Chapter 15: Structural Causes Of Aging

Structure, to my mind, encompasses three subsystems: The structure of responsibilities, the structure of authority, and the structure of rewards. They are interrelated and have to be aligned. You cannot expect success when people have high responsibilities, insufficient authority to fulfill those responsibilities, and unacceptable rewards. People need to know what is expected, feel that they can accomplish it, and have a personal reason for doing it.

In this chapter, I take one section of the puzzle, the structure of responsibility and authority, and discuss its impact on aging. The alignment of responsibility, authority, and rewards is a complex subject.

The Functionality of Organizational Structure

The functionality of organizational structure is the fourth factor that affects an organization's entrepreneurship. Often an organization's structure inhibits the entrepreneurial spirit. Consider the example of a bare-bones company, organized functionally. In order to demonstrate how structure impacts behavior, I am presenting a simplified example.

Notice that the departments on this chart are on legs of different lengths. The differences reflect the orientations of the departments. Those with long legs have a long-term orientation; those with short legs have a short-term orientation.

Figure 15-1: Typical Functional Organization Chart

The four PAEI roles of management describe the basic orientation of each of the departments.

What should the orientation of a typical sales department be in PAEI terms? Sales are closely oriented toward satisfying customer needs, thus Performance, the P role. Satisfying those needs efficiently is a function of Administration. A sales department, aiming to satisfy client needs efficiently, should have the PAei style. Such a department has sales scheduling, quotas, and sales training.

Marketing is also oriented toward customer needs, Performance, but that orientation is within the context of developing creative solutions to satisfy tomorrow's needs, or Entrepreneurship. Marketing should have a PaEi orientation.

The accounting department is a story in itself. Obviously A should be its primary function, but E is also necessary. Why not PA? The PA style calls for the organization to provide effective service efficiently. That is the function of sales, not accounting. AI, a system of accounting that will be politically correct, is not right either.

Still, why AE? The A does not need explaining, but why E? The following joke helps make my point.

A small company was looking for an accountant. The three candidates who applied were asked, "How much is two plus two?" The first candidate had just passed the CPA exam. Like most people with no real-world experience, he answered instantly and without doubt: "Four! No question! Four!"

The second candidate had worked for many years at one of the world's largest auditing firms. With some hesitation, he said, "I'll have to check with the home office first."

The third candidate was a graduate of the University of Hard Knocks. He was street-wise. Through half-closed eyes, he looked at the interviewer and asked, "What do you have in mind? Are you sell- ing or are you buying?"

The third fellow got the job, and rightly so. For accounting to be an information system rather than a data system, accounting must understand management's goals. It should be A or E, able to provide control of the company's direction. "Are we going into or getting out of the New York market?" Every question requires different information. In many companies, accounting is bookkeeping. Management gets data but no information. That happens when the management team doesn't include accounting in its discussions. The accountants are neither the driving nor the driven force. They just produce reports on what has happened, not what is or will be happening. And that reminds me of another story.

Two people are in a balloon flying over the countryside. Clouds form, and after some time, the balloonists realize that they are lost. Flying around, they finally see an opening among the clouds. They begin their descent, and when they see a man standing on the ground under them, they shout, "Hello! Can you tell us where we are?" And the guy yells back at the top of his lungs, "In a balloon!" Frustrated, one balloonist says to the other, "That guy down there must be an accountant."

"How do you know?" his partner asks.

"Because he gave us accurate, precise information-totally useless!"

The desirable pAEi orientation should also apply to organizations' legal and information technology departments. Each of those departments, in order to perform its function adequately, must first ask, "What do you have in mind?" Testing to see whether your legal people do ask that question is a good way to determine whether the organization has a lawyer, or a highly paid legal secretary.

Here is how it can go. Ask your lawyer to review a newly written contract and let you know whether you should sign it. If he says, "Fine, I'll call you in the morning," you should fire him. Anyone with legal training can check the legality of a contract. It takes only memory to know the rulings, precedents, and laws. What your organization needs is not a lawyer who tells you why not but one who tells you how yes to accomplish your goals.

Figure 15-2: PAEI Orientation of Typical Departments

A lawyer worth keeping would have pushed the contract aside and asked, "Before I read it, tell me what you have in mind. What are you trying to achieve?" You can have confidence that that lawyer will check, not only the legalities of the contract, but whether and how it will achieve your goals.

