After reading a book by I. Adizes, I was moved to blog again.

The American Business Life Cycle: On the Downside

Driven by possibilities, the birth of a new organization is surrounded in optimistic hope and visionary thinking. Any seasoned and successful entrepreneur will tell you that on the upside of the life cycle, the organization builds relationships with stakeholders – investors, employees, suppliers, bankers, customers, etc. Each relationship is built with a common mission, to create value in the goods or services provided by the new firm, and every stakeholder is investing blood, sweat, tears and capital – in “future equity”, not “current profits”.

During this phase of the life cycle, managers bring level six competencies and they operate in artisan mode, forming a culture of ad-hocracy. Each manager is free to use individual judgment, guided by shared principles. Governance is flexible to allow for discovery, mistakes and failures. Employees are also hired based on competency, as well as adaptability and responsiveness to the needs of the customer. Suppliers and investors join because they are thinking about long-term possibilities.

Maturity brings more balance and reward. As the organization progresses through the phases of the life cycle, the problems that need to be solved begin to change and therefore the culture begins to change. The focus shifts from vision to mission. Developing value gives way to harvesting value. The return on relationships fades and the sharp edge of responsiveness is dulled.

As the problems change, so does the people. Those who long for the romantic nature of the early days wander off to launch new ventures and start all over again. As the emphasis shifts from making a profit by managing value, to making a profit by managing costs we find we need a different kind of manager and a different kind of employee. The numbers of transactions trump the quality of relationships. Internal loyalty is more important than competence. Governance by rules replaces guidance by principles. A culture of unaccountable bureaucracy replaces ad-hocracy. Once the downward journey begins, there is little that can be done to reverse the downward death spiral.