Chapter 11: Predicting The Lifecycle: A Metaphorical Dance

In Part One of this book, I described the individual stages of the organizational lifecycle. Are there reasons why an organization moves from one stage of the lifecycle to another? Using the tools I described in Chapter 10, this chapter explains why organizations develop and deteriorate as they do.

If the four managerial roles-P, A, E, and I-are mutually incompatible and threaten each other, can it be possible for an organization to emerge, at birth, with all four roles simultaneously devel- oped and balanced? The answer is no. Those roles have to develop in a certain sequence synchronizing their development as they go.

At any point in time-because one or more of the four roles is missing, dormant, or not fully developed-every organization manifests problems that stem from not having the role fully developed and from the difficulties of having to synchronize the incompatible roles.

But an organization's lifecycle may follow either the typical or the optimal path. Those paths are differentiated by the sequence in which the roles develop and how they are integrated.

Let us first understand the typical path, which we have already described. Once we understand how the development and interplay of P, A, E, and I roles explain organizational behavior, we will dis- cover how it is possible to accelerate and improve the development and interplay of the four roles, creating an optimal path.

Organizations need to perform all four roles in order to be effective and efficient in the short and long run.

Since the four roles are incompatible, they develop in a certain predetermined sequence, seeking the route of least resistance, and striving to synchronize along the way. Organizations learn new roles and institutionalize them through the problem-solving process. After all, problems are caused by the absence or lack of development of one or more of the management roles and by the difficulties of synchronizing those roles. In the course of solving a particular problem, an organization develops and institutionalizes a new role in its consciousness.

When an organization fails to develop a role or to resolve incompatibility of existing roles, it will find that it is "stuck." It continually replays the manifestations of that shortcoming. Although the lack of a role or the difficulty of integrating it may manifest itself as what might appear to be numerous different problems, those problems will all be of a similar nature. The organization acts like a broken record, and its problems are no longer normal. In such cases, organizations usually regress to a former role. Unable to proceed forward, they retreat to the familiar. If there are significant changes in the environment, lacking certain roles will cause the problems of an organization to become pathological, threatening its very existence.

For example, companies in Go-Go are missing the A and I roles. For companies on the typical path, such a deficiency is normal. Later, however, if it becomes clear that the founders-who hire and fire an endless succession of chief operating officers-fail to develop A and I, the problem takes on the abnormal dimensions I call the founder's trap. Investors usually recognize the vulnerability of orga- nizations dependent on a single person, electing not to risk capital in such shaky situations. If it becomes impossible to raise funds to finance necessary expansion, the founder's trap can prove to be a pathological problem.

In order to facilitate therapeutic interventions, it's crucial to understand the process of change, how the roles develop and integrate, and the normal-as opposed to abnormal or pathological- problems that develop in the process of that change.

Why does the lifecycle follow a typical sequence? Because each of the roles emerges and later submerges, giving way to and balancing with the next role in a predetermined sequence. Since the roles develop in a predetermined sequence, the problems created by the incompatibility of the roles are predictable, and we have the power to anticipate those problems. Because we have a diagnostic and therapeutic theory that allows us to associate deficiencies of specific roles with specific problems, we can cultivate as yet underdeveloped roles and thus remove or prevent the problems from emerging.

It is during the growing stages of the lifecycle that organizations need to develop the four PAEI roles and integrate them. Organizations in the aging stages must prevent the roles from decaying. Organizations that keep the roles strong and in balance can remain in Prime.

Organizations need to develop each role, integrate each with those already developed, and operate using all of them. But every organization has an energy allocation problem: At any point in time, each system has a fixed amount of energy. We know that from physics. Energy can grow over time in a system that is dynamic and symbiotically interacting with its environment. At any point in time, however, in a static situation, the energy is fixed. How, then, do systems allocate that energy? How do they do it most efficiently? The energy is used for developing a role, for synchronizing incompatible roles and for practicing a role that is already developed.

The Dance: The Sequence of PAEI Role Development on the Typical Path

Imagine a very unusual square dance: There is no one calling the steps. Each of the four dancers has to develop its own dance and represent a different culture from around the world. Imagine Mexican, Thai, Balkan, and African dancers. The dancers have accepted the following assignment: By the end of the dance, they must develop their individual dances that represent their cultures, and they must integrate those individual dances so the four of them can dance the same dance together.

If you know anything about folk dancing, you know that these dancers face a formidable challenge. If you are not familiar with the variants of international folk dancing, imagine giving the same assignment to four dancers, each one with different training: classical ballet, modern jazz, folk, and Prussian marching.

