Business Stages

Don’t Be UpstagedRAY SILVERSTEIN

PRO, PRESIDENT’S ORGANIZATION SCOTTSDALE, AZ

CHICAGO, IL

INFORMATION RESOURCES

• PERSONAL EXPERIENCE & OBSERVATION

• ICHAK ADIZES---MANAGING CORPORATE

LIFECYLES

• JAMES FISCHER—NAVIGATING THE CROWTH

CURVE

• ERIC FLAMHOLTZ & YVONNE RANDLE—GOWING

PAINS

ALL ORGANIZATIONS EXPERIENCE

“GROWING PAINS” AS A NORMAL PART

OF THEIR DEVELOPMENT. GROWING

PAINS INDICATE THAT THE COMPANY

HAS OUTGROWN ITS INFRASTRUCTURE

AND THAT IT MUST DEVELOP NEW

SYSTEMS, PROCESSES, AND

STRUCTURES TO SUPPORT ITS SIZE.

WHEN FIRMS IGNORE GROWING PAINS,

SIGNIFICANT PROBLEMS AND EVEN

FAILURE CAN RESULT.− ERIC FLAMHOLTZ & YVONNE RANDLE—GOWING

PAINS

• “NOTHING ENDURES BUT CHANGE” HERACLITUS

• “IT IS NOT THE STRONGEST OF THE SPECIES THAT SURVIVE, NOR THE MOST INTELLIGENT, BUT THE ONE MOST RESPONSIVE TO CHANGE.” CHARLES DARWIN

Change

Problems

Solutions

PURPOSE OF THIS PROGRAM

TO KNOW, PLAN, AND REACT CONSTUCTIVELY TO THE CONCIMSTANCES IN EACH STAGE AND BE PREPARED FOR THE NEXT STAGE.

“THE ROLE OF LEADERSHIP IS TO LEAD THE NECESSARY CHANGE THAT CREATES NEW PROBLEMS, REINTEGRATE THE ORGANIZATION TO SOLVE THOSE PROBLEMS, PREPARE IT TO BE CHANGED AGAIN, AND HAVE NEW PROBLEMS.” ICHAK ADIZES “THAT WHICH CAN BE FORESEEN CAN BE PREVENTED”

CHARLES H. MAYO

“FOR A BLIND PERSON, EVERY OBSTACLE IS A SUDDEN SURPRISE”ANONYMOUS

“WHAT IS NORMAL AT ONE STAGEOF THE LIFECYCLE CAN BE ABNORMAL IN ANOTHER STAGE” ICHAK ADIZES

RECOGNIZING GROWING PAINS AND NEED FOR CHANGE

TEN MOST COMMON ORGANIZATION GROWING PAINS

1. PEOPLE FEEL THAT “THERE ARE NOT ENOUGH HOURS IN THE DAY

2. PEOLE SPEND TOO MUCH TIME PUTTING OUT FIRES

3. PEOPLE ARE NOT AWARE OF WHAT OTHER PEOPLE ARE DOING

4. PEOPLE LACK UNDERSTANDING ABOUT WHERE THE FIRM IS HEADED

5. THERE ARE TOO FEW GOOD MANGERS

6. PEOPLE FEEL THAT I HAVE TO DO IT MYSELF IF I WANT IT DONE CORRECTLY

7. MOST PEOPLE FEEL THAT MEETINGS ARE A WASTE OF TIME

8. WHEN PLANS ARE MADE, THERE IS VERY LITTLE FOLLOW-UP SO THINGS JUST DON’T GET DONE

9. SOME PEOPLE FEEL INSECURE ABOUT THEIR PLACE IN THE FIRM

10.THE FIRM CONTINUES TO GROW IN SALES BUT NOT IN PROFITS

GROWNING PAINS QUESTIONNAIRE

INTREPATION OF GROWING PAINS QUESTIONNAIRE

AVERAGE GROWING PAINS

BY COMPANY SIZE AND INDUSTRY

ORGANIZATIONAL GROWING PAINS, GROWTH RATES, AND

INFRASTRUCTURE

THE BUSINESS STAGES

COURTSHIP• STARTUP OR NEW VENTURE OF AN EXISITING

ENTERPRISE

• CONCEPT ONLY EXISTS AS AN IDEA

• BUILDING COMMITMENT

• TESTING IDEA

• PRODUCT ORIENTATION

A SUCCESSFUL COURTSHIP IS ONE THAT FOCUSES ON ISSUES BEYOND THE POTENTIAL FOR PROFITS.