The same rule applies to computer people. If they agree to tell you which computer or system to buy before they have reviewed the ways your organization aims to use it now and in the future, then they are only salesmen of computerized typewriters and calculators. They cannot be trusted to set up your company's information technology systems.

Where Is the Conflict?

In the above functional structure, how well do the various depart- ments of most companies get along? The following list details the departments that have-and should have-considerable disagreement and conflict:

• Sales versus marketing

• Production versus research and development, and engineering

• Accounting, legal, and information technology versus everyone

• Personnel versus human resources development

A mistake most analysts make is to attribute conflict to the individual personalities involved.

If conflict is not the result of personality problems, why, then, do those units have trouble getting along? What is the nature of their conflict?

Sales accuses Marketing of not understanding the realities of the market. The sales people perceive themselves as working hard to implement a pricing-and-product strategy, and as soon as it is working, the fat cats from corporate marketing headquarters come along and change it. Marketing, on the other hand, accuses sales people of resisting change and dragging their feet. "Salesmen, you know, aren't that smart. If they were, would they be on the road all day?"

Production and Engineering are also at odds. Engineering always wants to change the technology, to update it. What do production people say? "Come back next year." They do not want anyone messing up their production schedule. Their performance is measured by productivity and manufacturing costs. The changes might work in the long run but they sure make a mess and retard their goals in the short run.

And Engineering is upset, too. "There is resistance to change from these small-brain production people. They have their eyes set on their own belly buttons. Heck, if we didn't push, they would still be working with spinning wheels."

Often the organization neglects the structural issues and tries to resolve the conflict by changing the personnel. The company might send someone from Sales to head Marketing, or someone from Production to head Engineering, so that "those guys up there will know the realities we face before they make their decisions."

Of course, those solutions won't work. If the sales person maintains his sales PA orientation when he is supposed to be directing the marketing effort, the company loses E. Likewise, it's no solution to put a production person in engineering. If, on the other hand, those people are able to change their orientation from PA to PE, their erstwhile colleagues will accuse them of being traitors.

Another mistake is to attribute such conflict to problems of style rather than structure, to assert that people are just not team players. So people cry out, "We need a team player." Out goes one player and in comes another. What happens? If the new marketing guy is aware of his predecessor's marching orders, "be a team player," he may try to fit in. Then he won't be able to exercise pressure for change, as he should. Who sets the tone now? Sales.

Figure 15-3: The Streamlined Organization

And, you might see the same scenario playing itself out in Engineering, but, in that case, the Production department is the driving force. The organization has team players but as the PA orientation dominates, the E orientation is lost. Engineering ends up doing maintenance.

The most common solution to such conflicts is to unite the warring departments and produce a streamlined organization.

What's wrong with this structure? Sales is P-oriented, short- term, and results-oriented. Marketing should be E-oriented, long- range, entrepreneurial, viewing, and analyzing. When Sales and Marketing merge, which orientation will dominate? The P or the E? The short- or the long-term orientation? The answer is obvious: the short-term, sales orientation will win. Marketing ends up doing statistical analyses of sales and preparing sales support material, and calling those activities marketing. They are not leading change as they should. And how could they? Their bonuses, orientation, the group they belong to, and the pressure they experience all focus on short-term selling, not long-term market development.

Similarly, when production and process engineering merge, they call the department, the Manufacturing department. Nevertheless, process or industrial engineering staff is probably doing maintenance, oiling and repairing production's machinery. E is dominated by P, and the short run is driving the long run, rather than the other way around. It's clear that hardly any E remains.

The so-called Human Resources division has a similar problem. It encompasses both the EI functions, the true human resources role of developing new capabilities, and the PA role of human resources administration. In the administrative role they fire, displace, and perform salary administration, and they oversee personnel evaluations, selection, and labor negotiations. It is Administration for Performance, and Productivity. The EI, the true human resourcesStructural Causes of Aging 313 development, and the PA role of administration, are in conflict. And as expected, PA wins. The department personnel, although trained in I and aspiring to provide I for the corporation, is by and large in the A business. They do management's dirty laundry, the evaluations and firings. It is not strange then that labor, by and large, does not perceive the Human Resources Development department as being in the human resources development business. Labor considers human resources to be management's long arm. So, when human resources presents its ideas for job enlargement, job enrichment, or participative management, how does labor react? "Aha! This is a new trick to make us work harder for less money. No, thank you."

