How to reverse the fortunes of a declining business

According to Adizes, to get back to their Prime, aging companies basically need to go on a diet and get more flexible. To get their companies back in shape, owners and directors need to cut management layers, decentralize, hire talented people with fresh ideas, make risk-taking a cultural tenet, banish as many control systems as possible, sell off secondary businesses, and most importantly, refocus every person, process and ounce of organisational energy on the company’s products and customers.

The first step, of course, is to stop the denial that the company has lost its once golden position in Prime. Key decision makers identify and analyse only those problems that they believe they are able to manage and control. Owners and directors need to remove denial and get the group to accept responsibility squarely. A specific plan of action must be detailed with clarity on what, by whom, by when.

Secondly, the management team must be taught how to manage meetings and deal constructively with conflict.

The team’s attention is then drawn to learning how to empower the rest of the organisation to solve problems and deal with change. Without an organisational power change, there can be no behavioural change.

Units must then be established where units for change operate independently to units needed to produce results, eg. marketing and sales are separated.

Rarely does the rejuvenation process require a change of leadership. As the system changes, so does everyone’s behaviour. Read more of this post

This is what business success looks like

Companies in their ‘prime’ are recognizable: all aspects work well together, all operations thrive, and all members of the organisation know where it is going and how to stay on track. However, this state of ‘prime’ is an ever-changing condition, a segment of a journey, not a haven at the end of the road. Due to Prime being a state of equilibrium between flexibility and control, function and form, imagining and producing, innovation and administration, it is a state requiring constant balance. So hard to achieve, so easy to lose, the state of Prime continually risks sliding back to childish habits or stumbling into the rigidity of old age, warns Adizes.

A good way to judge an adult company is if it fails to produce significant new products or spin off promising start-ups within any three-year period.  Then it is either decaying, or on the brink of decline.

Of course, this rule of thumb varies by industry. In aerospace the cycle is much longer, whereas in the fashion industry it is much shorter. In the restaurant business, you must offer a new special every day, and change the restaurant’s concept every five years or so. In certain industries that are evolving at a breathtaking pace – electronics, biomedical research or telecommunications – product lifecycles last only six months to one year.

A company in Prime predicts trends correctly and is not attached to a single product line or market to the exclusion of any other. It develops and changes. For example, if Domino’s saw themselves as a company that delivers quality snacks quickly instead of a pizza company, they could have opened a new chain for bagels as pizzas were declining, and so transferred energy to the new endeavour.

“You always pass failure on the way to success.” Mickey Rooney

A company in Prime focuses on results with a ferocity that ensures that they will meet and exceed customer needs. The entire organisation shares a vision, encourages creativity, and performs with excellence.

But success hides danger. The Prime organisation suffers from a dearth of managerial depth and talent to match its opportunities for growth, and rather than confront the instability and challenge of Prime, too many companies ignore the signs of their degeneration and the process of management that produces those results. Like athletes at the top of their sporting events, companies in Prime face a questionable future: continued triumph or decline.

Of the two directions, decline is the more likely. Managers’ delusions about their company’s dominant position in its markets can bring about aging. What Prime companies need to do is to open their eyes to other possibilities while remaining within the range of businesses they know and understand.

Note, these diagnostic assessments of a company’s lifecycle don’t mention financial components. That’s because the financial picture may appear rosy – deceptively. To explain, a company’s financial statements capture individual moments in its history and are in no way indicative of the future.

So what does management look like at the Prime stage of business development? Read more of this post

Is your business struggling with its adolescence?

Much like an adolescent teenager, the adolescent company struggles for emancipation from its parent-founder, according to Ichak Adizes in his book ‘The Pursuit of Prime’. The stakes are high during this wrenching rite of passage: nothing less than rebirth as an adult. Brave, teary-eyed, scornful, scared, the teenager zigzags into a new sense of self. Although we can accept the teenage years as a normal transition from dependence to self-reliance, we need to remember nothing grows without a struggle.

As long as the company does well, expanding revenues and market share, the board regards the founder or COO as a genius with a golden touch. When, however, profits decline and uncontrolled activity brings about a succession of managerial disasters, the board starts to view the same leader as an unguided missile.

What is going on? How did the company survive the stages of Infancy and Go-Go only to arrive at Adolescence once again to do battle?

The answer lies in understanding the dynamics of systems development. Leaders of adolescent organisations want law and order, predictability, acceptance and ‘ownership’ of decisions. They want a constitution, but one they can stand above – free to break the rules by which others must abide – and this won’t continue to work.

So how to address this in terms of the 6 aspects of management? Read more of this post

How to survive business growth and expansion

The big message for the Go-Go stage of the corporate lifecycle, according to the Adizes model, is to get the company to stand on its own. Caught up in the chaos and excitement of growth, founders think there’s no time to set up effective production and administration systems. They must make time or they will find themselves in such messes as failing to deliver, or selling bad products. If the founder is not capable of institutionalising independent leadership, he will be in the founder’s trap of the business depending inextricably on him to survive. A company that grows with too much abandon will be undone by a project that demands more than its ad hoc systems can handle.

As we have seen in previous posts in this series, what is an asset in one stage of business development turns into a liability in another. A founder’s superb ability to ‘spot a deal’ has a troublesome counter-side during this Go-Go stage. The first taste of success for a founder is like swallowing a tasty minnow for a seagull – it sends her off, scanning the seas for yet another morsel, making deals, foraging for more joint ventures. While some seagull behaviour is normal, and we expect it, seagulls can make a real mess. They fly off, and when they appear they drop undesirable things on deck. Then they take off again and again, only to return later, unannounced, with more to unload!