“COMMITMENT—OR LACK OF IT—IS WHAT SUSTAINS—OR DESTROYS—AN EMERGING ENTERPRISE” ICHAK ADIZES

KEYS QUESTIONS FOUNDER SHOULD BE ABLE TO ANSWER

1. WHY ARE WE DOING THIS??

2. WHO IS GOING TO DO IT??

3. WHAT EXACTLY ARE WE GOING TO

DO?

4. HOW ARE WE GOING TO DO THIS?

5. WHEN SHOULD WE DO IT?

PROBLEMS OF COURTSHIP

Normal• Excitement, reality tested

• Details, thought through

• Realistically committed

founder

• Product orientation –

commitment to add value

• Commitment commensurate

to risk

• Founder in control

Abnormal• No reality testing of the

commitment

• No details thought through

• Unrealistically fanatic founder

• Exclusive ROI – profit orientation

• Commitment not commensurate

to risk

• Founder’s control is vulnerable

INFANCY

• WHEN THE FOUNDER INCURS AND TAKES

ON SUBSTANTIAL RISK.

• COURTSHIP FOUNDER IS A DREAMER. IN

INFANCY FOUNDER MUST BE HARD

WORKING, RESULTS ORIENTATED,

ACTION LEADER, AND NOT A DREAMER.

PYRAMID OF ORGANIZATIONAL

DEVELOPMENT

CHARACTERISTICS OF AN INFANT ORGANIZATION

• ACTION-ORIENTED AND OPPORTUNITY-DRIVEN

• FEW SYSTEMS, RULES, OR POLICIES

• VULNERABLE TO PROBLEMS—MANAGE BY CRISIS

• LEADER DOES NOT DELEGATE AUTHORITY

• FOUNDER IS CONSTANTLY TESTED AND CRUCIAL FOR SURVIVAL

PROBLEMS OF INFANCY

Normal

• Product orientation

• Questioning investors

• Commitment not threatened by

risk

• Negative cash flow

• Sustained commitment

• Lack of managerial depth

• Few systems

• No delegation

• One-person show but

willingness to listen

Abnormal• Premature sales orientation

• Doubting investors

• Commitment destroyed by risk

• Unanticipated negative cash flow

• Loss of commitment

• Premature delegation

• Premature rules, systems,

procedures

• Founder’s loss of control

• No listening; arrogance

PROBLEMS OF INFANCY(CONT.)

Normal• Mistakes

• Management by crisis

• Supportive home life

• Supportive Board of Directors

• Changing leadership style

• Short-term Infancy

• Short-term financing for short-

term investments

• Benevolent dictatorship

Abnormal• No room for mistakes

• Unmanageable crises

• Nonsupportive home life

• Nonsupportive Board of Directors

• Unchanging or dysfunctional

change in leadership style

• Prolonged Infancy

• Short-term financing for long-term

investments

• Dictatorship

GO-GO—THE WILD YEARS

PYRAMID OF ORGANIZATIONAL

DEVELOPMENT

CHARACTERISTICS OF A GO-GO ORGANIZATION

• THE IDEA IS WORKING

• GOOD CASH FLOW

• SALES ARE UP

• COMPANY IS FLOURISHING

• FOUNDER AND COMPANY ARE ARROGANT

• LEADERS DO NOT PAY ATTENTION TO DETAILS

• TREMENDOUS APPETITES FOR RESULTS AND GROWTH

• NEED CONTINUOUS RESTRUCTURING

• COMPANY ORGANIZED AROUND PEOPLE, NOT TASKS

• EVERYTHING IS A PRIORITY

PROBLEMS OF GO-GO

Normal• Self confidence

• Eagerness

• High energy

• Sales orientation

• Seeking what else to do

• Sales beyond the capability to

deliver

• Insufficient cost controls

• Insufficiently disciplined staff

meetings

• No consistent salary

administration

Abnormal• Arrogance

• Lack of focus

• Energy too thinly spread

• Sales and premature profit

orientation

• No boundaries on what to do

• Selling despite inability to deliver

quality

• No cost controls

• No staff meetings

• Overpaid employees

PROBLEMS OF GO-GO(cont.)

Normal• Leader surrounded by claqueurs

• Increasingly remote leadership

• Leadership’s inflated expectations

• Unclear communication

• Hope for miracles

• Unclear responsibilities

• Company subject to criticism

• Internal disintegration

• Cracking infrastructure

• Workable people-centric

organizational structure

• Everything is a priority

• Founder indispensable

Abnormal• Leader surrounded by fifth columnists

(traitors in hiding)

• Seagull syndrome

• Leadership’s paranoia

• No communication

• Reliance on miracles

• Lack of accountability

• Company object of legal action

• Diminishing mutual trust and respect

• Collapsing infrastructure

• Unworkable people-centric

organizational structure

• Everything IS a priority!!!

