Adizes' Corporate Lifecycle
Identifying the Patterns of Growth and Decline
Companies are like living beings: they're born, they grow, they enter a prime state, and then, eventually, they go into decline.
So, how can you guide your own company through to its prime state, and avoid the problems that can lead to decline?
Adizes' Corporate Lifecycle model helps you do this. We'll look at it in this article.
About the Tool
Dr Ichak Adizes, founder and director of the Adizes Institute, wrote about the Corporate Lifecycle model in his 1990 book, "Corporate Lifecycles." He updated the model in 2004 in the follow-up book, "Managing Corporate Lifecycles."
Dr Adizes traced the path of large and small organizations, and realized that most go through a predictable cycle of growth and change.
The 10 stages are:
- Signs of aging.
By knowing about these 10 stages, you can identify your company's current stage. You can then steer it to the optimum stage – prime – and work to keep it there.
You'll find the model most useful if you're a senior executive. However, other leaders can use it to guide teams through the ups and downs that are part of life in a growing organization.
About the 10 Stages
Let's look at the 10 stages in greater detail.
In this stage, the organization is no more than a dream in the founders' minds. Here, founders are planning, developing and testing ideas, and brainstorming. Excitement is often very high, but "how to" details aren't defined.
Major objectives during this early stage are to build excitement, solidify goals, and take the organization to the next stage in the cycle.
This stage happens once the founders have taken a risk – usually a financial risk – and have created the organization.
In this stage, the focus is on action, results, and opportunities. There's now real pressure to take the ideas developed in the courtship stage and turn them into reality. This stage focuses heavily on generating income (either now or in the future) so that the organization can survive and grow.
Dr Adizes states that several issues are likely to occur during this stage, including:
- Problems with the initial product or service. (These can relate to design, the offering, quality, and so on.)
- Problems completing orders or meeting demands from customers.
- Issues with the organization pursuing sales or revenue in the wrong places.
- Policies, procedures, and processes that can't cope with the organization's workflow and needs.
- People spending lots of time dealing with problems.
- Negative cash flow.
- Lack of delegation when required.
When an organization makes it to this stage, it's not only surviving but it's doing well; cash flow is sufficient, and sales and income are consistently growing.
Dr Adizes states that a big problem during this stage is arrogance and overconfidence; that is, the leadership team have seen their initial ideas work, and this success often goes to their head. They may start to feel as if they can accomplish anything. This overconfidence can be a big advantage, but it can also lead to the organization's downfall.
Many organizations diversify rapidly during this stage. Resources and attention are always shifting to focus on the next project or acquisition. This can lead management and team members to feel frustrated, overloaded and confused, because they don't know where to focus their attention.
The adolescence stage marks another turbulent time. The organization has grown and strengthened, however, the leadership team is under intense pressure to keep momentum going.
Goals may also be a major issue. In the go-go stage, the focus was on growth opportunities. However, in this stage, the focus often shifts to quality and profitability.
This stage is a time of difficult changes. Most organizations go from an "absolute monarchy" to a more decentralized decision-making structure, and this isn't easy for some leaders. Many times, professional CEOs and other leaders are brought in to manage the company. This can create power struggles and alienation: the founders resent the newcomers, and vice versa.
This is the optimal stage for any organization because it's all about balance. The organization has achieved a good mix between flexibility and control.
In the prime stage, everyone understands the organization's mission and their role in achieving it. The company is focused and energized, goals are clear, processes are working and relevant, and growth is good.
However, people may still struggle to create that perfect mix of balance and control. This can create tension within and between teams.
Recruitment might also be a problem; many organizations in prime don't have enough good people to handle all of their projects, departments, and clients.
Another issue that organizations in this stage face is complacency when things seem to be going well. This can be an early sign of the next stage (aging).
Also, leaders may lose urgency and want order just for the sake of order. The organization and its people may spend less time innovating, and may rely less on their judgment or new ideas, and more on hard data and facts. People may also be reluctant to take risks with new projects and new ideas.
6. Signs of Aging
Signs of aging within an organization probably won't be obvious at first.
You'll likely notice the first signs of decline in the way that people behave. For instance, people will be less excited about taking risks. Departments such as accounting, human resources and legal may have real political power within the organization. Everyone is more focused on profitability, and politics govern decision-making.
The workforce itself will show signs of decline. For instance, the organization might have leaders who don't work productively, or who hinder progress. People will be less flexible and more set in their ways; they want to follow the rules. Intuition, boldness, and creativity are still talked about, but there's less desire to trust these attributes and take risks. There are lots of discussions and meetings, but less gets done.
Slowly, the energy, enthusiasm, and entrepreneurship that made the organization great start to fade. The changes are subtle at first – this stage is quiet, unlike the other stages, which are more dramatic. If left too long, the organization will slide into the next stage: aristocracy.
In the aristocracy stage, leaders have settled into their ways. They focus on finding and employing people who will follow the rules and not "make waves."
They might even punish people who have radical ideas or try to implement major change. The atmosphere is usually formal and people are often reluctant to voice their true opinions.
Aristocratic organizations rest on past achievements and spend little time on new projects or innovation. They're often risk-averse, and they may ignore or dismiss problems, because no one wants to tackle the real issues. Although the organization is probably cash rich, products and services may become outdated.
Talented people and leaders may leave the organization. Organizations at this stage are also at risk of a takeover or merger.
At the recrimination stage, an organization has gone into a downward spiral. Top leaders have finally realized that the organization is in trouble, and people may spend a great deal of time assigning blame instead of trying to fix problems. Many workers focus on survival instead of their work, and infighting is common.
Layoffs are also common during this stage. People will likely be upset as they see their colleagues lose their jobs, and their morale and productivity will plummet as they worry that their jobs will be next. Gossip can spread like wildfire, making matters even worse.
Only organizations that receive some kind of support, such as cash from a larger company or government body, enter this stage; those that don't skip to stage 10.
Bureaucratic organizations are often described as "too big to fail." They provide little value and are so large and inefficient that few are concerned with performance. Most teams are unaware of what other departments or teams are doing, and there is little centralized control. The organization is focused on systems, procedures, and routine.
It can feel isolating to work in a bureaucracy; you and your team might feel cut off from your customers or from the work you should be doing. You might spend more time attending meetings, responding to emails, or filling out forms than doing any real work.
This stage occurs when the money runs out, and the company closes permanently.
Applying the Tool
Adizes' Corporate Lifecycle model helps you guide your company to the optimum stage – prime – and alerts you to signs that it could be moving into the later stages – aging, aristocracy, recrimination, bureaucracy, and death.
You can also use it to prepare for the issues that you might experience as your organization moves through each stage.
To help you do this, think about where your organization is right now:
- What stage is it in?
- What actions do you need to take to manage potential issues and guide your people through to, or back to, the prime stage?
- Should you review your strategy based on your analysis?
This model is useful for thinking about the stages of growth that your organization will undergo. However, not all businesses will go through the stages in this order, and many other factors may affect your organization's success and development.
The Greiner Curve is another useful tool that can help you anticipate problems as your organization grows.
Dr Ichak Adizes identified the 10 Stages of the Corporate Lifecycle after observing that most organizations share the same pattern of existence.
Adizes' 10 stages are:
- Signs of aging.
You can use your knowledge of these stages to guide your organization to the optimal state, prime, and to lead the organization back to growth if it has started to decline.