He is a Fellow of the International Academy of Management and has been made an honorary citizen of two Eastern European countries. He also received the 2010 Ellis Island Medal of Honor, which is awarded by the National Ethnic Coalition of Organizations Foundation for contributions to humanity.
  3. 3. About this Book  Original Book Written in 1988 By Ichak Adizes  Several Follow-up Books on this Concept  Mastering Change (1991)  Pursuit of Prime (1997)  Managing Corporate Lifecycles (1999)  Highly Useful Concept for Examining How Companies evolve over time
  4. 4. Prelude Managing Corporate Lifecycles, by Dr.Ichak Adizes, is a seminal work on organizational transformation as it studies the typical path of Corporate growth and development. Adizes bases his work on over thirty years of experience in more than thirty-five countries. Using a traditional bell curve, Adizes charts Corporate development through stages of growth and decline. One concept that is key to Adizes’ breakthrough teaching is that of PRIME. PRIME represents a healthy organization that is operating both effectively and efficiently. Adizes’ writing, teaching, storytelling, and worldview unite to provide the reader with a powerful and telling study of the typical path of all organizations and the often evasive pursuit of PRIME. Managing Corporate Lifecycles becomes a valuable tool for Professionals & Students in the Leadership and Management course because, like Spiral Dynamics, Dr.Ichak Adizes exposes fundamental principles of Change, Leadership, and Styles of management that are useful for affecting positive growth in organizations. Spiral Dynamics challenges the individual and the organization to progress along an upward and outward continuum that reflects internal and external integration with new cultural settings. Equally structured, the condition of PRIME eludes the organization in a dynamic tension that compels it forward. This book and this class provide the tools to effectively empower a staff, team, or workforce under an integrative vision and mission.
  5. 5. Business Evolve As They Grow  Understanding the stages of growth, the requisite structure, and people’s roles is key to successfully transitioning the organization.  The entrepreneur/CEO/business driver understanding his role and positioning himself to do what he is best at is vital to success.  This is hardest when the owner/CEO has no one whose role it is to tell “the king that he is wearing no clothes”.
  6. 6. Business Environment is Dynamic  Market cycles - seasonal, demographic  Technological developments  Market scope expansion - local to global  Personnel shifts - changes in capability/education of people  Ownership - changes in goals & risk tolerance  Business structure transitions - lifecycles A company moves through definable stages. To get to the next stage, the CEO & the company need to change to the behavior appropriate for the next stage.
  7. 7. Young Companies:  Highly Flexible  But Hard to Control (or Predict) Prime Companies: Good Flexibility & Control Old Companies: Highly Controlled But Very Inflexible The Nature of Aging Companies
  8. 8. The Corporate Lifecycle …and Administrators Take Over Entrepreneurs forced out… Inability to Develop Admin Systems & Institutionalize Leadership Lack of capital or Founder Commitment Kills the company Fantasy does not survive first brush with reality
  9. 9.  Management has to perform four roles:  Producer  Administrator  Entrepreneur  Integrator The Management Role
  10. 10. Producer- (P)  High energy, Active people with knowledge of the chosen field.  Like to be busy all the time, and their interests are overwhelmingly concrete.  Love to attain tangible results, and to attain them often.  Feel highly rewarded every time they can declare a task complete.  Have little patience with future-oriented tasks and wild brainstorming.  Much more interested in getting a task done than they are in ensuring that their colleagues are happy with the way it got done.  Responsible for driving many organizational achievements  Help to stop talking about solutions & start executing them.
  11. 11. Administrator- (A)  Quiet, Cautious people who are less concerned with what we should do than how we should do it.  Extremely uncomfortable with ambiguity or uncertainty, and they are made uneasy by unstructured environments. Unplanned activities feel distressingly chaotic to them.  Prefer to construct a system of routines and conventions for smooth and least disruptive operations.  Bring stability and order to collective activities.  Slow and careful in decision-making because they track each detail to make certain it is handled properly.  May say “no” to new proposals as a reflex, in order to slow things down so they can think further.
  12. 12. Entrepreneur- ( E)  Self-starters & dreamers.  Energized by novel challenges, exciting opportunities, new possibilities and future achievements.  Scan the environment constantly for changes, in their drive for novelty.  Love aligning themselves with new developments  Track activities at a very high level of abstraction, looking for trends and anomalies.
  13. 13. Integrator- ( I)  Team-builders.  Manage the interpersonal, interdepartmental, supplier and client relationships that allow the organization to function together as one organic whole.  Attend to peoples’ needs, views, motivators, complaints and conflicts to foster a constructive working environment.  Help people focus on shared goals.  Less concerned about formal roles & titles, & more concerned that people pull together, each and all doing whatever it takes to achieve their collective mission.  The measure of an Integrator’s success is his or her ability to take a vacation.
  14. 14. PAEI  Each role is necessary and the four together are sufficient for good management.  If any one role is not performed, a certain pattern of mismanagement can be identified.  These characters are allegorical. The Adizes Methodology holds that under normal circumstances, all people are able to operate in all four management modes. However, we are naturally strongest in only one of the four styles, almost from birth.  A secondary style develops as we mature, and by adulthood we are usually very capable in our second mode. A third style can be learned with more effort, and in our weakest style we can function but will almost always benefit from some help.  Teaming up with someone whose style profile complements ours is the only way to address all four horizons of concern with equal competence.
