Let’s start with a visual. Below is a helpful model for understanding the organizational life cycles and how the business functions get emphasized and/or deemphasized in each stage.
When a business is just starting, it relies on the entrepreneurship of the founder to make things happen. This stage is about having ideas, getting funding, and formulating a plan before creating products and services.
The company has just started production, and processes are flexible and informal. Success in this phase is due to being nimble, working hard, and adapting to customer needs.
Emphases: Production, Entrepreneurship
Business is buzzing! Production and entrepreneurship are expanding rapidly and creating lots of unique products and services. It’s an exciting and chaotic time of making things work, but often systems and prioritizations are lacking. The business is growing but needs structure to create longevity and make it sustainable for employees.
Ideally, the Go-Go stage should be brief, as it tends to be intense for leaders and employees, but the transition to adolescence is hard. Administrative structure is needed to create processes and systems, but employees thus far have been focused on production and doing whatever it takes to get the job done. There might be a clash between production and administrative employees as the company shifts from just production and sales to a strategic marketing focus. Sales might suffer briefly as leaders make a concerted effort to get more organized and invest in the longevity of the business.
This transition is also hard on the leader, and sometimes they get stuck in what we call The Founder’s Trap.
The Founder’s Trap happens when leaders understand the need to create order and structure but don’t know how to do it. Up to this point, they ran their business by being involved in all aspects, and building an administrative team means letting go of some control.
This can make them nervous. They’re not sure where to spend their time in this process, so they start micromanaging in response to the anxious feelings of their employees, then get pushback, and pull out. The inconsistency is stressful for the employees and the transition is overwhelming for the founder. And they get stuck.
We’ve seen businesses who have learned to survive in this in-between phase, by relying on their long-term employees. If those long-term employees are reliable, organizations are to be successful here for a brief time, but what happens when those employees start leaving?
The business ages prematurely. Their reliance on institutional knowledge makes them fragile and they don’t have the systems and structures in place to evolve.
How to Get out of the Trap: Learn to Lead Differently
To survive this part of the process, the founder needs to learn to lead and manage differently. They need to let go of control and trust their employees to bring the business to its next life stage with processes and systems.
The goal is to decentralize the organization. This is a scary time, and sometimes founders need extra support. They might pull in a professional management team to help facilitate the change and seek out mentors who can help them adapt to a new style of leadership.
Emphases: Production, Administration, Entrepreneurship
Once the business has made it through the Founder’s Trap, and now has some structure and more stability, it’s on the right track. The Production, Entrepreneurship, and Administration functions of the business are equally important in the adolescence stage and are prioritized as such.
Another sticking point: Partner Divorce
In this stage, as companies start to “grow up,” we sometimes see a parting of ways of the original founders or partners.
Perhaps one has made it through the transition and feels good about the new direction, while the other still hasn’t bought in. It feels too different from where they were before and they’re clinging to the past (maybe with a faction of loyal employees behind them).
If the two founders can’t get aligned, the workplace becomes dysfunctional and divided. At this point, someone needs to either decide to leave or end up being forced out by the other founders or employees who are aligned on a new path.
Emphases: Production, Administration, Entrepreneurship, Integration
And finally, the business has climbed out of the founder’s trap, made it through the partner divorce, and through the awkward stages of adolescent puberty, and has come into its prime. The prime stage introduces the final business function into the mix, Integration. The Integration function is about retention and longevity of the workforce. It’s about building benefit packages and career paths and giving folks a reason to stay with the business (outside of the mission-driven reasons that might have kept employees with the company in the early stages). It’s about investing in the employees so that the production and administration functions can also succeed. Entrepreneurship is still happening, but it’s less important at this phase.
Making sense of it
Let’s pause here. We’ll save the rest of the lifecycle for another article. If you’ve gotten to this point in the article, you may have a clear understanding of where your organization is in its life cycle, or maybe not. Sometimes it’s not as obvious as you’d think.
At illumyx, we use surveys to diagnose the challenges you may be seeing and help identify the organization’s life stage. Sometimes disfunction and chaos are appropriate for the phase you’re in. And sometimes it means you’re stuck between phases and need support getting out.
Wherever your organization is, context is important. The organizational life cycle offers you a roadmap to get to whatever is next, regardless of industry. At illumyx, we’re here to help you assess with concrete and objective data. We’ll work together to understand your business’s personal history, clarify and define your challenges, and help get you unstuck and on your way to the next life stage.