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«Ichak Kalderon Adizes, Ph.D. Adizes Institute Publishing Santa Barbara, California USA Managing Corporate Lifecycles How Organizations Grow, Age, and ...»

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Managing Corporate

Lifecycles - Volume 1

How Organizations

Grow, Age, and Die

Ichak Kalderon Adizes, Ph.D.

Adizes Institute Publishing

Santa Barbara, California USA

Managing Corporate Lifecycles

How Organizations Grow, Age, and Die

First Edition 2004

© 2004 by Dr. Ichak Kalderon Adizes

ISBN: 978-93-81860-54-0 (Paperback Edition)

All rights reserved. This publication is sold subject to the condition

that it shall not, by way of trade or otherwise, be lent, resold, hired out or otherwise circulated without the publisher’s prior written consent in any form of binding or cover other than that in which it is pub- lished and without a similar condition, including this condition, being imposed on the subsequent purchaser and without limiting the rights under the copyright reserved above. No part of this publication may be copied, reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording or otherwise) without the prior written per- mission of the publisher. Any person indulging in any unauthorized act in relation to this publication will be liable to criminal prosecution and/ or civil claim for damages.

This book is dedicated to the memory of my best friend, Marco Naiman.

Acknowledgments I want to thank all my colleagues at the Adizes Institute for their help in writing this book.

My associates have debated with me for years, have sharpened my thinking and enabled me to make the improvements presented in this revised edition. Outstanding among them are Carlos Valdesuso of Brazil and Aurelio Flores Ysita of Mexico.

Dr. Sara Cobb provided all the references and footnotes that appear at the end of each chapter. I could not have done it by myself.

The editor, Elyse Friedman, helped rewrite this book many times. If it were not for her patience, understanding, and editorial brilliance, it would not have been as readable.

My assistant, Dakota Bayard, kept it all together and worked on the illustrations and the accuracy of the manuscript.

Last but not least, I want to thank my wife, Nurit, who let me be by myself for weeks in a row. Although she missed my company for many, many weekends as I labored on the manuscript, she supported me with- out a fuss. Without her love, this book would not have been written.

To all, thank you!

—Ichak Adizes Contents Introduction

Chapter 1 Change and Its Repercussions ����������������������������������� 1 Chapter 2 Courtship ���������������������������������������������������������������� 19 Chapter 3 Infancy �������������������������������������������������������������������� 33 Chapter 4 The Wild Years: Go-Go �������������������������������������������� 51 Chapter 5 The Second Birth and the Coming of Age: Adolescence ������������������������������������ 77 Chapter 6 Prime ����������������������������������������������������������������������� 95 Chapter 7 The Signs of Aging ������������������������������������������������� 115 Chapter 8 The Aging Organizations: Aristocracy��������������������� 153 Chapter 9 The Final Decay: Salem City, Bureaucracy, and Death ����������������������������������������� 171 Chapter 10 Determining a Company’s Position on the Corporate Lifecycle ������������������������������������� 183


In this book, I present the theory of organizational lifecycles—which allow us to discriminate normal from abnormal problems in organizations.

Based on this understanding one can apply the appropriate interventions that lead organizations to their Prime condition.

This theory combined with the principles for leading organizational change— that I have developed and practiced over the past forty years— explain why organizations grow, age, and die, and what to do about it.

It describes and analyzes the usual path organizations take as they grow and the optimal path they should take to avoid the typical problems of growing and aging.

Purpose and Methodology This book is directed to organizational leaders who are responsible for managing or facilitating organizational change.

It is not a collection of case studies nor is it based on rigorous statistical analyses. Neither is this book a literature survey, although it provides footnoted references. Rather, this is a progress report on my experience with organizations since 1971, the patterns of behavior I have observed, and the approach I have taken in treating them. The Adizes Institute, headquartered in Santa Barbara, California, has associates worldwide who are trained and certified practitioners of the methodology, and this book reflects their experiences as well.

The examples in this book are collages of the many companies we have worked with over the years. Some of them are publicly known— through books and/or articles, as will be referenced later—as users of the methodology. Otherwise, names of clients of the Institute are kept confidential.

Domino’s Pizza is one of those publicly known, as described in Tom Monaghan’s book, The Pizza Tiger.1 Domino’s practiced the methodology and grew from $150 million to $1.5 billion in sales in seven years.

Another of the better-known clients, the Bank of America—at the time the second-largest bank in the world with $120 billion in assets and IntroductIon xii 90,000 employees—had reached a point in its Lifecycle where it was no longer growing and used the methodology to revitalize.2 We have also used the Adizes methodology to help nonprofit organizations such as the Los Angeles Department of Children’s Services, the largest children’s welfare organization in the world.3 In Ghana’s Ministry of Health, I facilitated the establishment of the Health Delivery Planning Unit, which the World Health Organization considered at the time a model for third-world countries.4 I have used the methodology and consulted with the prime ministers and/or presidents of Sweden, Greece, Brazil, Macedonia, Yugoslavia, Israel, Mexico, Montenegro, and El Salvador, mainly lecturing on how to rejuvenate governmental bureaucracy and the political machinery. My associates and I have been involved in using the methodology to resolve some sensitive policy issues that remain confidential.