  15. 15. PAEI  In problem solving, each role focuses on different imperatives:  P: What?  A: How?  E: When?  I: Who? Style: a repetitive set of behaviors that predictably occur in response to specific situations  P---: The Lone Ranger  -A--: The Bureaucrat  --E-: The Arsonist  ---I: The super follower  ----: The Deadwood  PAEI: The textbook Manager
  16. 16. Quality Decision-making Processes Make the Company More Effective and Efficient in Both the Short and Long Run What? Why? When? Who? How? Performance Entrepreneurial Administration Integration Effectiveness Efficiency Short-Term Long-Term P A E I PAEI Framework
  17. 17. 1 Change & Its Repercussions Change has no Precedents
  18. 18.  Change gives rise to events that can be opportunities or problems/challenges.  When we encounter changes, we need to make a decisions & do something different because we face a different phenomenon.  Every problem or opportunity introduced by change generates a solution , which will lead to more change, and we face a new reality leading to new set of challenges.  As long as there is change, there will be problems and opportunities.  Since change is here to stay, problems are here to stay … forever.  It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. The Perpetuity of Problems
  19. 19.  The Fundamental Truth all organizations are Living Organisms .  They have a lifecycle & undergo very predictable & repetitive patterns of behavior as they grow and develop.  At each new stage of development an organization is faced with a unique set of challenges.  How well or poorly management addresses these challenges, & leads a healthy transition from one stage to the next, has a significant impact on the success or failure of their organization.  Leading an organization through lifecycle transitions is not easy, or obvious.  The same methods that produce success in one stage can create failure in the next. The Corporate Lifecycle
  20. 20.  Fundamental changes in leadership & management are all required, with an approach that delicately balances the amount of control & flexibility needed for each stage.  Leaders who fail to understand what is needed (and not needed) can inhibit the development of their companies or plunge them into premature aging.  The challenges that every organization must overcome at each stage of development first manifest themselves as problems that arise from the growth and success of the company and from external changes in markets, competitors, technology and the general business and political environment.  This simple, unavoidable reality leads to the following five important insights about the nature of problems in organizations. The Corporate Lifecycle
  21. 21. 1. Problems are normal and desirable.  Problems are the natural result of change.  The only place on the lifecycle curve where there are no problems is the place where there is no change, which is Death.  If you think that good managers 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 is magnified. 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 your organization's ability to recognize and resolve problems. Your ability to work together as a team and quickly tackle any and all situations, or decide not to, is your ultimate competitive advantage. The Five Important Insights
  22. 22. 3. Some of the problems you face are normal and some are abnormal.  Normal problems are those that are expected for a given lifecycle stage. Abnormal problems are those that are not expected (or desirable) in a stage of the lifecycle.  Since you will never have enough time or resources to address all the problems you face, focus on abnormal problems.  Many normal problems can be ignored since they tend to resolve themselves during the natural course of growth and development. 4. You can drive your organization faster when you know the road ahead.  Most of the issues you face are common to all organizations.  There is no need for you to reinvent the wheel. You can save a lot of time and effort by thoroughly understanding the nature of all 10 stages in the lifecycle, and knowing what it takes to transition from one stage to the next. If you and your management team share a common understanding of this knowledge before problems arise, it will also help you attack the problems, instead of attacking each other. The Five Important Insights
  23. 23. 5. Prime is the Fountain of Youth for Organizations.  One key difference between the lifecycle for human beings versus organizations is that living things inevitably die, while organizations need not.  The "age" of a company in terms of its lifecycle is not related to its chronological age, the number of employees, or the size of its assets. Instead, the lifecycle age is defined by the interrelationship between flexibility and control.  There is a fountain of youth for organizations called Prime. An organization that is in Prime has achieved a balance between control and flexibility.  A Prime organization knows what it is doing, where it is going, and how it will get there. It also enjoys both high growth and high profitability. Once an organization reaches Prime, leadership must work to sustain that position. The Five Important Insights
  24. 24. 2 Courtship
  25. 25. Courtship  It is named courtship because the situation is not very different from the prelude to marriage.  We are truly married when commitment happens, is tested & survives the test.  When are we divorced ?  Not when the judge signs the papers.  The marriage is dead when there is no more commitment to keep it alive.  Rings & papers are only formalities.  It is commitment that makes any organization- marriage, business or society- viable
  26. 26. The emphasis in this stage is building Commitment—it is only an idea. He who has a why to live can bear almost any how. (Nietzsche) First Stage: Courtship
  27. 27.  Courtship is the first stage of an organization's development. At this stage, the company is not yet born.  It exists as a gleam in the founder(s) eye. The focus of Courtship is necessarily on dreams and possibilities.  The primary goal of this stage is to build the founder's enthusiasm and commitment to his dream.  The higher the risk, the deeper the commitment needed. As Conrad Hilton said, "If you wish to launch big ships, you have to go where the water is deep." Courtship
  28. 28.  In Courtship, it is normal to experience fear, uncertainty and doubts.  What exactly are we going to do?  How is it going to be done?  When should it be done?  Who is going to buy this and why?  Now is the time to wind-tunnel test the brilliance of the Founder's vision.  The goal of the fledgling business should be to add value and satisfy market needs.  Founders that are in it solely for the money, often don't have the fortitude to sustain their companies over the rocky road they will encounter in Infancy and Go-Go.  A useful definition of a Founder is someone with; "unreasonable conviction in the face of insufficient evidence." By definition, most will think that the idea for the new business is risky, and probably won't 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 Building a Commitment Correctly
  29. 29. Courtship Affair Is it a True Love or an Affair ?
  30. 30. Challenges in Courtship 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 Affair where the Founder's commitment evaporates at the first sign of difficulty. What is an affair but lots of enthusiasm with no real commitment?
  31. 31.  When the Founder(s) makes the bold decision to quit their day job, mortgage their house and/or accept the seed capital, the organization is born and instantly moves into Infancy.  With this simple act of faith, the Founder(s) cast off 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 acts of initiative and creation.  There is an elementary truth the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then providence moves too.  All sorts of things occur 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 man could have dreamed would have come his way. Suggestions for Success
  32. 32. At this stage the company is not born. It exists as a gleam in the founder’s eye. The focus is on dreams & possibilities. The primary goal of this stage is to build the founder’s enthusiasm & commitment to his/her dream. The higher the risk, the deeper the commitment needed. As Conrad Hilton said” If you wish to launch big ships, you have to go where the water is deep paEi
  33. 33. 3 Infancy
  34. 34. Infancy Courtship Affair Second Stage: Infancy The emphasis at this stage is on CASH! The product is important but selling is crucial. Starting a company means putting your personal life on hold.