In our case, the four dancers are P, A, E, and I.

How should the dancers proceed? In what order should they dance, and why should there be an order?

Who Is First?

In the first edition of this book, I stated that E is the first managerial role to develop. This is what we learn when we study economic theory (Joseph Alois Schumpeter) 1 and even psychology (David McClelland): 2 Entrepreneurial spirit fuels economic growth.

On the typical path, the E dancer goes to the center of the square dance and dances alone. Because neither he nor any of the others arrived with a well-developed dance, then and there, in the center of the square, he develops a dance that represents his culture. What is his dance about? It is about long-term effectiveness, and it is represented by the word why, which is synonymous with what for. E gives purpose to the dance. The other three dancers watch intently. The configuration of the dance at this point is paEi: E is dancing, while p, a, and i watch from their spaces, mimicking E's movements. That's why I note p, a, and i in lowercase letters. That was the Courtship dance. If the p, a, and i don't watch and participate on some level, they won't be able to join later. We would have an Affair, OOEO, instead of a Courtship, paEi.

Who Is Second?

Once E is comfortable and has developed the routine, who should join in? There are three candidates:

P represents short-term effectiveness.

A represents short-term efficiency.

I represents long-term efficiency.

E represents long-term effectiveness,

who would E find to be the most compatible partner?

Let's first identify the most difficult partner and remove it from consideration. Because E is long-term effectiveness, E's first partner must represent either the dimension of long term or of effectiveness. The most alien of the three would be a partner representing short term and efficiency. Such a partner has nothing in common with E. A, therefore, is beyond consideration. If, at this stage, A insists on dancing with E, it would ruin the dance. The two would interfere with each other, getting their legs so entangled that E would quit. That is exactly what happens in societies where government's inter- vention in business is too intense or in aging companies dominated by A.

Years ago, when I was a student, I read an article in Fortune magazine. The article, "The High-Flying that Might-Have-Been," stated that if all the companies, like TRW, Litton, and LTV, which had been established by Hughes Aircraft veterans, had been created within Hughes, Hughes would have been bigger than General Motors. 3 But Hughes's Entrepreneurs found it impossible to deal with Hughes's restrictive A atmosphere, and they left to start their own companies. When the spin-offs become as restrictive and suffocating as the company from which their founders escaped, subsequent entrepreneurs feel encouraged to leave and start their own spin-offs.

At this early stage of the dance, therefore, it's premature to allow A to join in.

The remaining candidates are P and I. What seems more like long-term effectiveness? Long-term efficiency, I, or short-term effectiveness, P?

Here, it's important to consider the local culture. In Western society, where the work ethic is so strong, P is the obvious candidate. By work ethic, I do not refer only to the Protestant ethic Max Weber described in his Protestant Ethic and the Spirit of Capitalism. The work ethic, I believe, applies to all societies that are subject to the rigors of winter weather. People in cooler climates had to plan ahead, producing and saving for the cold weather, while year-round abundance allowed people in tropical lands to live a day-to-day subsistence life.

In cultures ruled by the work ethic, short-term effectiveness, P is more likely capable of translating long-term effectiveness, E, into the short term. P is closer to E: Both deal with effectiveness. This closeness is also reflected in language: P stands for what, and as I stated above, E stands for why, which is synonymous with what for in every language group I checked: Latinate, Semitic, and Slavic. Following the same thread, we see that what is the short-term what for, and why (what for) is the long-term what.

Because P and E differ only in their time-span orientation, we have E move out of the center, giving P-E's short-term cousin-a chance to learn and develop his own dance before the two try dancing together. The other dancers watch from the edges, perhaps imitating P's steps. That Paei dance mirrors the Infant stage of the lifecycle.

What happens, however, if, while Pis dancing, E gets bored and leaves, taking A and I with him? In that POOO dance, P dances alone, gets tired, and retires. The dance is over: Infant mortality sets in. If, however, E remains, watching intently and making comments that P takes into account, by the time P feels confident, what happens? Well, rather than have the third dancer learn to dance alone, it makes sense for the two who already know their steps to work on learning how to dance together. Remember the fixed limited energy? First, all the energy went into developing a role. Now that theE and P roles have developed, less energy is needed. The saved energy goes now to synchronize them and operate their dance. It's the same energy, with a different purpose. And this is what happens. P and E move to the center. They try to synchronize their individual dances into a new dance of long- and short-term effectiveness. Because the two share a common heritage of effectiveness, it's not too difficult to integrate their dances. With the other two at the edges, imitating the dancers' steps, that PaEi dance looks like Go-Go.