The people in the Human Resources department are frustrated. The staff wants to develop people. They want to be humanistic and motivated. But they are accused of being manipulative. They are viewed with suspicion. "Those guys smile a lot; but they're wishy- washy soaped fish. You can't catch them. They'll wriggle right out of your hand. They are useless (or dangerous)."

Putting an EI like Human Resources Development (HRD) under Personnel will kill its EI function. It will be subordinated to personnel's PA function. HRD people end up at the bottom of the totem pole, ensuring that the coffee is warm and the refreshments have arrived for training sessions. They lose their EI functionality.

And now let's look at a real sacred cow of s—called modern management: the chief financial officer. It's a mistake to combine finance and accounting. Finance should cover investment analysis, treasury function, management of resources, investor relations, and use of funds. Its focus is on the future. Its style should be Ep. Accounting's province is the controller's function: accounts receivable, accounts payable, and general ledger bookkeeping. It focuses on the past. It should be Ae. By putting the two together, a compa- ny creates a very dangerous situation-a delayed reaction syndrome. The company skips a heartbeat, suffering arrhythmia. Let me explain.

Accounting's role is to be a pain. It should be and frequently is precisely wrong instead of being approximately right. Accounting returns a request because a signature is in the wrong place, and that's the way it should be. The accountants are the guardians of law and order, and the company needs that to maintain systemic control. As a consequence, accounting people are not widely popular, are they? People accuse them of being bureaucratic, unresponsive, closed- mouthed, and closed-brained.

Now, consider a scenario in which a certain product line is doing poorly. The executive committee analyzes the problem in its meeting. Will the head of Marketing suggest dropping the line? Probably not. It was Marketing's idea in the first place. Instead, the marketing people will ask for a higher advertising budget. They will try to increase the budget of the marketing mix, making promises in order to keep the product alive a little bit longer.

Will the sales people try to kill the product? Not yet. Their incentive systems are based on sales quotas. They will suggest lower- ing the price. They will attribute the problem to lack of collateral marketing, prices being too high, and the incentive being insufficient.

How about Production? No vocal objection from this department either. Production's incentive system includes this product line. The production people might say that things would be better with another piece of machinery. "If only we had that machine, we could improve the product's quality, and it would sell beautifully."

Personnel has no interest in killing the product either. Its death might mean reductions in labor force.

Clearly, every department views the corporate problem through its own interests. Each solution is derived from its local orientation.

Who, besides the CEO, is not interested solely in market share, sales, or production, unless it produces profits? It should be the vice president of finance, who should be looking at return on investment. Period. If the internal cost of capital invested in this product line is higher than its return, the finance person should say, "Let's do something else."

If accounting and finance are in one division, the finance vice president's attempts to kill a weak product line might be misinterpreted. "Those accountants always say 'no' to everything, so what else is new? Big deal. If we let bean counters manage this company, we will be dead in no time!"

Several months or even years will pass before it's no longer in the interest of Marketing, Production, or Engineering to keep that product line alive. By then, the company will be in trouble, and now everyone wants to do something about the situation. When an axis develops, the CEO can easily act. I realize that I am being, perhaps, overly dramatic, but in my experience, after Adolescence, no CEO acts completely alone and without consulting his top subordinates. What they advise the CEO is colored by their interests, and their interests stem from the organization's structure.

If I see an organization chart with VP for Marketing and Sales (and true to the orientation, it is always called: Sales and Marketing, not Marketing and Sales), VP Production and Engineering (or the mistake IBM made in 1997: R&D and Production together); VP Personnel and Human Resources Development, Finance, Accounting, Legal and IT, all under one VP for Finance and Administration who is also the CFO, people will complain that the organization is stymied, slow to react to market forces, and lacks a really strategic outlook. So, the organization hires someone to be a strategic planner. Figure 15-4 shows how that looks.

Figure 15-4: The Net Impact on "E"in the Streamlined Structure

You cannot make a submarine fly by appointing a very qualified pilot to look through the periscope.

Structure Causes Strategy

Please note: Structure causes strategy, rather than strategy causing structure.

That disagrees with the famous treatise of Alfred B. Chandler. In my view, Chandler was right that strategy should determine structure, but in reality, my experience is that present structure deter- mines present strategy. Existent structure has embedded interests, and when the time comes to make a strategic decision about change, guess what. People vote with an eye on their self-interests. And if the structure consolidates short-term interests, guess what, again. How do they vote?

Structure causes behavior; structure causes strategy. If one wants to change behavior, one must first change the structure. It's useless to develop a strategy for getting a submarine to fly. If you want it to fly, you must change the submarine to an airplane before you set a strategy for changing its performance. No new strategy can be implemented before a new structure is in place.