  35. 35. Climate  Infancy begins the moment financial risk has been undertaken and the Founder quits his/her paying job, signs the loan documents or promises 40% of the company to outside investors.  Infant organizations are necessarily action-oriented & opportunity- driven.  The focus instantly changes from ideas to action. The time for talking is over. It is time to get to work and produce results (sales and cash). Like a real baby.  Infant organizations need two things to survive:  Periodic infusion of milk (operating capital), and  The unconditional love of their parents (Founder(s)).  Like a newborn baby learning to walk, performance in Infant organizations is inconsistent.  Unexpected crises appear with little notice. Because Infant organizations lack systems, it's easy for them to get into trouble. Moving from one crisis to the next is normal.
  36. 36. Infancy  The Founder and all employees constantly test the limits of their endurance for work, stress and confusion.  Employees are often attracted to Infant companies for reasons that go far beyond money; and their loyalty to the team often extends beyond the struggling Infant's ability to pay them.  They end up working seven days a week and sleeping under their desks but still there is 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 don't know what you're doing, it is difficult to delegate.  Most Infant Founders are unable to spread the work effort for critical tasks.  This lack of delegation is an important control for the Infant organization.  Systems and information are usually very scarce so the only way a Founder can control many outcomes is to do the work themselves.  Once a task becomes routine, it can them be handed off to others.  Being a one-person show makes the Infant organization highly dependent on its Founder. If the Founder is injured or killed, the company often dies too.
  37. 37. Undercapitalization  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/ Revenue).  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 they need 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 it turns 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 market's validation of their new product or service.  Ideas from demanding prospective beta testers and customers are needed by the Infant to complete the development of their innovative new products or services.  Failing to sell to key accounts is an abnormal problem that will quickly lead to cash starvation, lack of continued interest from financial backers and the emotional collapse of the Founder
  38. 38. Autocratic Leadership Style  People criticize that founders of Infant organizations for not delegating, for working hard and for too opinionated.  For an infant company to succeed , its founder must be enthusiastic, passionate & resentful of anyone’s interference.  Infant organizations are fighting to survive, they cannot postpone decision making.  Little organizational memory , with little experience , with few rules & polices.  The general feeling & thinking is “ If it is not a crisis, we have no time for it “.  MBA’s find it difficult to function in an infant organization- since there are no titles, organization charts, hierarchy, job description, structure, strategies, goals, compensation, benefit plans & career succession plans.  Infant companies are in testing times in terms of ideas.  Company cannot afford to let people learn from mistakes. Hence founders must keep a close eye on every thing.  Good experiences are achieved with good decisions. Good decisions are achieved good judgment and good judgment is derived from bad experiences.
  39. 39. Challenges in Infancy
  40. 40. Infant mortality occurs if the company is unable to continue to fund its negative cash flow, makes a mistake that results 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 have very little to show for all their hard work and suffering, and decide to hang it up. Pathologies of Infant Organizations- Infant Mortality
  41. 41. Suggestions for Infant Success  Companies in their Infancy require a strong arm to keep them on course. What is needed is a Founder that can galvanize and unite the efforts of his/her 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 is strong, decisive, and fair.  Infant companies need more sales, more production, more improvements, more effort and more focus.  Everyone in an 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, and customers 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 sales to 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.
  42. 42.  Infant organizations can also benefit from judicious use of people outside the organization that are capable of accomplishing 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 give away too much equity in their Infant companies may live to regret their generosity when they get to Adolescence and lose control or find their ownership positions severely diluted.  Well-intended investors and advisors may counsel Infant organizations to spend more time analyzing and predicting their financial needs, improving sales forecasting and projecting staffing requirements. While it is important for a Go-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 the marketplace, and begins to enjoy strong demand, consistent sales growth and a healthy cash flow from sales, the organization transitions into the next stage of its lifecycle: Go-Go. Suggestions for Infant Success
  43. 43. Infancy begins the moment financial risk has been undertaken & the founder quits his/her paying job, signs the loan document or promises 40% of the company outside investors. Infant organizations are necessarily action-oriented & opportunity driven. The focus instantly changes from ideas to action. The time for talking is over. It is time to to get to work and produce results ( Sales & cash) Paei paEi
  44. 44. 4 The Wild years – Go-Go
  45. 45. Developing a company is just like planting a tree; Don’t plant it one day & then pull it up next week & look at the roots to see whether it’s growing.
  46. 46. Opportunities as Problems  A Go-Go organization is a company that has a successful product or service, rapidly growing sales and strong cash flow.  The company is not only surviving, it's flourishing.  Key customers are raving about the products and ordering more. Even the investors are starting to get excited.  With this success, everyone quickly forgets about the trials and tribulations of Infancy. Continued success quickly transforms this confidence into arrogance, with a capital A.  Go-Go companies are like babies that have just learned to walk.  They can move quickly and everything looks interesting.  Fueled by their initial success, Go-Go's feel that they can succeed at almost anything that comes their way.  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 a shopping center".
  47. 47.  This does not surprise the employees. It has happened before.  The success of the Go-Go is the realization of the Founder's dreams, & 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 a major asset of the Go-Go, but when taken to an extreme, it is also how they get into trouble.  Go-Go's are prone to rapid diversification and spreading themselves too thin.  They have so many irons in the fire they cannot give the necessary attention to each one.  They make decisions and commitments they should never have made, and they get involved in ventures that they know very little about.  Go-Go’s inevitably get burned and lose more money overnight on a shopping center, than they made in a whole year selling shoes. Opportunities as Problems
  48. 48. Characteristics of Go Go Companies  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.  The company is opportunity-driven rather than opportunity-driving.  It reacts rather than pro-acts to opportunities. In the rush 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 sales by accepting new business/projects that was unprofitable.  Uncontrolled growth can become an abnormal problem that will jeopardize the continued development of the company.  On the other hand, a premature focus on profitability can inhibit the long- term potential of the company.  Everything is a priority. Strategically important tasks that are not urgent often get deferred to pursue the latest "hot" new project.
  49. 49. Climate Crisis Management  Its insatiable appetite for growth drives the Go-Go company.  Their leaders often don't 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 types who lead Go-Gos often have difficulty articulating their ideas clearly.  One listens and wonders, "What in the world does he want me to do?" The few who can interpret the Founder's ideas become the people who get the business rolling. 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 don't need to be involved in those details".  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 want something 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 as the Founder's Trap.