• Founder still indispensable, but beyond

remedy

ADOLESCENCE

PYRAMID OF ORGANIZATIONAL

DEVELOPMENT

CHARACTERISTICS OF AN ADOLESCENCE ORGANIZATION

• FIND LIFE APART FROM THEIR FOUNDER

• CONFLICT / INCONSISTENCY CHARACTERIZE

BEHAVIOR− Us-versus-them /old-timers-against –newcomers mentality− Inconsistency in organizational goals− Inconsistency in compensation and incentive systems

•  PRINCIPAL CHALLENGES− Delegation of authority− Change of leadership− Goal displacement

PROBLEMS OF ADOLESCENCE

Normal• Conflicts between partners or

decision makers

• Temporary loss of vision

• Founders’ acceptance of

organizational sovereignty

• Incentive systems rewarding

wrong behaviors

• Yo-yo delegation of authority

• Policies made but not

adhered to

• Board of Directors’ attempt

to exert controls

Abnormal• Return to Go-Go and the founder’s

trap

• Inconsistent goals

• Founder’s removal

• Bonuses for individual achievement

while the organization is losing

money

• Organizational paralysis during

endless power shifts

• Rapid decline in mutual trust and

respect

PROBLEMS OF ADOLESCENCE

Normal• Love-hate relationship between the

organization and its entrepreneurial

leadership

• Difficulty changing leadership style

• Entrepreneurial role monopolized

and personalized

• Integration role monopolized

• Lack of controls

• Lack of accountability

• Low morale

• Lack of profit-sharing scheme

• Rising profits, flat sales

Abnormal• Board’s dismissal of entrepreneurial

leader

• Excessive internal politics

• Unchanging, dysfunctional leadership

style

• Entrepreneur’s refusal to delegate the

role to a depersonalized role

• Divide-and-rule management

• Imposition of excessive and expensive

controls

• Profit responsibility delegated without

capability to manage it

• Excessive salaries to retain employees

• Premature introduction of a profit sharing

scheme

• Rising profits, falling sales

EARLY PRIMEPRIME IS THE OPTIMAL CONDITION OF THE LIFECYCLE. THE HARDEST PART OF PRIME IS STAYING IN PRIME

PYRAMID OF ORGANIZATIONAL

DEVELOPMENT

CHARACTERISTICS OF AN EARLY PRIME ORGANIZATION

• VISION AND VALUES—“THEY WALK THEIR TALK”

• INSTITUTIONALIZED GOVERNANCE PROCESS

• CONTROLLED AND NUTURED CREATIVITY

• COALESCED GOALS

• CONSCIOUS FOCUS AND PRIORITIES

• FUNCTIONAL SYSTEMS AND ORGANIZATIONAL STRUCTURE

• PREDICTABLE EXCELLENCE

• GROWTH IN BOTH SALES AND PROFIT MARGINS

• ORGANIZATIONAL FERTILITY

• INTRA-AND INTER-ORGANIZATIONAL INTEGRATION AND

COHESION

LATE PRIME/FALL

CHARACTERISTICS OF AN LATE PRIME

ORGANIZATION• ORGANIZATION IS CONTENT AND STARTS TO LOOSE

FLEXIBILITY

• ORGANIZATION MELLOWS

• INCREASED G & A EXPENSE

• IDEAS GET A HEARING, BUT LITTLE EXCITEMENT

• FINANICAL AND LEGAL EXECUTIVES GAIN POWER

• ORGANIZATION HESITATES TO TAKE RISKS

PROBLEMS OF EARLY AND LATE PRIME

Normal• Insufficient managerial depth

Abnormal• Insufficient decentralization

Early Prime

Late Prime / Fall

Normal• NONE! There are no

normal problems of aging

Abnormal• Signs of disintegration• Signs of decreased entrepreneurial activity• Satisfaction with the results and the process• Reliance on what has worked in the past• Sense of security, no sense of urgency• Order for the sake of order• Increasing time spent in the office behind

desk• Increase in overhead as percentage of

revenues• Power shifts to staff positions away from line• Increased reliance on hard, measurable

data; decreased attention to judgment• Hesitation to take risks• Loss of vision

GROWING VS AGING

• Personal success stems from taking

risk

• Expectations exceed results

• Organization is cash poor

• Organization emphasizes function

over form.