So far the two dancers have been practicing only one genre of dancing-effectiveness. Function-effectiveness-has been doing well, while form-efficiency-has had no chance to do anything yet. A and I, so far only observers, are getting nervous as the dance gets more and more furious-all function, no form. P and E are having fun as E continuously feeds new steps to P. A-so completely different from those two-fears joining their dance. Like wild horses trampling an inexperienced rider, P and E could destroy A.

After a while, P and E get used to dancing together. Energy is saved because no energy is necessary to synchronize their dances; they are dancing together. It's time for a third dancer to join them.

Who Is Third?

Who will be the third dancer? A or I? The typical path prefers short run over the long run. That is the typical path of the Western society as opposed to Eastern cultures. A joins the dance, but, like P and E, does A first try it alone? No. That won't work. If A, working alone, develops a different dance, it's unlikely that A could integrate it with the dance P and E do so well together. The solution? One of those two has to dance with A, integrating A's contributions. Meanwhile, the other one should leave the center, watch, and wait. Just as dancing with the experienced P and E would overwhelm, overpower, and destroy the tentative new dancer, A, a newcomer Administrator who joins a PaEi organization finds himself powerless to deal with the founder and his or her entourage. In a Go- Go culture, a succession of As has a terrible time getting in and surviving. If A never succeeds in dancing with P and E, if he fails to achieve his assignment to develop the A role, eventually, the PE dancers either get exhausted and quit or, because they kick up so much dust, someone stops them, and the dance is over. Why do they get exhausted? Energy is fixed and is used for operating the dance. E without boundaries set by A and I might bring so many new steps in rapid succession that P simply gets overwhelmed. P often ends up on his knees and stops dancing altogether because he cannot learn the new steps fast enough to keep up. By the time P learns the newest step, E is into something new. So P finds it better to stop and wait. That was the POEO dance: the founder's or family trap.

In our square dance, then, either E or P has to sit down while the other one dances with A. Who should dance, and who should step to the side?

On the typical path, E usually refuses to sit and take a back seat. He was the first to dance and he's most interested in dancing by himself. Only reluctantly does he agree to dance with anyone else. True, he dances with P, but Pis a close cousin. Will he leave the floor to the "enemy," to A? Not on your life. He recognizes that he needs A, but he passionately hates and despises it. So, with no enthusiasm at all, he finally invites A to dance, but he keeps P there, too. The two of them drag A all over the floor, until kicked, stepped on, and bruised black, red, and blue, A quits and goes not to the sidelines to sulk, but home. Another A joins only to suffer the same experience.

E starts to get annoyed. P desperately wants A to control the wild E that has been absolutely exhausting him. He wants A to join because A is also close to P. A is short-term efficiency, and P is short-term effectiveness. P does not feel so threatened by A as does E. As a matter of fact, P seems to be talking to A behind E's back, trying to convince A to join and promising all kinds of alliances against E. P is anxious for order so he can use operational energy rather than developmental energy. E is losing his or her confidence because P is complaining loud and strong about E's driving the dance in multiple directions. Pis not cooperating and E is all over P, accusing him of not being productive, not being a responsive dancer, and so forth.

E and P start to resent one another. E is irritated that Pis slow to respond to his new steps, and P objects to E's furious pace. In their mutual rage, the two occasionally tread on bystanders' toes. They want A but they don't integrate it into their dance.

Reader, please observe: I am giving you a hint about what will happen. If E is controlling the dance, and, as yet, there is no I, E will fire a determined A and look for an A who has learned not to undermine E. In that case, the poor new A becomes a speck on E's foot, dancing with E in any way E wants. A fails to perform the A dance at all. He is a shadow of who he was while he was at the corner of the dance floor. Does E respect him now that A is so compliant? No way! E treats him like a surplus ballast, ignores him, and criticizes his ineffectiveness in public or behind his back. A will be unable to join the dance, and he becomes either a 0-deadwood-or he quits.

There is still no A in the dance.

Here's another possible scenario. A joins and tries to slow the dance so he can participate. To do that he needs to control the driving force-obviously E-of the PE dance. A, aiming to undermine E, tries to get him out of the dance. The two begin to fight. Nobody is dancing now although their kick boxing might look like a dance to someone. Meanwhile, P is lost and cannot dance: E is pulling him in one direction, trying to show him new steps, and A is ordering him to stick to the dance A has planned. Bewildered, P sits down. Dissent among the dancers has ruined the dance, and eventually it is over. The dance has gone bankrupt.