  50. 50. Climate Information & 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 its hands full just trying to properly account for revenue, expenses and cash flow.  Useful cost accounting and accurate reporting of individual product profitability is a distant dream.  Management reports are often published so late (30 days after the end of the month) that they are of little use for day-to-day operations. The best information is often word-of-mouth The Company is organized around people & 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 work really gets done in the organization.  The "real" organization chart looks like a piece of paper that a chicken has walked on.  Dotted lines, straight lines, and broken lines run in every direction.  If you ask a Go-Go employee, or even an executive, "To whom do you report?" You usually get a complex and confusing answer. "I mostly report to Sam, but sometimes I report to Lee; however, whenever there is a quality problem, I report to Jane." "Come to think of it, I report to Al as well."
  51. 51. Climate Employees Are Frustrated  In the face of an overwhelming workload, unclear responsibilities and fuzzy goals, employees find it increasingly difficult to be productive.  New people are hired and thrown into their jobs with little training 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 into senior 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 House of Cards.  As the company continues to succeed, work processes, procedures & systems expand accordingly.  The development of this infrastructure usually occurs in response to emerging opportunities or unexpected problems, rather than according to a long-term plan.  As things become more complex, it takes longer to fix mistakes and some fixes create new problems because of unexpected side effects.  Addicted to growth, the company 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 in charge of the infrastructure now begin to rely on that miracle.
  52. 52. Climate 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 just watched 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 to implement 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 tend to struggle with delegation and decentralization.  Workable decentralization requires an effective system of control. In the absence of such a system, Founders attempt to delegate by establishing rules such as, "Before you make any big decisions come ask me first. And, "don't" make any decisions I wouldn't make."  This approach usually fails which 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".
  53. 53.  The Founder needs to escape day-to-day details so that they can focus on the big picture, so they delegate authority and take off.  What happens when they return? 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 what to do, or not do, and everyone grows increasingly anxious.  When the peripatetic leader makes their next appearance, the accusations and frustrations begin anew.  With repetition, subordinates are unwilling or unable to act decisively and paralysis reigns.  Employees often have deep feelings of affection and respect for the Founder, but at the same time he/she is driving them crazy and they wish he/she would change.  For their part Founders feel betrayed and unfulfilled. They want to handoff the details, but they feel they can't since no one has demonstrated the ability to replace them. Entrepreneurial leaders are often a bit paranoid so even if there is a capable replacement, they may fear that this new leader will hijack the company and steal their dreams. Climate
  54. 54. Challenges in Go-Go
  55. 55. A Go-Go organization is company that has a successful product or service, rapidly growing in sales and cash flows. The company is not only surviving, it is flourishing. Key customers are raving about the products & ordering more. Even the investors are starting to get excited. With this success everyone quickly forgets about the trails & tribulations of infancy. Continued success quickly transforms this confidence into arrogance, with Capital A PaEi paEi Paei
  56. 56. 5 The II Birth & The Coming of Age - Adolescence
  57. 57. Fourth Stage –Adolescence  During the Adolescent stage of the organizational lifecycle, the company is reborn.  This second birth is an emotional time where the company must find a life apart from that provided by its founder.  This critical transition is much like the rebirth a teenager goes through to establish independence from their parents.  The Adolescent company teeters on the brink of both success and disaster.  So long as the Adolescent company does well, investors and the Board regard the Founder as a genius with a golden touch.  However, when the infrastructure collapses, sales slow down, costs mushroom or profits decline, the finger pointing begins in earnest.  The Founder, accustomed to the magic of adoration, is instantly transformed into a goat who is no longer up to the task of leadership.
  58. 58. Fourth Stage –Adolescence  The Adolescent company teeters on the brink of both success and disaster.  So long as the Adolescent company does well, investors and the Board regard the Founder as a genius with a golden touch.  However, when the infrastructure collapses, sales slow down, costs mushroom or profits decline, the finger pointing begins in earnest.  The Founder, accustomed to the magic of adoration, is instantly transformed into a goat who is no longer up to the task of leadership.  Adolescence is an especially stormy time characterized by internal conflicts and turf wars.  Everyone seems at odds with everything. Sales fall short or exceed production’s 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 dejection in another.  Throughout the organization, people are busy tracking the real and imagined injustices they have suffered, which they nurse with great care.  The Founder’s safe conduct through this tempest is by no means guaranteed. If these conflicts are not resolved, Adolescent companies can find themselves in Premature Aging that can lead to the early departure of entrepreneurial leadership, or the professional managers leading to pathologies called Divorce or Premature Aging.
  59. 59.  The shift from management by intuition to a more professional orientation occurs it’s the shift from entrepreneurship to professional management.  New leader creates systems, designs compensation packages, redefines roles and responsibilities, and institutionalizes a set of rules and policies.  New leader says no no no when people are used to go go go  Organization achieves balance of self control and flexibility – they know what they’re doing, where they’re going, and how to get there Fourth Stage –Adolescence
  60. 60. Fourth Stage –Adolescence  During the Adolescent stage of the organizational lifecycle, the company is reborn.  The rebirth is more painful & prolonged than the physical birth of infancy.  They are recognizable by their  Us-Vs. them/Old-timers- against newcomers mentality  Inconsistency in organizational goals  Inconsistency in compensation & incentive systems  The transition fro Go-Go to Adolescence is difficult  Delegation of authority  Change of leadership  Goal displacement
  61. 61. Delegation of Authority  Part of the reason the organizations survived the Go-Go phase is because they had some awareness of the requirements for cash & the limitations on our time and capacity.  Consequently, management decides it’s time to delegate. Only instead of delegating properly, they inappropriately decentralize decision making.  In other words, instead of assigning tasks with the appropriate authority to complete those tasks, they abdicate decision making at too low of a level and don’t like the result.  Management is not properly trained in the art of establishing and maintaining accountability.  Subordinates don’t understand their roles as subordinates and are effective in “upward delegation”. “Upward Delegation” refers to subordinates resistance to accepting the responsibilities assigned to them and taking advantage of their manager’s tendency to do their thinking and make their decisions for them.  Rather than taking on a project and doing the proper research, they present their dilemma to their manager and wait for him to report back progress.
