What do giants such as McDonald's, Apple and Walmart have in common, besides having more than 100,000 employees, is an interesting question. They all started small, with just a few people, and then began to grow. Do aspiring entrepreneurs imagine the way Walmart was supposed to go from the frugal Five and Dime store in Arkansas to a global empire with more than 11,000 stores worldwide and 2.3 million employees. The development stages of the organization are applicable to domestic companies. All major manufacturers are facing transitions. Basically, without government support and big investments, it all starts with small business.
During this growth, firms had to change their work, and each stage brought new challenges. All companies go through the same development cycles, regardless of industry.
Stages of business life
Ichak Adizes, one of the world's leading experts in the field of management, has developed a methodology that describes the stages of development of the organization that each company goes through. He compares the growth of a firm with the human, when it grows, grows old and eventually dies. There are 10 steps, and each consists of a unique set of tasks.
Growth Stage 1: The Idea Comes
Basically, it all starts with an idea. The developmental stages of an organization begin as a vision in the head. The future founder dreams of everything he can do, and spends days and nights in developing ambitious plans. Future entrepreneurs tell everyone about their idea, enthusiasm is heating up, and everything is rosy, promising. But there is an aggravating concern: “What if this does not work? What if I fail? ”
This stage is called “Emergence of an Idea” because the founder is already thinking about how to start a business, but has not taken any concrete steps. To proceed to the next stage, a businessman needs courage to take risks and devote himself to the implementation of his project.
This stage of development of the organization ends at the moment when the founder decides to take responsibility and assumes the risk (for example, renting a room, purchasing equipment or buying equipment). However, the business may not develop if the entrepreneur does not assume obligations and abandons the idea.
Growth Stage 2: Birth
As soon as the founder takes risks, "business is born." This is expressed by registration of the organization. An idea becomes a reality, and it should begin to produce results. Each sale is a special event, and everything is action-oriented. A business does everything for sale.
There are no processes or systems, and no one pays any attention to paperwork. What the emphasis really was on was the registration of the organization and the proper paperwork. Further, accounting can be conducted remotely.
Founders work 16 hours a day, seven days a week. They do not have time for personal life, because a business that requires constant attention is like a child. Decisions are hard to make. Every day there are new problems, so rules and best practices are created along the way. Energy and enthusiasm begin to decline gradually. A business can be opened at the organization’s main address. However, this is not always the case.
To ensure positive cash flow, long-term planning is relegated to the background. Everyone is busy trying to keep the business afloat. All this becomes a way of life. Each day brings unique situations that require creativity and the ability to make decisions quickly. The main mistake of many starting projects is related to the inconvenient organization address. If the company works with customers directly, you need to choose a comfortable and affordable location.
In addition, the early presentation of processes and the formation of strategies will be a mistake, because everything changes too quickly. What worked today does not necessarily work tomorrow. Founders are deeply involved in technical work and day-to-day operations and delegate authority only when necessary. Many companies forget about logo design. This is actually an important element in marketing a company. Without it, recognition will be minimal.
Logo design can be ordered from professional designers. Customers meet a new business precisely in design. Therefore, you should create a presentable appearance.
Growth Stage 3: Beginning of Development
The business is constantly earning and growing rapidly. This means the formation of the organization and its prosperity. The company is optimistic, confident, proud and takes on more than it can withstand. As a result, even greater intensive growth is required. The entrepreneur has a vision of where it is better to find application for goods and services.
Forming an organization here will be a long process and not always convenient. The business is trying to use all the opportunities that it has, and it is difficult for him to remain focused on a specific goal. People are scattered due to the many work. New employees appear, but not enough processes to coordinate everyone. Work becomes careless, and quality suffers.
The main stages of the organization's development should always be under control. If there are no managers who could mark all the transition periods, the company will begin to have serious problems. When founders organize a company around people rather than functions, they continue to interfere with everyday work. This leads to the fact that directors try to run everything, taking on many unnecessary functions. To avoid collapse, entrepreneurs must hire their first managers and relieve control and decision-making.
Growth Stage 4: Transition
As the founder lets go of the situation a bit and hires CEOs, the company needs a new structure. The main stages of managing the organization here may be repeated. The transition to a new stage is often difficult and filled with internal situations, as the founders have difficulty transferring managerial functions. This is because professional managers see work as ordinary work, and founders see their life in the company. The main documents of the organization are put in order only at the moment when a competent manager arrives. Founders, as practice shows, always treat papers with carelessness.
During the transition period, the organization experiences a temporary loss of control due to conflicting views. Too many projects were launched in the previous stage, but few are being implemented. Thus, the first task of the new leadership is to consolidate existing projects and reorganize them. They also need a sequence and a way to measure progress. As a result, they introduce processes.