• People focus on why and what to do

• People kept for contribution despite

personality

• Everything permitted unless

forbidden

• Problems seen as opportunities

• Marketing/Sales have political

power

• Personal success stems from avoiding

risk

• Results exceed expectations

• Organization is cash rich

• Organization emphasized form over

function

• People focus on how and who did it

• People kept for personality regardless

of contribution

• Everything forbidden unless permitted

• Opportunities seen as problems

• Accounting, legal & finance have

power

GROWING VS AGING

• People on the line call the shots

• Responsibility not matched w/

authority

• Management drives organization

• Management drives momentum

• Leadership change can lead to

change in organizational behavior

• Organization needs consultants

• Organization is sales oriented

• Organization exists to create value

• Corporate staff calls the shots

• Authority is not matched by

responsibility

• Organization drives management

• Management rides the inertia

• Have to change system to change

organizational behavior

• Organization needs ‘insultants’

• Organization is profit obsessed

• Political gamesmanship governs

decision-making

FULL POTENTIAL LIFE CYCLE

THE FOUR MANAGEMENT ROLES

P ORGANIZATION PURPOSEFUL PERFORMANCE— SATISFY THE NEEDS OF THE CLIENTS FOR WHICH THE ORGANIZATION EXISTS.

A ADMINISTRATION

E ENTREPRENEURIAL—CREATIVITY AND RISK TAKING

I INTEGRATING—DEVELOPS A CUTLURE OF INTERDEPENDENCY AND AFFINITY, NURTURING A

UNIQUE CORPORATE CULTURE. ORGANIZATION’S CONSCIOUSNESS FROM MECHANISTIC TO ORGANIC

Input OutputManagement Role Makes the

organization:Time Range

Purposeful Effective Short run

Administrative Efficient Short run

Entrepreneurial Effective Long run

Integrative Efficient Long run

Input (Role) Throughput Output Provide desired needs

Functional Effective in short run

Administer Systematized Efficient in short run

Entrepreneurial Proactive Effective in long run

Integrate Organic Efficient in long run

SEQUENCE OF TYPICAL MANAGEMENT PATH

THE INCOMPATIBILITY OF THE ROLES

P-I INCOMPATIBILITY

P-EINCOMPATIBILITY

P-AINCOMPATIBILITY

A-I INCOMPATIBILITY

E-I INCOMPATIBILITY

SUMMARY

STRATEGIC PLANNING

• MAJOR TOOL FOR MANAGEMENT TO SHAPED CORPORATE

CULTURE AND CREATE A SHARED VISION OF WHAT THE

COMPANY WILL BECOME.

• PROVIDE SENSE OF DIRECTION FOR COMPANY AND ITS

EMPLOYEES AS WELL AS SPECIFIC GOALS TO MOTIVATE

AND GUIDE BEHAVIOR.

• DEFINE CAPABILITIES THAT WILL BE NEEDED TO ACHIEVE

THE ORGANIZATION’S GOALS.

• DEFINES THE STRATEGIC ASPECTS OF MARKETS AND

COMPETITION.

STRATEGIC ISSUESSEVEN QUESTIONS ALL ORGANIZATIONS, REGARDLESS

OF SIZE AND INDUSTRY, MUST ADDRESS.

1. WHAT BUSINESS ARE WE IN?

2. WHAT ARE OUR COMPETITIVE STRENGTHS AND LIMITATIONS?

3. DO WE HAVE OR CAN WE DEVELOP A TRUE MARKET NICHE?

4. WHAT DO WE WANT TO BECOME IN THE LONG TERM?

5. WHAT IS OUR STRATEGY FOR COMPETING EFFECTIVELY IN OUR CHOSEN MARKETS AND FOR REACHING OUR LONG TERM GOALS?

6. WHAT ARE THE CRITICAL FACTORS THAT WILL MAKE US SUCCESSFUL OR UNSECCESSFUL IN ACHIEVING THIS LONG TERM MISSION?

7. WHAT GOALS SHALL WE SET TO IMPROVE OUR COMPETITIVE EFFECTIVENESS AND ORGANIZATIONAL CAPABILITIES IN EACH OF THESE CRITICAL SUCCESS AREAS?

SUMMARYLIFESYSLE STAGE GOAL CONSTRAINT GOAL INFANCY CASH QUALITY OF FOUNDER’S PERSONAL LIFE GO-GO SALES MEASURED NONE, IF FOUNDER IN MARKET SHARE CAN GET AWAY AND PROFITS WITH IT. TESTING THE LIMITS ADOLESCENCE PROFITS SALES IN DOLLARS PRIME PROFITS & SALES STRATEGIC DECISIONS FALL PROTECTION OF THE NOT BE MAKE WAVES STATUS QUO ARISTOCRACY ROI SALES IN UNIT TERMS BUREAUCRACY PERSONAL SURVIVAL POLITICAL GOALS POLITICAL POWER POLITICAL CONSTRAINTS

Thank You!

RAY SILVERSTEIN

PRO, PRESIDENT’S ORGANIZATION

 SCOTTSDALE, AZ

CHICAGO, IL