  62. 62.  The founder is the president, salesperson, financier, and innovator.  For the organization to change, he needs to change. The transition is occurring from sales to profit, but the president is still submarining his own directives.  He has policies put in place toward enhancing control, but he is the biggest violator of the policies.  The rules don’t apply to him.  The employees see this so the policies become obsolete almost before they’re born. This is normal to an extent.  To the extent the President can play by the rules, the organization will survive this phase and proceed to the next. Proper Delegation requires a framework of boundaries called policies, procedures, and job descriptions. Delegation of Authority
  63. 63.  Entrepreneurs have a unique set of skills, talents and characteristics that are needed to take risks, follow through with commitment and make decisions based on very little hard information.  These skills are required to reach this stage. Progressing through this stage requires a different set of skills.  Entrepreneurs have qualities that are often a liability once they’ve reached this point.  Their success is largely due to their intuitive decision making ability and, in some cases, dumb luck. They’ve been fortunate enough to avoid making serious mistakes and many of their decisions have worked out.  Based on their history, there is a tendency to have a high degree of confidence in their decision making ability. Change in Leadership
  64. 64. Change in Leadership  This has the potential to interfere with the process of bringing on board a senior manager that has the qualities and knowledge that they don’t have.  If they bring in an administrative type to put controls in place, there can be a serious compatibility issue. “The founder is looking for someone who can fly a submarine.” Someone who can complement the style of the founder and do what he wouldn’t or couldn’t do.  An administrative type will focus on what not to do and conflict with the existing culture of the organization and the personality of the founder.
  65. 65. Planner/Manager Systems, Policies & Admin Oriented“ Doer Visionary & Results Oriented Risk & Results Oriented Leadership Needs by Phase “This person is not like me. If I ran the company like this, we never would have made it. We need to find somebody like us.” He doesn’t understand the company. He’ll kill the company. He doesn’t run things like you.” We need a professional manager.” Many Founders Are Looking for Someone Who Can “Fly a Submarine” (Be Like Us But Do the Things We Do Not Do)
  66. 66. Displacement of Goals  A further complication is the need to transition to a new set of goals.  In early Adolescence, company goals as well as the management information & compensation systems all generally reinforce the Go-Go's emphasis on growth and sales.  In Adolescence, the company must change from the Go-Go's "more-is-better" goals to "better-is-more" goals.  Profitability emerges as the most important goal for the organization.  Instead of working harder, the Adolescent company must learn to work smarter.
  67. 67. Displacement of Goals  Growth and new sales are desired only to the extent that they also have higher profitability.  Adolescent companies can end up reducing revenues for a period of time as the company pulls back from low margin business.  This significant switch in goals must be implemented through a complete overhaul of the structures, management information, 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 more smoothly, 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."
  68. 68. I think it’s time we established new guidelines for Corporate behavior
  69. 69. Challenges in Adolescence
  70. 70. Pathological Challenges  There are two solutions that will allow this transition to avoid pathological problems.  First, the founder must be aware of what he brings to the table and what he doesn’t.  A different type of decision-making is required, and it’s not reasonable to expect that he’s going to agree with all the decisions that are being made.  He needs to accept that he’s going to have to swallow a certain amount of fear to give the manager enough room to operate.  This isn’t to say that there is no room for coaching or guidance. If the founder doesn’t leave an appropriate vacuum for the manager to operate, the manager’s performance will shrink to fit the space left by the founder and neither of them will be pleased with the outcome.  The other side of the equation is the selection of the manager.  We do, in fact, need someone who can keep a submarine in the air long enough to get through the transition.  Someone responds to an ad or comes along somehow that has senior management experience.
  71. 71. Pathological Challenges  They bring with them the system from where they worked before that may have had positive qualities.  If their experience is heavily weighted in a particular discipline, there is a different set of potential problems that goes along with each scenario.  If we bring in a financial person, the situation will play out much as Mr. Adizes describes.  There will be a revolving door of managers until we find a submarine pilot that comes up with reasons we can do things while maintaining controlled growth.  If we bring in a sales-oriented manager, our problems won’t change much, other than we’ll have another staff person coming up with ideas on how to increase sales with insufficient regard for profit.  If we bring in a technical person, we may end up with controlled costs, but our organization is likely to become stagnant
  72. 72. Suggestions for Success  To get to the next level requires the establishment of sufficient controls.  The implementation of these controls requires the organization to spend time and energy away from the day to day operation of the business. This means meetings.  If the meetings are managed properly, we can move on to the next phase.  Out of control, we end up with infighting and a strained organization. The answer is effective leadership.  The organization begins to plan their activity. The focus is on how we direct the market instead of how the market directs us. We have more control over our customers than before and are beginning to put our competitors on the defensive.  While before, it was very difficult to predict our performance, we have a budget. We still aren’t real sure how much we’re going to sell and our costing is still a little shaky, but we have a better idea why we are going to make money.
  73. 73. During this stage of the organization lifecycle, the company is reborn. This second birth is an emotional time where the company must find a life apart from that provided by its founder. This critical transition is much like the rebirth a teenager goes through to establish independence from the parents. The adolescence company teeters on the brink of both success & disaster. pAEi paEi Paei PaEi
  74. 74. 6 Prime
  75. 75. Prime  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. Even if you are on the right road, you will eventually get run over if you just sit there
  76. 76. Early Prime  Characteristics  Vision & values- they “ Walk their talk”  Institutional governance process  Controlled & nurtured creativity  Coalesced goals  Conscious focus & priorities  Functional systems & Organization Structure  Predictable Excellence  Growth in both sales & profit margins  Organizational Fertility  Intra & Inter Organizational integration & cohesion
  77. 77. Simply having vision & values does not make for a Prime Organization “ Honesty is the best policy, “ Ok.! Now, What is the second- best policy
  78. 78.  These are the characteristics of an organization in Prime:  The organization is guided by the vision of its reason for being. There is a clear purpose and people know what they will do, and will not do, "they walk their talk".  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 & 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 the market. 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 composure and peace of mind when making tough decisions.  The entrepreneurial spirit is fully institutionalized. Evidence of organizational fertility abound. This creativity repeatedly produces controlled, profitable innovation. Characteristics of Prime
  79. 79. Characteristics of Prime  These are the characteristics of an organization in Prime:  Organizational structures work well. Opposing forces are balanced. There is alignment between vision, strategy, structure, information, resource allocation and rewards. A company in Prime is continuously realigning 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 one's recommendations are not heeded. Differences of opinion rarely deteriorate into personality clashes or turf wars.  There is intra- and inter-organizational integration and cohesion with clients, suppliers, investors, and the community. 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 for positions at all levels.  They embrace change. Prime companies work hard to adapt to changes in markets and technology so that they can gain share from weaker competitors.  They enjoy consistent, above average growth in both sales and profits.