Let me illustrate what I mean with a story from my own adolescence.

Just after I finished high school, I was part of an Israeli high school delegation to France. We traveled overnight by train, from Biarritz to Paris. As teenagers will do, all twenty of us tried to sleep in one compartment that could accommodate eight people at best. It took almost two hours and plenty of cooperation before each of us was able to find room for feet, arms, and head. Some tried sleeping on the floor. Some were sitting on others' laps. One head was behind somebody else's shoulder. The sleeping arrangement was structured around people.

Just as we finally fell asleep, somebody announced that he needed to go to the bathroom. Incredible commotion. He could go only if he upset the entire group. One had to move a leg; that one had to move a hand; this one had to move his body; another screamed, "Don't step on my toes."

When an organization is structured around people and not around a task, it may well be easier to wet your pants than to cause widespread commotion. And for that reason, in organizations structured around people, change can be very difficult. There is a saying that, in such organizations, you can recognize innovators by the arrows in their backs. To make a change requires so many buy-ins, approvals, and arrangements that the innovator simply gives up before even starting. Eventually, not only one person is wet. A lot of people are feeling damp, and someone will say, "This organization stinks!"

What should the new structure be? For that we need a strategy, don't we? This is a chicken-and-egg problem. I have dealt with this dilemma the following way. First the organization should define its business, that is, its mission. The focus is not on strategy: That is a how focus. Mission is a what and why focus. Who do we want our clients to be, which of their needs do we want to satisfy? What is our role? That exercise leads to organizational structure. What I often find is that there is a market segmentation that calls for product differentiation and a structural representation of that differentiation.

Take the following example of a company that was introducing what I will call a new food bar. It was delicious with lots of vitamins. Sales were growing 100 percent annually. The company was structured functionally: head of Sales, head of Manufacturing, financial officer, and administration: Classical Structure 101. I asked the managers, "What's your market share?" They hesitated. "Well, it depends," they said, "how you define it. If we are talking about sports energy bars, market share is X. If we are talking about the snack market, then it is Y. And for the weight-loss market, it is Z." In other words, the company was serving a multiplicity of markets with one and the same product, one and the same promotion program, one and the same package and price delivered with one and the same functionally structured organization.

How could anyone do strategic planning? For whom do they plan if the different market segments are not represented structurally? The company should have organized itself with market-segment managers responsible for the market share of their specific markets and the profitability of those businesses. The managers should devel- op specific strategies for their markets. They can share Manufacturing, Accounting, Human Resources, and even the Sales force, but they need a structural focus that reflects market and product differentiation.

Only when organizations have implemented the right structure and aligned information and reward systems do we progress to strategic planning. If, after we have designed the strategic plan, we see the need for a newer structure, we adapt the latest structure to reflect those new needs. In organizations that work with the Adizes methodology, structure is continuously adapting and changing.

So why doesn't every company proceed that way? It is my belief that self-interest dominates the choices we make. It's easier to send someone for Harvard training. It's easier to hire a strategic planner to sit, smoke a pipe, write reports and get an ulcer. And it's easier to pay a very respectful consulting firm a cool million dollars for very competent recommendations than it is to put people through the pain of structural reorganization. And even if you are willing to submit to that pain, you cannot do it too often. Spending money on consulting recommendations doesn't bother management so much as spending its own time, struggling to survive political wars, and fearing the painful political repercussions of change. Once you free the genie from the bottle, who knows who will survive? So companies do not restructure or they restructure much less frequently than changing market forces dictate.

Structure affects strategy because structure reflects relative self- interests, and the interest structure affects the emerging strategy.

Structure causes behavior.

And if the structure rejects E, it can become the fourth factor contributing to the loss of E.

Growing vs. Aging Companies: The Difference

What I said above applies to aging companies. It explains how the streamlined functional structure ages them by rejecting E. It does not apply to growing companies which have ample, albeit personalized, E.

Each company should be structured to encourage and nourish the role it needs most depending on its location on the lifecycle. Growing companies should structure to protect A, to act as a countervailing power to E. In growing companies, a vice president of administration to oversee accounting, personnel, legal, and information technology is recommended.

