CEO/Board Member Briefing
Are present problems normal or abnormal?

Corporate Life Cycles

Organizations evolve and dissolve in a series of stages. This paper will provide you with key criteria to assess the present developmental stage of your company and determine the nature and severity of current issues and problems.

Problems are constitutive of business however, it is imperative that leaders understand exactly where they are in their corporate lifecycle so that they can determine which problems are normal and which are abnormal.

Normal problems can be dealt with by those inside the company, while abnormal problems and issues require outside intervention. Often this distinction, crucial to corporate success, goes unnoticed.

Additionally they must understand that the models or systems used to get through one stage do not usually work for evolving stages. Our experience and that of others shows that leaders unconsciously continue to work in the mind set of the stage that last worked, rather than fully understanding the contextual shifts required to successfully negotiate a new stage. Unfortunately, no one announces the shift in stages as they occur.

The evolutionary stages are as follows:

Let's take a look at each stage, and then you can determine which stage you have evolved to and which situations or problems, you need to address immediately. The stages are as follows:

Courtship Stage: This is the stage where the founder is focusing on ideas and future possibilities to change a market or create a market niche. Creativity reigns and there is a joy in designing these possibilities. Courtship ends when the founder assumes risk by investing in the idea. The company has now moved to the Infancy stage.

Infancy Stage: Sales drives this action-oriented, opportunity driven stage with little attention paid to paperwork, controls, systems, or procedures. The founder works 16-hour days, seven days a week, trying to do everything. Because a small problem can escalate and turn into a major crisis overnight, the founder makes all decisions-big or small. Infancy ends and Go-Go starts
when the organization's cash flow stabilizes and is predictable and positive.

Go-Go Stage: Sales are still the focus in this rapid growth stage. The founders often believe they can do no wrong thus are vulnerable to flagrant mistakes. Everything is viewed as an opportunity thus a lack of focus on the core competencies can lead to big problems. Leaders organize their companies around people, who wear many hats, rather than functions. The founders control and make every decision. What was normal in Infancy is becoming abnormal in Go-Go. Go-Go ends and Adolescence begins when the company gets into a serious crisis because of uncontrolled growth.

Adolescence: Crisis is the operational word, as everything seems at odds with everything else. Production exceeds or falls short of sales estimates, quality control is not up to customer expectations, old-timers fulminate against new hires, yesterday's goals are sales oriented to maximize revenues, and when the cost of sales increases, profits deteriorate. Everyone becomes frustrated, with finger pointing and accusations leading to goal defocusing. The company is flexible but lacks discipline.

Prime: If the company makes it through Adolescence it moves to the Prime stage when everything comes together. Discipline is introduced and enforced without losing the vision and creativity that is responsible for getting the company to this point. The company in Prime establishes an even balance between control and flexibility, between external focus (customers) and internal structure. The organization in the Prime stage is disciplined yet innovative, consistently meeting its customers' changing needs.

"To lead your company to Prime, you must first get it to the healthy part of its current stage in the lifecycle and prepare it to advance. Company leaders must be like parents who know how to treat their child one way when it is a baby and to modify their parental approach as the child grows to adulthood and beyond." Adizes in Pursuit of Prime

Where do you stand?
Once you have found which stage you are working in at this time refer to the corporate stage checklist below to determine which problems are normal and which are considered abnormal for the stage. Normal problems typically can be dealt with by using internal resources, while abnormal problems often respond best to external intervention.

Courtship Stage
Normal Problems
• The primary emotion of the founders is excitement
• Almost all energy is focused on the why
• The how, when, and who take minor roles

Abnormal Problems of Courtship
• Refusing to consider reality when involved in making decisions is blinding.
• Founders' commitment is not commensurate to the risk.
• By denying the need to analyze the future, the founder fails to give heed to the who, how, or when.
• The founder makes irresponsible promises he or she cannot deliver, will not be able to deliver, or will not want to deliver.

Infancy Stage
Normal Problems
• Leadership is authoritarian.
• Because there is no delegation, operations become overcentralized.
• The organization is usually short of cash.
• Problems with quality are not unusual.
• On-time delivery is unpredictable.
• Infant organizations have no second tier, or any other tier, management.
• There are no cost accounting systems.
• All information is centralized with the founder.
• Everyone works hard and long, way beyond normal hours.
• The organization's insufficient tools, equipment, people, and communications make it vulnerable.
• There is no good workspace.
• All management is management by crisis (firefighting).
• The lack of structure means overdependency on the founder for survival.
• Job descriptions are ambiguous.
• Cost controls are loose at best.
• Budgeting is helter-skelter. Either there is no budgeting at all or budgets change moment to moment.