  80. 80. Challenges of Prime  Senior management of companies in Prime engages in a continuous struggle to maintain the delicate balance between flexibility and control. It takes very little to push a company in either direction. When administrators gain the upper hand, the company's balance swings in the direction of excessive control, and the company sacrifices flexibility. When entrepreneurs gain the upper hand, the company grows more flexible but loses control.  Prime companies often don't have enough good people to run all their business units. The other key issue they face is complacency. Prime is a temporary condition, not a permanent destination. Once you get there, the principal leadership challenge is to stay there. " Since everything is fine, why change?" This attitude is the first step into decline.  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 activities that retard aging and sustain the vitality of Prime. Vladimir Horowitz, one of the world's best-known pianists, once said: "If I do not practice a day, I notice the difference in my playing. If I do not practice a week, my wife notices the difference, and if I do not practice a month, the audience notices the difference
  81. 81. Normal problems  Insufficient managerial depth. Abnormal problems  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 spent in the office, behind the desk. Challenges of Prime Pathologies of Prime Any sign of aging is a pathology in a Prime organization. This aging will naturally occur unless management actively 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.
  82. 82. Prescription for Success  The slide into aging is subtle. The emergence of an attitude of complacency is the first step into decline. Since the 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 working to refuel momentum by nurturing a portfolio of Infant, Go-Go and Adolescent business units ensuring that entrepreneurship thrives.  When a Prime organization loses its ability to embrace 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 an organization. When a company first starts to age, it is still producing the desired results as measured by short-term sales and profitability.  Aging is having a negative effect on the company, but this effect is not yet reflected in sales or profitability.  Therefore, the lifecycle curve is still rising, however the rate of change is slowing so the rising curve is starting to level off. If Prime organizations don't refuel their momentum, if they keep harvesting their momentum 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 the curve, there are no major transitional events in aging companies. The only differences between the lifecycle positions of Stable, Aristocracy, Early Bureaucracy and Bureaucracy is a question of the degree to which aging problems pervade the organization.
  83. 83. Prime is the optimal position on the lifecycle, where the organization finally achieves a balance between control & 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. Sometimes the prime organization is more flexible than controllable, and sometimes it is not flexible enough. PAEI paEi Paei PaEi pAEi
  84. 84. Politics without Principle Pleasure without Conscience Wealth without Work Knowledge without Character Business without Morality Science without Humanity Worship without Sacrifice Will Destroy us 7 The Signs of Aging
  85. 85. Growing Vs. Ageing
  86. 86.  From Risk taking to Risk Avoidance  From Expectations exceed results to Results exceed expectations  From Cash poor to Cash Rich  From Emphasis on function to Emphasis on form  From Why & What to How, Who & Why now ?  From Contribution to Personality  From Asking forgiveness to Asking permission  Are those problems or opportunities ?  From Marketing & sales to Finance & legal  From line to staff  Responsibility to Authority  Who is managing whom?  Momentum or Inertia  What to do ? Change Leadership or Change the system  Internal & External consultants vs. Insultants  From Sales to Profit orientation  From customers to capital  From Cash to politics Whether the organization is aging ?
  87. 87. Interests and Focus Over the Lifecycle As Companies Grow Management, Organization, and Capital Begin to Require Greater Focus!
  88. 88. Start Up Capital External Capital, Services, & Variable Resources External Needs Over the Lifecycle As Companies Grow, External Resources Play a Larger Role
  89. 89. Deterministic Vs. Constraint goals over lifecycle
  90. 90. Stable is positioned at the top of the Lifecycle curve, but it is not the place to be. Companies that are in stable phase have started lose their vitality and aging. When an organization first begins to age, the symptoms won’t show up on its financial reports. In fact, the opposite is true. Stable companies are often cash rich and have strong financial statements.PAEI PA-I paEi Paei PaEi pAEi
  91. 91. 8 The Aging Organizations : Aristocracy
  92. 92. “Through the hoop, Bob! Through the hoop!
  93. 93. Aging Organization – Stable  Still growing but losing flexibility, sticks to what worked in past, sense of urgency disappears, expectations for growth and new markets are lowered.  This organization starts to reward those who do what they are told to do and they are more interested in interpersonal relationships than risk
  94. 94. Aging Organization – Aristocracy  Organization places an emphasis on how things are done rather than what and why it is done.  Individuals are still concerned about the company’s vitality, but as a group, the operating motto is don’t make waves.  There is low internal innovation….corporation often buys other companies to acquire new products and markets
  95. 95. Aristocracy – Its Characters As organizations enter Aristocracy they characteristically:  Are cash rich and have very strong financial statements.  Have reduced expectations for growth.  Demonstrate little interest in conquering new markets, technologies, and frontiers.  Focus on past achievements rather than future visions.  Are suspicious of change.  Reward those who do what they are told to do and punish those who do not.  Are interested in reducing their risks.  Invest much more on control systems, benefits, and facilities than they do on R & D.  Form dominates function in the organizational climate. More emphasis is placed on how things are done, than what was done.