Another scenario is that A does succeed in eliminating E, assisted by P who, exhausted, also wants E out. Now P and A dance together. It is a good dance-short-term effectiveness and efficiency-that both enjoy, but it's so highly regimented that it starts to look more like a march than a dance. The energy is used for P and A, but without E there is no new energy coming in, no new steps, and no new outlook. The dance repeats itself to the point of being old hat and obsolete. The audience leaves, and, with no one watching, the dancers, who miss the clapping that gave them the energy to continue, stop the dance altogether.

Stepping on Each Dther's Toes

That dance describes the pain of Adolescence. What happens in Adolescence depends on who wins the struggle between E and A. Who will kick out whom? If, as described above, E repeatedly forces A to leave, the organization suffers the founder's trap, but if A kicks E out, the organization suffers from premature aging.

If A manages to get E out of the dance, E leaves and goes home sulking. What happens to the dance when E departs? Energy for dancing starts to decline because E's interaction with the internal and/or the external environment-coming up with new ideas, new purposes-is the source of energy. E provides long-term effectiveness, and with E's disappearance, the dancers no longer know why they are dancing. They cannot dance just for the sake of dancing. Their dance needs purpose. Granted, purpose changes, but the dancers need a reason for dancing. At first their purpose may be simply to win applause; then, they may want to perform in a festival; and later on they may be hoping to make a movie of their dancing. E is the factor that imparts the ever-evolving long-term goal. If it should disappear, when the dancers achieve their stated purpose, which is no longer evolving, they go home. They have no more reason to dance. The dance dies. To have the dance continue indefinitely, E must be dancing all the time. If one E gets tired, another member of the E tribe should join to keep the dance going.

E, then, must always be dancing or ready to join. Is there a problem with that? When A squeezes E out and has control over the P dancer, a new E will find it difficult to join. The last thing A wants is someone to mess up his orderly dance. I might join so long as it abides by A's rules. Without E everyone eventually runs out of energy, and one by one, dancers start to leave.

Energy serves three necessary purposes: to develop new dancers or roles, to synchronize the dancers who need to learn to dance together, and to support the actual dancing. When energy declines, role development is the first purpose to be deprived of adequate energy. P pulls out first: He misses having E to give him new steps. He dances all right, but after a while his dance starts to look like a march. Now that P has left, what energy remains is reserved for operations. Only A remains, dancing alone until it runs out of energy, freezes in a motion, and remains like a sculpture. That is premature aging and death. The organization dies, never having reached Prime.

As you can see, it is very difficult to make the transition from short- and long-term function, PE, to short-term efficiency, A. How, then, should organizations accomplish that transition? What is healthy, albeit painful? And what is abnormal and potentially pathological?

The Healthy Dance on the Typical Path

In the earlier edition of this book, I said E should stay and dance with A, and P should take a rest. I knew, when I instructed organizations to do that, I was asking them to do something very difficult and painful. I didn't know better. I thought that if an organization allowed E to decline, it would age prematurely. It does lose energy. But I was prisoner to the concept that E is indispensable. I was caught up in the near sanctity of the entrepreneurial spirit. Today, with more experience and a better understanding of the four roles, I am more courageous about challenging established concepts. Today, after several years, I see I was wrong.

I forced P to retreat and boosted E by emphasizing vision and strategy. From where did we get the energy to synchronize the arch-enemies, A and E? I made P step to the sidelines and developed A by cutting P. My clients resisted and fought, but I insisted. And I was wrong! What was wrong with my earlier assumptions? Let's consider. Who should retreat, P or E? The role that is closer in character to A should stay.

P represents short-term effectiveness.

A represents short-term efficiency.

E represents long-term effectiveness.

I represents long-term efficiency.

If A is short -term efficiency, which other role is most like A? E-long-term effectiveness-is neither short term nor efficiency-oriented. E should leave the dance and wait on the back bench. P, like A, is oriented to the short term. True, effectiveness and efficiency are different, but let short-term efficiency integrate with short-term effectiveness first, allowing for the development of a system with short-term effectiveness and efficiency. Later, we can try for the long-run orientation. Doesn't that make sense?

"Now, before we get busy with any new ideas, is the time to make old ideas work," Stuart Resnick, chairman of Franklin Mint, told me. He and other companies objected to my advice that their companies should keep EA, that is, that they should continue to develop their vision and strategy for expansion while systematizing their organizations. They insisted that they should focus on PA. And they were right. That is what should and does happen in successful companies on the typical path. Some venture capital companies make a living of doing that. They look for companies that are in the founder's trap, buy them out, appoint a PA to organize and systematize them, and take them public, making a good profit.