Abnormal Problems
• The founder is too arrogant to listen to anyone.
• Expectations for success have little relation to reality.
• There is much more dreaming than doing.
• Cash flow is perilously unpredictable.
• Inadequate funding cannot sustain the company.
• Demand for the company's product or service is shallow.
• By taking short-term loans for long-term investments, the company's investment structure is thrown off balance.
• Founders spread their product lines too thin.
• The founder's commitment is insufficient to support the risk taken.
• A lack of support from the founder's family makes it difficult for him or her to devote adequate time to the company.
• The founder fails to take even preliminary steps to form a complementary team.
• The organization is characterized by an unresolvable lack of mutual trust and respect.

Go-Go Stage
Normal Problems
• Management by crisis characterizes the daily life in a Go-Go environment.
• There are more priorities than the company can handle.
• The company prepares budgets--late--and there is a high variance between actual and budgeted figures.
• There are no regularly scheduled staff meetings, and when there is a meeting, there is no real or up-to-date agenda. If there is one, many people ignore it.
• Centralized management and a messy organizational chart make it nearly impossible to understand who reports to whom.
• Operating results are either extremely good or extremely bad.
• Management, such as it is, doesn't follow up on decisions.
• Results are king.
• More is better.
• The organization is sales- not marketing - or profit oriented.
• There is no world-class inventory control, material planning, or cost accounting system.

Abnormal Problems for Go-Go
• No budgets, of any type, exist.
• Management's arrogance precludes any meetings or attention to problems.
• The company has established a board of directors made up exclusively of company insiders who depend on the founder for their existence.
• People--not situations or lack of systems--are blamed for all problems.
• Elitist management generates a climate of fear and suspicion.
• Access to top management slots has been preordained and reserved for only those with the right blood type--family members.
• Negative cash flow or no control over cash flow threatens organizational survival.
• Everyone is spread so thin, it is hard to know "who is on first."
• The company is a leggy collection of interwoven legal structures. Wide-ranging joint ventures are interdependent and confusing.
• Strategy has lost its focus.
• The founder confuses personal interests with corporate interests and milks the company in exclusive self-interest.
• The missing founder, who is often absent (caught in the seagull syndrome), reappears from time to time, drops a "load" of new priorities on the organization, and disappears to follow other interests that have nothing to do with the company.
• The company makes unrealistic promises and commitments to clients without thinking about how it will deliver on them.
• Deliveries are unpredictable.
• Goals are murky.
• Individual responsibilities are not clear.
• Authority (i.e. budget, decisions, hire and fire) is not made clear for various levels of management.
• Insufficient or monopolized access to information compromises quality.

Adolescence Stage
Normal Problems
• Although there are internal conflicts among the partners, mutual trust and respect are still strong.
• The confusion that started in Go-Go over who is accountable for bad results is becoming an acute problem.
• Because it is unclear who the real leader is, leadership struggles and power plays plague the organization.
• The company expects to increase both sales and profits.
• There is no consistent planning.
• Meetings are generally useless, and it is not clear who should be attending them. Although the meetings do have agendas, no one follows up on the decisions because they are not enforced.
• The founder is easily irritated by his staff, and the staff resents the founder.
• The cost accounting systems are useless.
• The company devotes resources to developing computer systems that do not serve the organization because they are based on a poorly defined structure.
• Reward systems are either inconsistent or nonexistent.
• Decisions with regard to promotions, titles, salaries, benefits, policies, and rules are inconsistent and easily forgotten.
• When there are problems, management's response is to hire additional people to solve them.

Abnormal Problems of Adolescence
• The leadership team cannot stand one another. They have lost all mutual trust and respect and are unable to work together productively.
• Old-timers fight guerrilla wars against newcomers.
• There is no cost accounting system.
• The company changes leaders frequently and impatiently, not waiting long enough to see any impact. Everyone wants a do-it-now savior.
• Partners, who can no longer work together, split up. The administrative type buys out the entrepreneurial type.

Prime Stage
Normal Problems
• The company never seems to have enough of the kind of talent it needs, and it is engaged in a continuous search for more and better people.

Abnormal Problems
• The headquarters staff gains more and more authority, which it takes from an increasingly disempowered staff on the line.
• The finance and legal departments become more powerful than marketing and sales.
• The finance department makes budgets, which top management approves and then delegates to the heads of divisions.
• Rewards are based on short-term results only.
• Relying on past successes, the company depends on its tried and true lines. Only a small portion of revenues comes from products that did not exist three years ago.
• Decision-making is centralized in the leader.
• The organization depends on a single leader for its development and growth.
• With no clear mission, the company repeats the past rather than inventing the future.

Often older companies become stuck in stages that occur following Prime. Also, we have seen, for example in acquisition minded companies, that parts of the company are working in one stage while others are in totally different stages making it difficult to coordinate and integrate.

For more information or support assessing your company you can reach us at roblaur@lauridsengroup.com or www.lauridsengroup.com or call us at 408 395-9541.

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The preceding has been taken from The Pursuit of Prime, by Itchak Adizes.