  96. 96. Aristocracy – Its Characters ( Continued..)  Value uniformity, consistency and formality in dress, decorum, and behavior.  Employ individuals who are concerned about the company's vitality, but are willing to abide by a "don't make waves" operating motto.  Engender only negligible innovation with internal efforts.  Acquire other products or companies for new products, markets, and entrepreneurship to feed into their distribution channels and operating systems.  May be takeover targets themselves.  The effects of the steady decline in flexibility, which began in Prime, start to become more obvious in Aristocracy.  Because it has neglected to pursue long-term opportunities, the company's focus becomes increasingly short-term. For the most part, its goals are financially-oriented and low-risk.  With less of a long-term view, the climate in an Aristocratic organization is relatively stale.  What counts is not what people do, but how they behave.  Working within the system, supporting the status quo and not making waves, are the most important contributions.  The actual accomplishments of its leaders, or lack of same, are becoming less and less important.
  97. 97. Aristocracy – Its Characters ( Continued..)  Aristocratic organizations exhibit a very characteristic set of behaviors. How people dress, where they meet, the facilities they own, how they speak to each other, handle conflict and make decisions are remarkably different from the other stages on the lifecycle.  Dress Code:  Aristocratic organizations exhibit a very characteristic set of behaviors. How people dress, where they meet, the facilities they own, how they speak to each other, handle conflict and make decisions are remarkably different from the other stages on the lifecycle.  Meeting Rooms:  In the boardroom of a typical Aristocracy, you will find a huge, highly polished, dark wood table surrounded by matching plush chairs. The carpet is thick. Lighting is subdued, and the windows are heavily draped. From the paneled walls, a larger-than-life portrait of the unsmiling Founder looks down on the room, as if warning everyone to remember his or her place. Ornate works of art cover the other walls. The roar of silence in the room is deafening.  When an outsider comes into the room, the dim lights, the uniformly dark suits, the somber portrait of the Founder collectively scream "Don't make waves!" How can they possibly tell corporate leadership, "Hey, guys, we are losing market share."
  98. 98. The effect steady decline in flexibility, which began in prime, start to become more obvious in aristocracy. Because it has neglected to pursue long-term opportunities, the company focus becomes increasingly short- term. For the most part , its goals are financially oriented & low-risk. With less of a long-term view , the climate in an Aristocratic organization is relatively stale. paEi Paei PaEi pAEi PAEI PA-I -A-I
  99. 99. 9 Early Bureaucracy
  100. 100. Early Bureaucracy  When an Aristocracy is unable to reverse its downward spiral and the artificial repairs finally stop working, management's mutual admiration society abruptly ends.  The good-old-buddy days of the Aristocracy are gone, and the witch-hunts of Recrimination begin. Companies in this stage exhibit the following behaviors:  People focus on who caused the problems, rather than on what to do about the problems.  Problems get personalized. Rather than dealing with the organization's problems, people are involved in interpersonal conflicts, backstabbing, and discrediting each other.  Paranoia freezes the organization.  Personal survival and turf wars absorb all available energy leaving precious little to deal with the needs of customers or the world outside the organization.
  101. 101. The Witch Hunt  Everyone is busy trying to find out who caused the disaster.  With blades drawn, it's backstabbing time in the boardroom.  Like primitive tribes afflicted by extended drought or famine, there is a rush to appease the gods.  The organization needs a sacrifice. Whom does it sacrifice?  The fairest maiden, the finest warrior, or the cream of the crop?  Typically, the management of a company in Recrimination sacrifices its most valuable and scarcest treasure.........the last vestiges of innovation and creativity.  The company fires the EVP of Marketing, explaining, "We're in the wrong market with the wrong products and our advertising does not work."
  102. 102. The Witch Hunt  " The heads of Strategic Planning, Business Development and Engineering are the next to find themselves on the street.  "Our strategy does not work. Our acquisitions are not working.  Our products and technology are obsolete." The people who get fired don't feel they are responsible for the company's situation.  The Marketing VP often said that the company ought to change its direction.  The strategist has an ulcer worrying about the lack of direction. Privately, these individuals complained, urged, begged, and threatened, but their efforts were like pushing wet spaghetti up a hill.  Their exodus merely exacerbates the problem because these creative people are the individuals the organization needs most for survival.
  103. 103. The Witch Hunt  In the Aristocratic organization, silence precedes the storm. People smile.  They are friendly, handling one another with kid gloves.  In Recrimination, when the bad results are undeniable, managers start fighting each other.  The ritual of human sacrifice is repeated over and over. Someone must take the blame every time there is bad news.  Bad news comes every quarter when they must report results, so every quarter a new scapegoat emerges. No one is sure who will be the next to get the ax. Paranoia reigns.  This poisonous atmosphere encourages the circulation of outrageous rumors. If, for instance, the sales manager announces a discount, the other executives don't interpret it in rational terms by referring to competitive conditions.
  104. 104. The Witch Hunt  Instead, they attribute the move to the sales manager's Machiavellian strategy to discredit the marketing department and to expose the incompetence of the marketing vice president.  This irrational paranoia accentuates and accelerates the decline. Managers fight each other, spending most of their time building cliques and coalitions that are constantly changing.  They expend their creative energies in a fight for personal survival. Individual security, they know, depends on eliminating and discrediting internal "competition."  Organizational performance continues its relentless decline, and the paranoia intensifies.  Talented people, objects of fear and distrust, either get fired or leave. This cycle of vicious behavior continues until the company ends up bankrupt or becomes a full-fledged Bureaucracy.
  105. 105. When the Aristocracy is unable to reverse its download spiral & the artificial repairs finally stop working. Managements mutual admiration society abruptly ends. The good old buddy days of the Aristocracy are gone and the witch hunt for Early Bureaucracy begin. Companies in this stage focus on who caused the problem, rather than what do about them paEi Paei PaEi pAEi PAEI PA-I -A-I -A--
  106. 106. 9 Bureaucracy
  107. 107. Bureaucracy- The Final Decay  Although it should be dead, the company in Bureaucracy is kept alive by artificial life support.  The company was born the first time in Infancy, it was reborn in Adolescence, and its third “birth” is in Bureaucracy when it gets an artificial continuance on its life.  Death occurs when no one remains committed to keeping the organization alive. If there is no business or government commitment to supporting a company in Recrimination, death can occur instead of bureaucratization.  In the Bureaucratic stage, a company is largely incapable of generating sufficient resources to sustain itself. It justifies its existence by the simple fact that the organization serves a purpose that is of interest to another political and business entity willing to support it. The Bureaucratic organization  Has many systems and rules runs on ritual, not reason.  Has leaders who feel little sense of control.  Is internally disassociated.  Creates obstacles to reduce disruptions from its external environment.  Forces its customers to develop elaborate approaches to bypass roadblocks.