The organizational form after such measures is in constant conflict and confusion. Leaders cannot agree on the direction and what risks to take. But as soon as they resolve their conflicts, the company reaches its peak of formation.
If management cannot resolve its conflicts, one of two things happens:
- Professional managers leave the company, and it stops growing, unable to fully reach its potential.
- Premature aging. The founders decide to resign or sell the business. Administratively-oriented managers take responsibility and reduce costs, which increases profit for a short time. But then they run out of ideas. Without creative energy and the vision of the founders, the company ceases to grow and stagnates.
Growth Stage 5: Flourishing
When the leadership and the founders have a clear vision, "magic" happens. The company reaches its peak, and everything is united. Actions become disciplined and innovation is introduced. The company becomes flexible and delivers results consistently, thanks to strong management decisions. This main stage of development of the organization makes it possible to make good profits.
The company begins to possess the same energy and aggressiveness as in the "Beginning of Development" stage, but now more accurate calculations and forecasts appear. Thanks to more people, the organization can achieve more, do better and increase efficiency through continuous process improvement.
Management has a strategy to improve services, products, and employee satisfaction. Companies in their prime are having difficulty finding talent because their standards are high and they need a lot of specialists. At this point, they begin to develop their own cadres, and not rely on recruiting. The greatest danger for companies in their prime is complacency and satisfaction with success.
Growth Stage 6: Stability Outcome
The transition from prosperity to stability takes place so calmly and takes so long that no one even notices it. But this is the deepest transition, since it marks the beginning of the end. The company is currently the industry leader, but it does not have the same aspiration as before. The organization welcomes new ideas, but with less enthusiasm. Financially motivated people run the company and, in order to please shareholders, they focus on short-term results, rather than investing in research and development that is necessary for future growth. However, the stage of stabilization of the organization may not last long.
Top management feels comfortable and does not want to change their status. They have a formula for success, and they do not want to change it. Company policy is also becoming a problem. People are more focused on how something is done and processed than on a common goal. At this moment, the company is so large that it reacts very slowly to changes. The only way out of this stage is destruction.
Aging Stage 1: Recognizing A Leader
Destruction begins gradually. The organization in the liquidation phase begins to show the first signs from the moment of reaching continuous stability. Further, the company begins to abandon innovation. Leaders rely on the past to push the organization forward, but this is not possible. Companies die if they do not grow and change. Obstacles to innovation and improvement always lead only to collapse. Thus, the structure itself begins to degenerate.
Management is beginning to lose touch with the market and external conditions. The company makes more money than ever before, but it does not have new initiatives where it will invest these funds. Management at this stage often rewards itself with huge bonuses and puts high salaries.
The company ceases to invest in its new initiatives, but spends a little money, mainly on the acquisition of young technology startups. Thus, she is trying to return vitality to the organization, but her ideas are not being realized because of the old views of the administration and the bureaucracy. Intensive growth of development is no longer possible due to the heavy load of created administrative barriers and principles.
People in the company attach more importance to the dress code, decor and names than the actual work. Now the office and the general work of managers and executives more like an exclusive country club. Poor work is allowed, while new ideas are discarded because they threaten the already established brand authority.
The company begins to lose touch with the market and is gradually losing customers. No one wants to get the bad news to the top until it is too late to do anything about it, which creates the basis for the next stage.
Stage of Aging 2: Cross-Battles
When management can no longer hide that profits are falling, they begin a “witch hunt”. Owners spend all their energy trying to find someone to blame instead of channeling that energy to solve a problem. Leaders argue among themselves and at the same time try to maintain their position. This is where the crisis in the organization appears. Conflicts arise due to the separation of views.
Managers, usually the most productive ones, either leave or are driven out. The purges and feuds continue, while clients are treated as uncomfortable guests who distract from the “real problem” of identifying the perpetrators. However, as soon as the culprit is found and removed, the problems remain, because the difficulty is not in individuals, but in the system. To return its profits, the company focuses on cutting costs, which only harms the business.
Stage 3 Aging: Bureaucracy
"Witch Hunt" drives away all remaining talents and hope for salvation. A new CEO is coming to correct chaos and turbulence. But the new leader appreciates stability, processes and repeatability of execution, which launches a creative system of destruction. Creative people begin to leave, and the company's culture itself is completely changing. All that remains is procedures, policies and documents that stifle innovation. The company relies on small technical requirements for work, because it is trying to avoid the chaos of the previous stage. Even the organization’s advertising is starting to change. It usually refers to stability and commitment to tradition, and this is especially fatal in technological industrial areas.
At this point, the company is on life support, and it can no longer make a profit, because almost all customers left due to neglect. The only reason the firm is still alive is because some external subsidy keeps it afloat (for example, it is in a regulated environment and has political significance, it is of national interest, so the government takes over partially). But as soon as the subsidy is canceled, complete collapse ensues.
