Lifecycle of an organization
Most of us work in a startup environment or are in touch with entrepreneurs and groups of people creating synergies in similar situations. It all starts out with a first idea and countless days and nights discussing, sketching out and turning it over again. The first pioneer looks for other passionate entrepreneurs, for specialists in their fields or for strong counterpart. Little by little, he is joined by a team. If all goes well, the idea grows into a product and the loose group of co-workers becomes an organization.
But how does a group of people become a company? How is this change attained and how does the organization evolve?
The way an organization is formed and grows is different for each product, for each entrepreneur or even for each culture but still there is an underlying pattern that is followed. I like to compare this process of growth to biological cycles that are generally structured by birth, development, flourishment and transformation or death. Just like any other being an organization goes through these same different stages in its evolution.
In the beginning of the 19th century, the researchers Bernard Lievegoed and Friedrich Glasl identified these evolutionary phases in the life of an organization as: Pioneering, Differentiating, Integrating and Associating and came up with the so called Lifecycle of an Organization. This theoretic model functions as a tool for analyzing the development of a start-up but should not be taken as the one an only guideline or golden rule.
I like to turn to this model for structure and reassurance and I consider it useful for any entrepreneur.
Following the cycle of life a company has its beginning in the Pioneering phase where the biggest influence on the company is the founder itself. His personality, ambition and passion run through all parts of the organization. The organization is build around people — it makes the organization very adaptable. It is autocratic and mainly focussed on the vision.
“If they cannot imagine the future, they cannot create it.”
This statement taught by Coimbatore Prahalad to his graduates in Business Strategy at the University of Michigan sums it up pretty well. The organization that is acting like a family all gathering around the pioneer depends upon one person and its vision. It relies on his or her capacity to imagine the future circumstances, to find a place for the product and to adapt accordingly.
The organization starts shaking and is in need to move forward soon enough. The first symptoms that alert the pioneer of the need to evolve are a fast changing environment, an accelerated organic growth with unknown customers or even new hires that do not match the leadership style of the first pioneers.
This might result in decreasing profits, in a dent in the growth curve, in internal conflicts with the leadership style and the communication of information and even a decrease in motivation, strength and flexibilty of the team.
The organization enters a crisis and needs to change, but how can the transition be made?
According to the Lievegoed/Glasl model the answer is Scientific Management as it was thought up by Henry Ford in the beginning of mass production. The organization has by now successfully entered the market but it needs some order and structure in order to grow further and not be distracted by internal distress and inefficiencies.
One way to get to the next stage (Differentiating) is by creating this order through process observation and standardization. The company needs some protocols and a stronger focus on tasks instead of people. Growth makes it inevitable to create structure, standard and control.
At some point creating structure means creating inflexibility and that is where the next crisis hits our little organization. When before we were focussing on the individual we have now brought into existence some kind of hierarchy that gives rise to coordination and communication problems. Instead of focussing on the person we focus on the task and create a fertile ground for rivalries. With new processes problems of coordination arise. Not all is well in the organization that has gone from chaos to structure.
It seems as though the established order in the Differentiating Phase has created barriers for creativity and flexibility.
The characteristics of the first two phases come together in the next stage of life of the organization: Integration. The integration stage is the turning point in the life of the organization as it combines the spontaneity and spirit of entrepreneurship of each team member in the first phase with the standardization and process orientation of the second phase.
Through a new focus on the strength of each individual the Integrating stage is attained. It completes the development of the complete organism and is known as a synthesis of pioneering and differentiating.
The organization is characterized by a horizontal orientation, high autonomy, responsibility and self-initiative for the single worker and decentralized, autonomous teams.
Our organization has evolved to be a living organism.
The circle of life could stop here at the Integrating phase as the company has succeeded in ‘crossing the chasm’. The company is no longer an experiment or prototype but it has reached significant market acceptance, early growth and a noticeable high employee morale.
Nevertheless a startup can not only live on its own but is depended on its environment. With this, every organization enters into contact with other companies: partners that help in the value creation chain. In the last phase of the evolution we are looking at the dissolution of borders in order to become one with providers and other partners. Company biotope — such as the Japanese Keiretsu systems — are formed.
“Focus not just on your competitors, but also on your collaborators and complementors” C. Shapiro (1998)
The environment we work in is in constant change and we feel uncertainty on a day to day basis. If all goes well, our start-up grows very fast in all directions. We develop new products, enter new markets and hire new experts — the change is constant and omni-present.
The model of evolutionary growth (created by Lievegoed / Glasl) that I presented to you is a good handbook to give us guidance. If we feel lost and confused by small crisis, great communication complications with our 5-head strong teams or even slow-downs in growth, we can turn to this model to find advice and comfort.
The model of evolution can give us inspiration to grow our organization to be an autonomous and healthy living organism in close contact with its environment.
CMO at Camaloon