Organizational Lifecycles and the Renewal Stage
Like humans, organizations develop and evolve.
Organizational development follows a defined lifecycle, from inception to maturity to eventual decay if operations cease.
Forty-six percent of organizations generally fold within a year-and-a-half of opening. The ones that remain in business generally average a median lifespan of seven years.
So how can organizations beat the survival odds? This is a complex question and one impossible to answer in a blog post. However, there is wisdom in understanding the lifecycle of organizations, particularly the renewal stage.
Lifecycles define the mental models that drive organizations throughout their development. There does not seem to be an escape from these developmental stages much like humans cannot avoid going through childhood or adolescence.
There are several models that emerged in the 1970s and 1980s that describe the lifecycles of an organization. One of the most popular was created by Dr. Ichak Adizes, a prolific author who explores his model in most of his books, including Corporate Lifecycles: How and Why Corporations Grow and Die and What to Do About It.
In the Adizes model, organizations start in the courtship stage. In it, founders are dreaming up what they want to do. Entrepreneurship is the dominant mental model resulting in the eventual founding of the company.
The infant stage follows. In this stage emphasis is on production and time pressures dominate everyone’s attention. At this point, the organization does not have any traditions and its culture is being established. Productivity is high, meetings are few, and little planning takes place. This is the stage where the organization must assert itself in the marketplace if it is going to survive.
Infancy is followed by the go-go stage. Organizations that have reached this stage have figured out how to deliver value into the social systems they serve and are rewarded with supportive customers. Rapid expansion, personalized leadership, some planning, and fast decision making are the hallmarks of organizations in this stage. The go-go years bring financial growth and expansion.
In Adizes’ model, adolescence is the next stage. It is in this stage that planning and coordination become important. Administrative activities increase at the expense of both entrepreneurial endeavors and production. The mental models of stability and conservatism surface and start to dominate the way the organization conducts its business. Formalized rules and policies emerge.
The prime stage is next in the organizational lifecycle. In this stage the emphasis is on efficiency. Organizational boundaries are erected and the company starts to lose touch with its environment. Goals and aspirations remain stable but the desire to grow and change starts to disappear. Stability and predictability become the prevailing mental models.
The final stage in the Adizes organizational lifecycle model is maturity. It is in this stage where organizations become paternalistic seeking a comfortable organizational climate. There is a low emphasis on production. Relationships are formal and little innovation takes place.
Reflecting on the Adizes model, it would seem that the prime and maturity stages are less desirable than the others. After all, who would want to become bureaucratically disconnected from their environment and lose the desire to change? Unfortunately, there are many organizations that operate in the maturity stage and are focused on harvesting what they planted long ago because they have customers that are willing to continue endorsing their products and services. Sears would be a good example of a mature company.
Although the Adizes model is a comprehensive lifecycle framework, it is missing a critical stage. This is the stage of renewal. Larry E. Greiner and William R. Torbert address it in their lifecycle models. Renewal brings the elaboration of new structures, decentralization, domain expansion and adaptation to the needs of the environment. The results of renewal are innovation and a reengagement with the social system which the organization serves but at a higher level of risk-reward. In 2001, Apple introduced the iPod and iTunes into the entertainment social system as a result of internal renewal fueled by the returned of its beloved CEO Steve Jobs. Today, the company has the largest market capitalization of any company in the planet. The entertainment and the communications social system are rewarding this company.
Renewal is not a stage like the others that follow almost prescriptive steps. It is an emergent process resulting from conditions that require organizations to break conventions, traditions, and values. Greiner attributes delegation, coordination, and collaboration to this stage. Delegation brings a decentralized organizational structure where decision-making is pushed lower in the hierarchy and management is performed by exception and not control. Coordination creates the internal environment for new systems and innovation. This gives way to new product and service groups. Long term planning is conducted in alignment with the needs and wants of the social systems. Internal compensation becomes participatory. The collaboration element of Greiner’s renewal stage calls for spontaneity in management, creative confrontation, full accountability, and integrated team action.
Torbert’s lifecycle model takes a different approach to Greiner’s but, in essence, identifies similar characteristics in the renewal stage. Torbert identifies an open structure, a foundational community, and what he calls "liberating disciplines." The open structure includes collaboration among levels of the organization, reflection about deeper issues, creativity and innovative methods, and flexibility in company procedures. In terms of a foundational community, Torbert identifies shared values with deep theoretical and spiritual qualities. By "liberating" practices, individuals and the organization as a whole engage in self-renewal activities, seek challenges, and have inclusive boundaries.
Organization and social scientists tells us that lifecycles are unavoidable. Organizations need to survive their infant stage to be in business. The go-go years are necessary to establish a market presence. Adolescence is indispensable in providing stability and support the customer installed base. Stable products and services require the mental models that come with the prime and maturity stages; however, a company runs the risk of becoming irrelevant to the social systems it serves if it gets stuck in these two latter stages.
The renewal stage is what we humans do not have, but organizations do: the ability to be young again, even to be born into a different context. This is what is available to organizations as an emergent process. The challenge for organizations is knowing when and how to tap into this process. Because it is emergent, there is no known and repeatable path; however, understanding organizational lifecycles is a start, particularly the conditions necessary for the renewal stage.