Adding I to Reach Prime

What is the difference between this PA version of the dance and the PA of premature aging, which I described above as highly undesirable? The difference is E's state of mind and sense of control. In premature aging, E is kicked out, goes home, or tries to start another dance somewhere else. In the above healthy transition, E voluntarily and without losing control takes a back seat for a short time, giving the P and the A time to get to know each other. It takes self- discipline and, most important, it requires I. Now, reader, I am giving you another powerful hint: I is crucial. If there is no I, E and A fight and destroy each other. If there is I, self-discipline, and an understanding of the process, E can, for a short time, take a back seat and return later, rejuvenated and ready to help the organization reinvent itself.

Once P and A can dance well together, P should rest, giving his old partner E a chance to dance with A. Dancing with the somewhat similar P has prepared A for E, and the challenge is not too overwhelming.

That is the healthy dance on the typical path. The difference between normal and abnormal is the degree of mutual trust and respect E and A have for each other. And mutual respect is a function of I. If one kicks the other out, that event is abnormal and can be pathological. They need to give each other space, in the right sequence, and with the right timing.

What comes next? P, A, and E know how to dance together in pairs. Now is the time for all three to dance together. P rejoins, and we have a PAE dance.

To be sure we did not lose the sequence of the healthy dance on the typical path so far, here it is:

Figure 11-1: The Sequence of the Typical Path

Isn't it time for I to join? It sure is the last minute. It's almost too late. It should have joined no later than Adolescence when it was needed desperately to negotiate the fight for life and death between E and A. The earlier I joins, the better. This, reader, is my third hint to you. I joins with little difficulty because I can dance with anyone. I is a true polyglot able to speak any language, or I should say, dance any dance.

Do we have a PAEI dance? Are we there now? Have we reached the promised land-Prime? Yes. But you must take care of the land, irrigating, fertilizing, and cultivating it. Even the promised land can become a desert through negligence and inaction. It is clear, however, that the PAEI dance does achieve its assignment: The four do manage to dance together. But their dance will gradually come to an end.

Because it is very difficult to add I at the late stage where P, A, and E are dancing but not comfortably with each other, I will be vulnerable. Without I, E declines. E does not thrive in a threatening, aggressive environment. E needs nurturing. This is an interesting point. While E needs an Integrated environment, it sows disintegration. While Es hate people being aggressive with them, they are nevertheless aggressive with others. With low I or unstable I, E starts to retreat. When E goes down, the organization moves to late Prime and then to a stage of the lifecycle I call the Fall: PAel.

The Fall

How does that happen? E is surrounded by form: A and I. And P, which is being driven by E, isn't helping E; it is driven by E. Unless E gets additional sustenance by shaking the overwhelming embrace of AI, the dance will look too much like the Depression-era marathon dance nightmare portrayed in the movie They Shoot Horses, Don't They? E gets exhausted and pulls out. In Chapter 14, I explain the reasons for E's decline, the causes of aging. The life span of Prime depends on how fast A takes over and starts shackling E's feet and how fast the environment changes. Does the audience issue relentless demands for new dances?

When E goes down, which role should fall back? Reductions in long-term effectiveness affect short-term effectiveness. Pis the closest to E. E drives P, and if E retires or leaves altogether, P will eventually have to leave, too. The Talmud teaches us, "If you don't know where you're going, any road will take you there." So when we lose our long-term goals, we lose the drive to run. P feels lonely. Surrounded by form and the lonely representative of function, P is ready to pull out. Time to go. What remains is a pAel dance-mostly form, little function. That is the Aristocratic stage of the lifecycle.

With E and P down, function keeps falling, the organization's relationship with its environment disintegrates. External I has gone down. The competitive marketplace does not let that crime go unpunished. The company starts to lose market share. Eventually, the disintegration becomes pathological because the ability to survive is on the line. Internal disintegration follows, internal I goes down, and the witch hunts start: Who did it? Who can we blame? That is the Salem City stage of the lifecycle, and, when I disappears altogether, only a stump of 0A00 remains. The tree is gone. There are no leaves. Only the dead stump-memories of a tree that was once there. That is Bureaucracy. Because the organization serves no one, when even A, the remaining stump, is eventually cut, the organization dies: 0000.

Figure 11-2: The Lifecycle of Organizations

Now that we have shown how the four managerial roles relate to one another on a metaphorical level, in Chapter 12, we will see how they manifest themselves behaviorally in the different stages of the lifecycle.