But not all clients are huge corporations or government agencies. We have worked with NGOs, churches and religious organizations, worldwide missionary organizations, and TV networks. I can say with confidence that the Institute has tested the methodology repeatedly under a variety of conditions, and we can replicate results regardless of organizational culture, size, and technology. The one variable that can affect the efficacy of the methodology is the CEO, who must be committed to implementation, and there must be positive chemistry between the CEO and the Adizes-certified associate who is implementing the process.

While this book focuses primarily on corporations, it also points out similarities to marriage, the personal process of growing and aging, and the process of change in civilizations, biological systems, and even religions. Obviously, such comparisons are necessarily superficial, and I admit that I wouldn’t be surprised if they are even totally wrong. But life has taught me that everything is related to everything. If we do not see a relationship, it is only because we don’t understand it yet. Still, we must try to pierce the veil of separation to gain a small glimpse of the universality and the rules that govern this universality.

IntroductIon xiii

Organization and What’s New Managing Corporate Lifecycles: How Organizations Grow, Age, and Die describes the typical behavior of organizations through the lifecycle stages on the typical path organizations take, from Courtship up through Prime and aging to the end of the organizational lifecycle, and the normal and abnormal problems they encounter on that path.

A companion volume to this book, Why Organizations Grow, Age, and Die and What To Do about It presents the principles for leading organizational change that I have developed and practiced since 1971. It also describes how an organization behaves, and the principles of guiding an organization along the optimal—faster—path. This is necessarily short because we have had insufficient experience with this path. It is a subject for further work and subsequent reporting.

Two other books that I have written complement the volumes described above:

Pursuit of Prime discusses how an organization should be managed depending on where it is on the lifecycle, and Mastering Change presents the theoretical underpinnings of the methodology for transforming (treating) organizations.

For clinical training on how to make therapeutic organizational interventions, I direct the interested reader to the degree and certificate programs at the Adizes Graduate School for the study of Leadership and Change, which has been licensed by the State of California and initiated since the first edition of Corporate Lifecycles was published.

Another point. After I had finished writing the first edition of Managing Corporate Lifecycles, I realized that something was wrong. I asked myself, if organizational integration is so important, why is it low at the growing stages and high in the aging stages? At the time, I could not answer that question. It took me ten years to resolve that dilemma, and I report my findings here. I have learned that although it remains true that entrepreneurship causes growth and a lack of entrepreneurship causes aging, Integration is the factor that precedes entrepreneurship in predicting organizational growth and aging. This factor enables the creation of the nurturing environment essential for entrepreneurship and, thus, for organizational growth. Integration also allows organizations to IntroductIon xiv treat aging problems more proactively—that is, earlier. Because this factor is subtle, it is commonly ignored and neglected in the pursuit of growth. That neglect is what causes organizations to take the typical path—with all its pains—on the organizational lifecycle.

My research has illuminated several additional factors that enhance the existence, or cause the demise, of entrepreneurship in organizations.

These factors further explain the pains of growing and what we used to understand as the inevitability of organizational aging.

Once we better understand the interplay among the factors that cause growing and aging, we can accelerate an organization’s progress to Prime, the most favorable stage of the lifecycle, and keep it there longer. When the first edition of Corporate Lifecycles was published in 1989, to rejuvenate an aging organization and at least point it toward Prime used to take three years. Today, with better understanding and precision, presented and explained in this edition, we can achieve the same results with even bigger organizations in less than a year. Thus, I have discovered that organizations need not experience the growing pains I described in the first edition of this book. Presented here is an optimal path. Although it generates other problems, they are preferable to those on the typical path because they bring an organization to Prime faster and can keep it there longer. Furthermore, the problems on this path are rarely pathological, i.e., they do not endanger the existence of the organization.

The first edition described only the typical path. How to reach Prime faster and without the problems of the typical path—via the so-called optimal path—is a new addition.

My hope is that this will not soon meet the fate of receiving the review Samuel Johnson gave to a literary aspirant: “Your manuscript is both good and original; but the part that is good is not original, and the part that is original is not good.” Nevertheless, I had fun writing it and hope you will find it thought-provoking.

I learn from the experience of others and encourage you to communicate your ideas—whether critical or supportive, theoretical or experiential—with me at adizes@adizes.com.

Ichak Adizes, Ph.D.

Santa Barbara, California

IntroductIon xv


1. T. Monaghan, Pizza Tiger (New York: Random House, 1986).

2. See M. Johnston, Roller Coaster: The Bank of America and the Future of American Banking (New York: Tichnor and Fields, 1990); also R. Saisman, Breaking the Bank (Washington, DC: American Institute for Economic Research, 1990).

3. I. Adizes, R. Chaffee, and Y. Hasenfeld, Revitalizing Child Protective Services.

School for Social Services (Los Angeles, CA: UCLA, 1988). (Also prepared as Adizes Institute Working Paper #22.)

4. I. Adizes and P Zukin, “A Management Approach to Health Planning in.

Developing Countries,” Health Care Management Review 2, 1(1997): 19–37.


Change and Its Repercussions Change has no precedents.

Niccolo Machiavelli The Perpetuity of Problems It might not be news to you if I were to say that we all experience change and change is a phenomenon that exists for as long as we can perceive anything.

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