That structure would be very undesirable for aging companies, premature or not. In aging organizations you want less A. You should separate the A functions, and, to prevent aging and the loss of E, you should unite E with a vice president in charge of Marketing, Finance, Engineering, and HRD. How can anyone manage such a diversity? How can the CEO? This is the training-wheels position for being a CEO. If the person cannot run multidisciplinary functions, it's good we identified the disability early.

Never, never, never should organizations structurally pair these functions: marketing and sales, production and engineering, finance and accounting, human resources development and human resources administration. For aging organizations it can be pathologically dangerous. In growing companies it is undesirable but bearable because the titles do not reflect what is really happening. The vice president for Sales and Marketing carries the title but does no marketing. The founder really does that. The same is true of the chief financial officer. In reality the founder monopolizes the E role no matter what you call it and where you put it. The problems start when the organizations are honest-to-goodness trying to find a structural solution. Then bad design causes bad behavior.

Organizational Colonialism

We have diagnosed a functional structure for a simple profit-center organization. A company with many profit centers faces an additional challenge-organizational colonialism. What is that?

We can use a single lifecycle curve to describe an organization as a whole. Such a curve, however, does not represent each of the company's component divisions or departments.

Companies comprise units, departments, or divisions, and each of those can be located in a different part of the lifecycle curve. It's not unusual for a multidivisional company to have some profit centers in Infancy, some in Go-Go, and others in Prime or Aristocracy. Frequently, such entities are organized according to the hierarchy shown in Figure 15-5.

Because Aristocracies like to take over Go-Go companies, such configurations are not unusual. The Go-Go gives the Aristocracy growth it can't otherwise achieve. Go-Go companies, on the other hand, acquire Infants because Go-Gas are promiscuous. They start or buy businesses easily. Such structures are, however, susceptible to a problem.

I define a situation in which Infants report to a Go-Go and a Go-Go reports to an Aristocracy as organizational colonialism.

Figure 15-5: Organizational Colonialism

Analysis of the relationships among the units, in terms of their needs and the appropriate measures of performance, reveals the problem with organizational colonialism. What is the goal of an Infant organization? To break even and get enough cash to survive. Infants are engaged in a constant fight for cash. They always need more capital. What does a Go-Go company want? Sales and sales growth are the goals they impose on those reporting to them. Moreover, because Go-Gos need capital to fund their own growth, they are not inclined to share. The request for funds annoys the Go-Go parent, who in response to the continuous requests for funding, demands, "What? More money? We gave you money four months ago. When will you stop asking? What's more, we want to know why you aren't growing so fast as we expected. We grow 35 percent a year, and your growth is nowhere near that rate. Why should we give you more money?"

What does Aristocracy want? Dividends. Return on invest- ment. Instead of giving, an Aristocracy takes. It wants to milk the calf as well as the cow. So the Aristocracy milks the Go-Go, and the Go-Go kills the Infant by denying it resources. I call it colonialism because the higher unit imposes its goals, which reflect its lifecycle location, on the unit it dominates. It ignores the goals that are appro- priate for the younger unit according to its stage on the lifecycle.

What happens is very interesting. The entire organization goes under. Every component that enables rejuvenation and growth is available, but the organization's structure causes its various units to impose nonfunctional demands on one another. Each unit suffers. The goals that the parent imposes are dysfunctional for the child's stage in the lifecycle. The demands are functional only in terms of the parent's needs, and it uses its power to impose its desires.

Summary

To summarize this and the last chapter, four factors have impact on E: the mental age of those in control of the organization, the functionality of the leadership style, the perceived relative market share, and the functionality of the organizational structure.

To diagnose an organization, we observe its behavior. That should indicate its location on the lifecycle. Then we analyze its managerial roles: Is E personalized in the leader, or is it systematically provided? If it is personalized, the organization is pre-Adolescent.

If it is systematized, it is post-Adolescent. Is E, as measured by the rate of change and the need for proactive response to the environment, sufficient? If the organization is aging, you need to check to see which of the four factors is contributing to E's demise. That should confirm your hypothesis about the organization's location on the lifecycle and why it is there.

Where are we now?

I have stated that one's age is determined by the difference between expected and desired. Remember? As long as you wish for more and/or better than what you have, you are motivated to change. That makes you young. The day you wish for nothing more, you have aged.

But that does not describe old people. They want more, and they are old. They want more health, more youth that they have lost. Now what? Well, it depends on whether what they want is controllable. Is it wishful thinking, or do they have a potential plan of action? That brings us to our discussion of controllability and its impact on aging.

CAPI in the Lifecycle

There are internal and external forces that explain why CAPI behaves the way it does at the different stages of the lifecycle.