“All growth is a leap in the dark, a spontaneous unpremeditated act without the benefit of experience.” Henry Miller

So how to handle this growth in terms of the six dimensions of management? Read more of this post

How founders give birth to new businesses

In his book ‘The Pursuit of Prime’, Adizes describes the early stage of business development as ‘Courtship to Cradle’. Moving through this first stage of a business feels a lot like ‘new romance’. It is driven by passion, without which a would-be entrepreneur never gets beyond the anxiety and confusion of those early days of uncertainty. Realists adapt to their environment, but the people who dare to be founders of businesses try to change their environment. Founders, therefore are not quite realistic, not even reasonable.  So how to they handle things under the 6 management categories?

Style

The courtship stage is inherently limited; founders suddenly decide to stop their dreaming and bring their ideas into fruition. Having conceived a grand idea, they grab it by the scruff of the neck and drag it to the next stage of the corporate lifecycle, Infancy. In infancy, we need doers, realists, overachievers, risk-takers, people who drive to the heart of a problem. This is not always present in the founder themselves – it requires both prophet and doer; a person who dreams and then wakes up to take action. If these elements are not balanced, there are ideas being churned out without any action, or plenty of action, but lacking inspiration.

When examination of a business in courtship reveals a founder committed to the continuous excitement of creating, we can be sure it will be a disaster without some balance. Unless there is a second player willing to take it through the process of pain and politics required to raise a company, the enterprise will be short-lived. Infancy is the time to do, not to dream and talk but to do.

Before a founder can delegate tasks for what needs doing however, the style is a controlling one – and this is as it should be. Despite all the talk about centralization, founders must control everything during the growing stages – obligation precedes delegation. Before they can delegate tasks, they need systems that inform others about what, how, when, and where tasks should be done. At the early stages, even founders themselves are still learning about the job, experimenting with how to do it, and making improvements on the fly. Read more of this post

Key management levers and when to apply them

To solve problems and move a company to Prime, Adizes advocates looking at the contributions of six classic managerial responsibilities:

1. Style
2. Structure
3. Strategy
4. Staffing
5. Rewards
6. Planning and goals

The offerings that each of these areas bring to a business are variable and different at every stage of the business lifecycle, so they form a framework for each of the forthcoming posts in this series.

As changes happen, each of the variables will contribute differently over time as appropriate to the stage of development.

“I think of a hero as someone who understands the degree of responsibility that comes with his freedom.” Bob Dylan

In order to lead a business to Prime, you must first get it to the healthy part of its current stage in the lifecycle, and prepare to advance it. Company leaders are like parents who know how to treat their child one way when it is a baby, and modify their parental approach as the child grows to adolescence and beyond. Read more of this post

Are your business problems terminal or healthy?

Diagnosing your stage of business development

Adizes theory of being able to reach and stay at the stage he terms ‘prime’, is based on his belief that the future of businesses is predictable and manageable. The first action step is to plot your position on his lifecycle curve. There are certain signs and indicative symptoms to identify stages of organisational development or decay.

Age, Size and Self-Control

Neither chronological age nor size determines the stage an organisation occupies on the corporate lifecycle. There are 108 year old companies which demonstrate flexibility, adaptation, change, and growth, and five year old companies that show age, staleness, predictability, and disconnection from their market.

The two conditions, which can be correlated to age and size but not necessarily caused by them, are flexibility and self-control. These are the central factors in a company reaching prime. Until prime, the company has been flexible but uncontrollable, and after prime it is controllable, but it has grown rigid.

Changing at Different Rates

It is not automatic that a company develops all areas at the same rate. For instance, in a young company, marketing and sales usually change rapidly while accounting stays locked in tried and true formulas, and concern for human resources has yet to emerge. This position reflects disintegration rather than integration – and herein lays one of the essential issues. We are healthy when we are a unified whole, whether psychologically or physically. When solving business problems, you look at what steps will bring the pieces together, rather than cause more disintegration.

“If we don’t change direction soon, we’ll end up where we’re going.” Professor Irwin Corey

There is also another element to diagnosing a company’s problems: you must differentiate between external integration and internal integration. External integration is that energy expended on identifying and satisfying clients needs, and internal integration is what it takes to coordinate the efforts within a company to produce the desired results. A company in it’s prime has developed equilibrium between both internal and external integration.

However, be careful not to over-simplify; all companies develop unevenly, and this is to be expected because systems develop their subsystems in sequence. An observation from Adizes, and consistent with my experience with most clients, is that changes to whatever position is diagnosed need to be incremental. Companies change from one stage to the next, perhaps rapidly, but there is no leap-frogging. Although rapid change brings with it torrents of problems, managers must be careful to assess which of those are critical, and which can be delegated or passed over. Moving a company through these necessary transitions first requires a conscious awareness (at company level, not just individually) of the need for assistance. This calls for openness between members of the organisation and honesty in dealing with one another. The higher the company’s self-awareness, the more receptive it will be to change.

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This is the second in a series of posts summarising Adizes approach to achieving and sustaining business prosperity.  If you’ve only just joined the discussion, the first post entitled ‘Is your business in its prime?‘ will give you an overview. Other posts in this series can easily be found by clicking the ‘Adizes’ tag.

If there is anything you would like to comment on in this or any of the other articles, please click the ‘Leave a comment’ button at the top of the post.

If you’d like help to address any of the matters raised, just give me a call on 0412 921 292 for a confidential discussion. Even if I can’t help you myself, I’ll probably know someone who can! As a TEC Chair (www.TEC.com.au) I have access to a worldwide network of resources and consultants.