Stage of Aging 4: Death
The death of a company is a slow and protracted process that can take several years. As soon as the company cannot generate the money necessary to cover its own expenses, it begins to decrease in size and sell its assets.
The company is a sinking ship, but no one feels responsible for its destruction. People simply leave or leave until there is no one left and the lease term for the office expires.
How to organize the internal work of the organization?
Understanding a simple model of the three stages of organizational growth, companies can design themselves to move from chaos to high productivity.
Most firms experience chaos. In fact, the complete absence of problems would mean that they could not respond to changing requirements, and this already suggests that nothing will work out. Nevertheless, the chaos that immobilizes the organization and leads to its inability to respond effectively to environmental requirements is unproductive and should be minimized if the company wants to succeed.
The impact of development on the company
There are three more stages that make it possible to “revive” a business and direct it in the right direction. It does not require a fundamental change in direction or the injection of a large amount of funds. Below will be presented the main points by which it is possible to determine at which stage during the reorganization the company is located.
Stage 1 - Chaos:
- Crisis or short-term focus.
- Lack of clear direction and goals.
- Change of priorities.
- Unclear policies and procedures.
- Disagreement in the team.
- Guilt of leadership and lack of involvement.
- Mass layoffs of employees.
Stage 2 - transition to the basics of stability:
- Clarity of goals and directions.
- Consistency in priorities.
- Clearly defined policies and procedures (technical and personnel).
- Agreement on roles and responsibilities.
- Key management processes implemented.
Stage 3 - achieving high performance:
- A clear statement of the mission, which creates a sense of corporate spirit.
- Clearly defined values ​​that lead to a pronounced culture.
- Respect for people who are deeply rooted in culture.
- Good communication systems and information exchange.
- High involvement and empowerment of people.
- A design (workflow, structure, system) that supports mission and values.
Each of the stages will be described in detail below for a clearer understanding of the cause, problem, and method of solving it.
Stage of chaos
A chaotic organization is on the verge of getting out of control.This is a problem-oriented moment. People respond and manage by monitoring the situation. Expectations, policies, standards are unclear, inconsistent, or poorly enforced. There are plenty of good ideas and intentions, but unity, commitment or fulfillment is not enough for their implementation.
Work is unpleasant for most people. Employees act out of self-defense, blaming and criticizing others, and therefore create an atmosphere that increases fear, suspicion, hostility, and frustration. The problems of a chaotic organization are the lack of stability, the lack of clarity and, therefore, concern about what to expect from moment to moment. More formalized structures, procedures, accountability and refinement of policies, expectations and roles in the overall structure are needed.
Stage of stability
A stable organization is characterized by predictability and control. Structure, cycles, policies, were created to eliminate uncertainty in the system. The goals are clear, and people understand who is responsible for what. The main objective of the organization is to ensure effective daily work. Employees in this climate are generally obedient and expect justice from management. Order is the key word, and people are rewarded for their work, not for risk and innovation.
The company's goal depends on its effectiveness. A limitation of an organization that cannot go beyond stability is that efficiency is more important than innovation and development. Doing according to instructions and following procedures becomes more important than the goal and the mission itself. Such companies are ultimately left behind as customers find more responsive competitors. A long-term vision, emphasis on growth, development and a culture in which people show greater autonomy in making decisions and solving problems is necessary.
High Performance Stage
The essence of high efficiency is co-ownership. Employees are partners in the business and are responsible for its success. These organizations actively participate and collaborate. Their members have broad decision-making responsibilities. The line of the site and other information sources is dedicated to customer service, rather than a formal organizational structure. Mission, not rules and policies, directs to daily decision making.
Such an organization is based on a unique and strong culture built on a clear set of values ​​expressed and reinforced by its leaders. These values ​​allow you to focus on what's important, while at the same time providing flexibility and innovation. The processes, systems and structure of the organization are designed to match or harmonize with the values ​​within the enterprise. Highly efficient regulation holds a long-term perspective. Human development is seen as the main task of management. Trust and cooperation exist between all members of the structure. People do not blame or attack others because it is not in their own interests.
An important lesson learned from this model is that an organization cannot achieve high results without a foundation of stability. Ironically, high productivity requires not only participation, flexibility and innovation, but also order, predictability and control. The leaders of many organizations have tried to grow from chaos to high productivity without the fundamental foundation of stability and, therefore, have failed or were disappointed in their efforts. Managers who want to create high-performance work systems must be sure that they implement processes that also ensure stability.
Conclusion
There is no magic going beyond chaos. There are no simple formulas. Real organizational development requires commitment and hard work. Nevertheless, for those who want to eliminate losses, improve quality, provide better customer service, there are powerful initiatives that can lead to the foundation of organizational stability and, as a result, high productivity. Such system models can be applied at any stage, since the adoption of such decisions well affects the development of the company.