  108. 108.  Bureaucratic organizations accomplish very little of any value.  Focus on control for the sake of control.  No inclination to change, everyone's day is filled with systems, forms, procedures, and rules.  People know all the rules, but they can't remember why they exist. If you ask why they do things in a certain way, managers in a Bureaucracy will likely tell you, "Because it's the policy." The response to almost any request is, "Write me a memo."  After the pressures of Recrimination, working in a Bureaucracy is a low-stress environment.  There is little pressure to perform, so long as one abides by the rules and regulations.  Bureaucratic managers are among the nicest people you'll ever meet. To make change happen, they know need the cooperation of others, which is a near impossibility in a Bureaucracy.  A single executive cannot mobilize people across organizational lines. Rituals must therefore substitute for action. Meetings take place. Minutes are taken. Papers get filed. There is plenty of voting, and debates rage but one sees little, if any, real action. Bureaucracy- The Final Decay
  109. 109.  Bureaucratic companies are internally disintegrated.  Individual responsibility for a particular task, but no one collective responsibility for the overall goals.  It is usually up to the client to put all the pieces together.  Employees don't know the inner workings of other department. The customer service department often consists of telephone reps whose job it is to listen, record complaints, and answer them with a standard, routine letter: "We regret any inconvenience, but we will do our best to resolve your problem.  Mostly they respond to customer requests by demanding yet another document. Bureaucracies do not ask in advance for everything they will require. Rather than show its entire hand, a Bureaucratic organization shows only one card at a time.  Like an older person who follows a set routine every day and becomes highly aggravated with any change,  Bureaucracies resent outside disruptions and aggressively create obstructions to limit them. Customers are an example of one such disruption.  Bureaucracies minimize the possibility for external disruption by connecting to the external world through very narrow channels. Perhaps they allow only one incoming telephone line or they keep their customer service departments open for only a few hours a day. They keep people standing in lines, only to tell them which line they must go stand in next. Bureaucracy- The Final Decay
  110. 110.  In a Bureaucracy, the left hand does not know what the right hand is doing.  One department rejects what another one requests.  Customers are puzzled, frustrated, and lost.  To get results, a customer must build their own systems to deal with the ineffective organization.  Businesses that must work with Bureaucracies usually have dedicated departments, systems and people that are experts on the inner workings of a particular government agency and getting the results they need from that Bureaucracy.  Because bureaucracies rely on laws that provide them with a monopoly on services and allocation of funds generated by taxation, heads of bureaucracies spend most of their time in halls of government and with politicians safeguarding their source of their funds. What annoys politicians most is negative press. So, heads of bureaucracies are careful to ensure that there is no negative press about their agencies. Ask people in a bureaucratic organization, "Who is your client?" The answers generally include a long list of state or federal agencies that either supervises its performance or its budget; other Bureaucracies that it works with, unions, newspapers and other media. Lost at the end of this long list of stakeholders, are the customers whom the Bureaucracy is really supposed to be serving. Bureaucracy- The Final Decay
  111. 111. paEi Paei PaEi pAEi PAEI PA-I -A-I -A-- -A-- Although it should be dead, the company in Bureaucracy is kept alive artificial life support. The company was born first time in Infancy, it was reborn in Adolescence and its 3rd birth is in Bureaucracy when it gets its artificial continuance on its life. Death occurs when no one remains committed to keeping the organization alive.
  112. 112. Death Death occurs when no one remains committed to sustaining the organization. Monopolies and government agencies that are quarantined from competitive pressure and provide a large employment base, often live long and very expensive artificially prolonged lives.
  113. 113. paEi Paei PaEi pAEi PAEI PA-I -A-I -A-- -A-- ---- Death occurs when no one is committed to sustaining the organization. Monopolies and government agencies that are quarantined from competitive pressure and provide a large employment base, often live long & every expensive artificially prolonged lives.
  114. 114. Key Lifecycle Questions  How do the management needs of a company change as it grows?  What particular challenges occur as a company’s founder seeks to install long term management?  Is corporate strategy simply the addition of individual business strategies?  When should businesses be integrated and when should they remain distinct?  What level of strategic alignment among businesses is desirable?  How should boards allocate resources across businesses when they have different risk profiles and time horizons?
  115. 115. Take Away  Organizations can and do progress through these phases with varying degrees of success and discomfort. Understanding the problems that are normal and predictable is helpful towards progressing through the transition without suffering from pre-mature death or aging, i.e. bankruptcy or bureaucracy.  Mr. Adizes, in subsequent chapters, provides a prescription for success with a focus on decision-making and implementation. A predominant theme is leadership. People don’t follow systems and procedures. They follow people. If they have respect for the people in leadership positions, they’ll be inclined to follow the procedures and policies in a way that balances flexibility and control. Leaders are capable of getting results, whether they have the requisite authority or not. He provides a model for predicting the quality of decisions.  Leadership is broken down into three components, Authority, Power, and Influence. Mr. Adizes discusses at length the dynamics of leadership across the growth spectrum.
  116. 116. Take Away
  117. 117. Take Away
  118. 118. To Sum up…Two Questions to Answer …
  119. 119. Conclusions  Organizations can and do progress through these phases with varying degrees of success & discomfort.  Understanding the problems that are normal and predictable is helpful towards progressing through the transition without suffering from pre- mature death or aging, i.e. bankruptcy or bureaucracy.  We need look at prescription for success with a focus on decision-making and implementation.  A predominant theme is leadership. People don’t follow systems and procedures. They follow people.  If they have respect for the people in leadership positions, they’ll be inclined to follow the procedures and policies in a way that balances flexibility and control.  Leaders are capable of getting results, whether they have the requisite authority or not. He provides a model for predicting the quality of decisions. Leadership is broken down into three components, Authority, Power, and Influence.
  120. 120. Mail your comments to ramaddster&gmail.com

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