During the Adolescent stage of the organizational lifecycle, the company is reborn. This second birth is an emotional time where the company must find a life apart from that provided by its Founder. This critical transition is much like the rebirth a teenager goes through to establish independence from their parents.
The Adolescent company teeters on the brink of both success and disaster. So long as the Adolescent company does well, investors and the Board regard the Founder as a genius with a golden touch. However, when the infrastructure collapses, sales slow down, costs mushroom or profits decline, the finger pointing begins in earnest. The Founder, accustomed to the magic of adoration, is instantly transformed into a goat who is no longer up to the task of leadership.
Adolescence is an especially stormy time characterized by internal conflicts and turf wars. Everyone seems at odds with everything. Sales fall short or exceed production’s estimates, quality is not up to customer expectations, and old timers plot against the new hires. Emotions are volatile and organizational morale traces a jagged line: ecstasy in one quarter, depression and dejection in another. Throughout the organization, people are busy tracking the real and imagined injustices they have suffered, which they nurse with great care. The Founder’s safe conduct through this tempest is by no means guaranteed. If these conflicts are not resolved, Adolescent companies can find themselves in Premature Aging that can lead to the early departure of entrepreneurial leadership, or the professional managers leading to pathologies called Divorce or Premature Aging.
Why is the transition from Go-Go to Adolescence so difficult? There are three principal challenges:
- Decentralization of authority.
- Change in leadership from entrepreneurship to professional management.
- Goal displacement.
Decentralization of Authority
In moving to Adolescence, a Go-Go must transform itself from an absolute monarchy to a constitutional monarchy. It is rare that a king voluntarily yields his absolute powers. Such changes are (usually) accompanied by revolutions. The revolution erupts not just because the king loves power and does not want to relinquish it, but also because he has developed behaviors that are no longer be relevant, and he has trouble changing his behavior to fit the new environment.
Founders generally know that they need help managing their Adolescent organizations. They, and their families, are painfully aware that there is not enough hours in the day for them to still manage their organization as a one-person show. They want to decentralize, but fear loss of control and/or major mistakes. It is also often true that the people already in-place lack some of the skills and experience needed to succeed with their decentralized responsibilities. One careful step at a time, the leaders of Adolescent organizations must learn to develop their people and decentralize control. Often Founders dole out new levels of responsibility only to re-centralize authority at the first sign of trouble. This tendency can quickly become abnormal if the behavior persists despite having capable employees.
Most Founders struggle to make this difficult leadership transition. In despair, they often bring in professional managers from the outside to take over the responsibility for decentralization, so that they can return to work they enjoy. Struggling Founders who do not do this voluntarily may find themselves pressured to bring in a replacement that is better suited to the new leadership role. If the Founder still owns enough stock, they can survive by getting promoted to CEO and Chairman, while a more professional manager comes in to run the company. Founders sometimes bring in new leaders only to then sabotage the new regime by refusing to relinquish meaningful control. It also does not work for the Founder to turn their back on the company and abdicate control to the new regime.
Change in Leadership-From Entrepreneurship to Professional Management
Bringing in a professional manager changes the leadership of the company. The new manager must be a real leader, not another gopher brought in to carry out the Founder’s instructions. Their job is to take over from the Founder and drive the company to become more thoughtful and less intuitive in the way it manages itself. The Adolescent company must become opportunity-driving rather than opportunity-driven. The new leader’s most critical job is to ensure that the processes, procedures, policies, structures, systems, goals and compensation needed to support long-term growth and allow effective decentralization are put in place. This new leadership requires a careful touch. An over-emphasis on control can bring the Adolescent organization to its knees and stagnate growth. The organization must learn how to balance control while continuing to nourish its entrepreneurial spirit.
The new leader says “No! No! No!” to a company used to hearing only “Go! Go! Go!” from its Founder. It doesn’t take long for the Founder and everyone else to discover that the new “hired guns” are not like them. The common reaction from a Founder is “This guy is not like me.” “If I had run the company the way he does, we never would have gotten this far.” Such logic can start a revolving-door syndrome where the professional managers get fired because they “don’t fit in.” The Founder searches and searches for “someone like me,” who at the same time “can do the things I cannot do”. They are looking in vain for someone that does not exist: a pilot who can fly a submarine. What they must realize is that for this critical transition, Adolescent companies don’t need leaders like their Founders; they need new people that are different and can complement the Founders’ style.
