This article was written by Alison McSparron-Edwards, Founder and Managing Director of. consulting.
Five stages of the corporate lifecycle
It may seem pretty obvious, but as companies grow, they seem to follow a corporate life cycle: creation, growth, maturity, rebirth, and decline. [Kimberley, J. R., Miles, R. 1980., and associates The Organisational Lifecycle: Issues in the Creation, Transformation, and Decline of Organisations. San Francisco: Jossey-Bass.]
At the same time, it appears that companies need to hire different types of leaders to succeed at each stage: creators, accelerators, sustainers, transformers, and terminators. [Ward, A., The Leadership Lifecycle: Matching leaders to evolving organizations. Ebbw Vale: Palgrave MacMillan] Here is your challenge: Do you know if your leadership actions are aligned with your company's growth cycle?
What causes business failure or success? Well, you might be surprised to learn that a 2012 study by Bank of America stated that 90% of small business failures are due to incompetence on the part of management. There may be people and there may be no people. Unfortunately, this is borne out by the fact that many Fortune 500 and Fortune 1000 companies have filed for bankruptcy over the past decade. Another UK study, 'Success in difficult times', by Surrey Business School, states: [PDF, it was reported that SMEs make up a staggering 99.9 percent of all new enterprises in the UK but only 45 percent of them survive the first five years.
It appears that, regrettably, the very same managers who built successful companies were the ones who often, in the long term, failed them and that a leader that suits one stage in the life-cycle does not necessarily suit another.
The typical corporate life cycle and relevant supporting leaders appear to be as follows:
Creation supported by Creators
The strategic priority for start-ups is to take a product or service to market in the shortest time possible. In order to survive, the start-ups will often have chaotic and frenzied cultures which create environments that are flexible, having little bureaucracy, staff or systems. Their creative entrepreneurial leaders will know clients, suppliers and employees individually and are excellent problem solvers.
Growth supported by Accelerators
The next strategy will be to pursue rapid growth but, unfortunately, this often stretches and strains capabilities and systems. To support accelerated growth, leaders must focus on internal issues and add discipline and structure to the business, but without destroying the company through under or over investment or losing its culture and values.
Maturity supported by Sustainers
Having grown rapidly, the organisation now needs to focus on the external market and understand how to strategically win and keep market share. Leaders need to understand that maintaining the status quo is insufficient as, ultimately, younger, hungrier businesses will steal their hard won market share and the business may go into decline.
Unfortunately not all companies can sustain the maturity phase and decline and annihilation can follow.
Turnaround supported by Transformers
In this phase the strategy must be to reverse any decline or face ultimate annihilation. Otherwise falling sales, assets being sold off, cost reductions and lower investments will create a vicious downward spiral of inactivity resulting in bankruptcy. Leaders need to understand how to transform their companies and get them out of the “rut” that they have become entrenched in. Poor routines or negative scripts have become embedded in the organisation causing narrow minded thinking and a loss of creativity and innovation. Their job is to help people “unlearn” old scripts, to challenge the status quo and to bring fresh perspectives to the business thereby creating new profit opportunities.
Decline supported by Terminators
At this stage in the business cycle the strategy has to be to realise what little value there might be left in the business. In our shrinking world where Sheth’s “Rule of Three” prevails [Sheth, Jagdish and Sisodia, Rajendra. 2002. The Rule of Three: Why Only Three Major Competitors will Survive in any Market. New York: Free Press.], In any given market, there are no more than three major competitors. As a result, leaders must think about how to maximize value, whether by selling to a larger company, merging to achieve scale, or breaking the company into valuable components.
How will this impact small businesses?
Small and medium-sized enterprises follow similar growth patterns to large enterprises, but are smaller in size.
Many of the small business failures we encounter are caused by leaders' lack of self-awareness about their company's strengths and limitations. People who are aware of what they're doing and what they're not doing well can build a team around them that leverages their strengths and compensates for their limitations. In fact, some people realize that their strengths are too narrowly focused and delegate the day-to-day management of the business to others who are more capable. A good leader regularly asks herself and her advisors (particularly her NEDs, non-executive directors) whether she is the best person to run the company and makes management decisions based on those assessments. make decisions.
When was the last time you took a step back and evaluated your performance and that of your management team? Are you and your team best suited to run the company at its current stage of growth? If so; great news! If not, now is the time to address your concerns so you can continue to achieve your strategic goals.
