Company life cycle and description of stages


the stage of creating an organization. The founder (or founders) conceives a business idea and is filled with enthusiasm. Moreover, for some reason, they believe that everyone around them should also be equally enthusiastic as soon as they hear about their idea and should actively support it. The danger that can ruin the business at the very beginning lies in the fact that, while wanting to realize their idea, the entrepreneur does not take into account the actual market conditions sufficiently. They are blinded by the allure of the innovation itself.

From the perspective of organizational responsibility, the internal commitments of the founder are crucial - the willingness to take on risk. The higher the level of commitments that the organization takes upon itself at its inception, the more realistic the success of the business becomes


Time of selfless efforts to achieve a dream. This stage is characterized by informality in work relationships, the absence of hierarchy ('everyone calls each other by their first names'). There is no hiring system - there is a union of like-minded individuals. There is no system for assessing the work done because decisions about what needs to be done are made swiftly; the organization moves from crisis to crisis, fighting for survival. Each crisis overcome is a collective victory, and every mistake is a stimulus to overcome the crisis.

Ichak Adizes points out the need for an influx of financial resources at this stage, something the leader should not forget. Another key to successful survival is the psychological factor of the founder's commitment to the idea of creating a sustainable organization, which means responsibility not only for realizing the idea in principle but also for implementing it 'here' and 'now' with these people and partners.

Go-Go Stage

Relative financial stability, an increase in sales levels. This is a new stage of the organization's internal responsibility. The situation is dangerous because survival may appear as prosperity, even though there is still a long way to go before reaching this stage. The mindset 'We can do it all!' can lead to the demise of the company. The prospect of expanding the scope of activities is too enticing. Therefore, Ichak Adizes defines the main organizational task of this stage as 'the reverse': the company must clearly define what it should not engage in. The desire to encompass everything, including the unknown to the company's employees, can destroy the organization in an instant.

At this stage, the company is not yet internally structured: decisions are made by people, not by positions. According to Adizes, the role of the founder-leader appears rather contradictory. They attempt to delegate authority and responsibility to the organization's employees because they feel the impossibility and impracticality of concentrating all decisions in their own hands at this stage of development. However, in reality, nothing is decided without the head of the company, and it is the leader's fault that they fear losing control of the situation.

During the stage of rapid growth, the relationship between the organization and the external environment is usually strained. The company reacts to market opportunities offered rather than anticipating and planning for them. It follows favorable (or seemingly favorable) circumstances. As a result, the organization increasingly operates on a trial-and-error basis, which is quite risky. Moreover, the better things are going, the higher the risk.

For the leader, a crucial moment arises in determining when it is necessary to transition from intuitive administration to professional management.

Adolescence Stage

The organization's second birth is a lengthy and painful process. Decentralization and delegation of authority become necessary. The emergence of a professional manager figure (executive director, vice president) is fundamental. Finding such a person is a challenging task. They must perform functions that were previously absent or dispersed, meaning they need to be able to do what those working in the company cannot do or are not prepared for. At the same time, the founder and their associates unconsciously seek someone 'like us' or 'similar to us.'

'Youth' is a time of conflicts. People begin to focus on themselves, and ambitions come to the forefront. Conflicting relationships emerge between the founder and the manager, the manager and the veterans, and the veterans and the newcomers.

Management experts assert that 90% of what happens in a company occurs at an informal level. Therefore, 'informal cultural networks' are crucial for leaders.

During the 'youth' stage, there is also the challenge of the conscious contradiction between the organization's needs and the financial needs of its employees primarily.

If the organization survives its conflict-ridden 'youth,' including aligning its external aspirations, it then enters the 'prosperity' stage."

Dawn Stage

This is the stage of balance between self-control and organizational flexibility, it's about understanding and aligning goals, possibilities, and means of achievement. In theory, the "prosperity" stage can last indefinitely provided there is quantitative and qualitative growth in the organization – through the influx of new talent, the establishment of subsidiary organizations, and, most importantly, the preservation of the spirit of entrepreneurship.

At this stage, the responsibility of leaders and employees is expressed in this challenging-to-formalize quality of self-stimulation, in their understanding of the entrepreneurial nature of any socially beneficial and in-demand endeavor. Otherwise, there is a smooth transition to the dangerous stage of "stabilization.

Prime Stage

It is characterized by an increased sense of security. The evident stability of the company's presence in the market leads to a reduction in resources allocated for research in favor of expenditures on extrapolative development. This marks the beginning of aging - the company increasingly focuses on its past.

In the firm, financiers now carry more weight than developers and marketing specialists. Interpersonal relationships within the organization take up more of people's time than addressing new risky proposals and initiatives. The responsibility of leaders is realized in the simplest way - by maintaining the firm's status quo.

Aristocracy Stage

The transition to this stage is almost imperceptible, and this is a clear sign of aging, not growth. More and more resources are allocated not to innovation and development but to control, insurance, and arrangements. The certainty of results completely displaces options associated with risk. The company's image is characterized by conformity in communication, behavior, and attire. Conference room interiors should convey an impression of immutability and grandeur. Emotional outbursts by employees are perceived as a breach of decorum. Some may still try to care about the company's viability, but they are rebuffed, accused of panic and nervousness, of being inadequate and inappropriately expressive. The same level of profit is declared, even as product or service sales decline. Prices may increase for vacations, but quality may even decrease in the process.

Internal responsibility in the organization is formalized, while external responsibility is quite weak. It was also weak in the early stages of the company's life cycle as outlined in Ichak Adizes' scheme. Then there were stages of strong market dependence (a kind of involuntary responsibility) and, finally, balance. As we can see, an aging organization once again falls into infantile irresponsibility. Before, it was because the company essentially did not exist, and now it's because it exists as if it has always been and will be forever.

The true state of the organization - on the brink of disaster - is suddenly revealed. Survival mode begins, but not for the company as a whole. Everyone is fighting for themselves. Such a situation almost inevitably leads to the next stage in the continued existence of the organization - the stage of "early bureaucratization."

Recrimination Stage

They seek culprits, those who cause problems. Market work and consumer engagement take a back seat. The "culprits" are removed. The result: entrepreneurs come and go, administrators remain. The rest are busy clarifying relationships and measuring each other's wrongdoings.

In terms of responsibility, the following happens: it is delegated to those who actually tried to save the company but were accused of destructive attempts against it.

Bureaucracy Stage and Death

A bureaucratic organization has multiple systems with weak functional orientation. Such an organization is inward-focused and closed off. A "cult of the written word" prevails within the firm. It is characterized by a fragmented "informational field." Each employee possesses only a portion of the information. The client is forced to gather it in pieces, breaking through narrow information channels, and the firm's departments do the same.

A self-contained, "closed" organization in the stage of "developed bureaucratization" may appear monstrous externally, but even slight changes in the surrounding environment can cause it to collapse. Only an external force (such as the government for the sake of preserving jobs) can save it from demise.
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