When the new “professional” managers come in they usually inherit a situation that is somewhat chaotic and disorganized. Everyone and his brother report to the Founder for one reason or another. The compensation system is a patchwork of special deals. Important processes, procedures and policies are poorly documented. In the absence of documents, this key information exists in the brains of the people that have been with the company the longest. These old-timers therefore have substantial power. Into this environment, enter the new managers charged with “professionalizing” the organization. Their efforts to introduce change are seen as direct attacks on the existing seats of power. New incentive systems that remove personal bias in favor of objective rewards based strictly on performance arouse opposition from the old-timers who risk losing their special deals. In defense, the old power structure bypasses the new chain of command, going directly to the Founder to complain about the new bosses.
- “They are ruining morale.”
- “She doesn’t understand how this company works.”
- “He is going to destroy this company.”
- And the ultimate blow: “He doesn’t do it as well as you do.”
The new managers face opposition everywhere they turn. Whom does the Founder support? Probably not the new guys. Instead, they stick with the old-timers who carry the same scars and are loyal to the Founder. If this happens, the new guys are forced to resort to bringing in their own supporters to outflank the “old boys”. Sides are chosen and guerrilla wars prevail, creating a we-versus-they culture. Often, the Board of Directors gets caught in the middle.
The power struggles are exacerbated by the behavior of the Founder who is the first to violate the new policies and procedures. The old-timers watch this “game.” When the Founder sets the example with the first violation, they assume that all the new rules are subject to violation. Guess who gets called on the carpet to explain why the new budgets, rules, and policies are not being followed? Of course it’s the professional manager. Such treatment is enough to cause the new leaders to develop a strong persecution complex, as well as intense dislike for the Founder and her buddies. The professional manager sees herself in a no-win situation and begins to wonder why she accepted the job in the first place. She feels impotent, exhausted, disliked, and completely unrecognized for her contributions.
In some companies, the opposite leadership situation exists. The Founder, the Board and most key employees agree that a transfer of leadership is absolutely necessary. The new leaders come in and immediately take over complete control. The Founder is forced to abdicate the throne and is relegated to the back seat. Because Adolescent companies usually have no systematic way to make decisions or make course corrections, this can lead to a dangerous situation where the new managers go on shopping sprees: buying new people, hardware, software, and consultants all in the name of “professionalizing” the organization. While some controls are undoubtedly needed, the revenues of the Adolescent may not support such profligate spending. If this happens, the Founders feel the pain of having their company hijacked and headed for disaster. They are prevented from getting involved and forced to just sit in the back seat and watch their companies get ruined.
The pain of raising an organization in Adolescence is very real and often prolonged.
Displacement of Goals
A further complication is the need to transition to a new set of goals. In early Adolescence, company goals as well as the management information and compensation systems all generally reinforce the Go-Go’s emphasis on growth and sales. In Adolescence, the company must change from the Go-Go’s “more-is-better” goals to “better-is-more” goals. Profitability emerges as the most important goal for the organization. Instead of working harder, the Adolescent company must learn to work smarter. Growth and new sales are desired only to the extent that they also have higher profitability. Adolescent companies can end up reducing revenues for a period of time as the company pulls back from low margin business.
This significant switch in goals must be implemented through a complete overhaul of the structures, management information, resource allocation and reward systems of the Adolescent organization. This transition looks easy on paper, but in reality it is very difficult. Almost everyone in an Adolescent company wants the business to run more smoothly, but they do not see the problem as their own department.” My department’s fine. Go work on sales, that’s where the problems are.”
Problems of Adolescence
- Over-excitement, possibly unwarranted.
- Fuzzy on many details.
- Fear, uncertainty and doubts.
- Mixed goals. Change the world and make money
- Low commitment (“try it and see” attitude).
- Over-thinking the details, stalling.
- Lack of fear.
- Exclusive focus on making money.
Pathologies of Courtship: The Affair
A Courtship which has no testing of the harsh realities that face any new business can easily degrade into an Affair where the Founder’s commitment evaporates at the first sign of difficulty. What is an affair but lots of enthusiasm with no real commitment?
Prescription for Success
When the Founder(s) makes the bold decision to quit their day job, mortgage their house and/or accept the seed capital, the organization is born and instantly moves into Infancy. With this simple act of faith, the Founder(s) cast off on a wonderful, and largely uncontrollable, journey of triumph and tragedy.
Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness, concerning all acts of initiative and creation. There is an elementary truth the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents and meetings and material assistance which no man could have dreamed would have come his way.
W. H. Murray, The Scottish Himalayan Expedition, 195
Managing Corporate Life Cycles, 2nd Edition by Dr. Ichak Adizes.Published by the Adizes Institute. © 2004, Ichak Adizes.