CAPI can break down for internal reasons. In family businesses, CAPI can break down because of deteriorating relations among family members or because other interests have started to diverge.

We have already said that prior to Adolescence, CAPI is with the founder, who, more often than not, is a dictator. Why then, if the founder has complete control, is organizational predictability low? It should be high. The reason for that unpredictability is that prior to Adolescence, CAPI is personalized. It is vested in the founder, who is a big E. Such founders provide continuous change, unopposed. It is predictable that their organization will behave unpredictably.

Since founders call all the shots and control their companies, they are arrogant, dictatorial, and authoritative. They make decisions in a nonparticipative way: intuitively. Founders don't articulate their strategies, and people seldom understand their decisions. Consequently, despite founders' complete control, their organizations are out of control. The lack of organizational control is attributable to a lack of A-systems, rules, and policies. A imparts a backbone of predictability to companies, controlling founders, as well. The backbone is developed during Adolescence, and organizations move to Prime where their behavior is flexible and predictable.

Figure 15-6: CAPI over the Lifecycle

From Adolescence onward, control is systemic rather than personal. Incrementally, starting in Prime, the system grows stronger than the individuals who constitute it. For that reason, structure can cause the loss of E. That explains the increase in organizational pre- dictability and the loss of flexibility.

When CAPI breaks down, and interest groups split in several directions, the organization is predictably stale. No one group alone can direct organizational change, and, since each group has different interests, it is difficult to coalesce and affect change. Eventually, when the form is barren, yielding no desired function, a breakdown will occur. The system will die, and a new one will emerge from the ashes.

What are the internal factors that can cause a company's CAPI to break down? Consider how personal self-interests and organiza- tional controls interact.

In healthy, growing companies, founders control their organizations. They usually have CAPI. In Infancy, their focus is on survival. In Go-Go, the goal of those in control is to have fun: Go-Go leaders want their own personal sandboxes. All their other interests-from family needs to the demands of as-yet nonunionized labor-get only offhand attention, at best. Those interests don't yet have a chance to express themselves because the founders at that stage still have CAP I.

In the founder's trap, the self-interest of founders dominates at the expense of organizational interests. Founders' compulsion to be in control-to satisfy their own egos-prohibits their companies from developing self-control. No one else can play in a founder's sandbox. CAPI is unified and under control but because it is per- sonalized and monopolized, it is dysfunctional to the development of the organization. Such founders are analogous to parents who refuse to allow their adolescent children freedom to mature; they want them under control, immature. This can happen in organizations comprising adult and otherwise mature people whose managerial behavior is nevertheless immature. Even the middle-aged vice presidents and members of the executive committees of such organizations exhibit immature, adolescent behavior. They are often laughing, giggling, fighting, and complaining about one another. They go to "Papa" for judgments and decisions. They refuse to accept responsibility for anything they complain about. They expect Papa to sympathize with them and solve their problems. Their biggest com- plaint, frequently tinged with hostility, is about Papa himself. Papa is the person who made the company grow during Go-Go. There is a love-hate relationship flourishing between Papa and the subordinates. The subordinates want Papa out, but, at the same time, they know they can't manage without him. Some organizations get stuck at this point. There is little, if any, change coming from internal sources until the founder either passes away or sells the company.

The situation of companies caught in the family trap is even more serious. The split in interests can take many forms.

Sibling rivalry is one reason companies lose CAPI in the family trap. If the reins of management are passed to an older daughter, the younger son, who might be more aggressive than his older sibling, resists his sister's control. I have observed that, depending on birth order and the style of the parents, children's style is predictable. By and large, firstborn children are not Es if, in the "traditional" family with the mother not working, the father was an E. The father burns the E behavior out of the child. Most firstborn children of Es have A tendencies. The second child is most likely an I. The third child can afford to stick out and be an E. Obviously, these patterns are not cast in concrete, and a lot depends on whether the family is traditional or modern.

Children who are not firstborns may object to a hierarchy of leadership determined by birth sequence. "This is not a royal succession," they claim. "Why does he or she get to be the leader?"

Family pride can easily dominate rational managerial thinking, and that can be another source of breakdown in CAPI. To maintain control, members of the family may be prohibited from selling stock. Voting stock, for instance, might be in a trust over which the patriarch or matriarch has complete control. The children clip coupons, but they have no way to affect what is going on. Eventually and inevitably, however, children grow up and patriarchs die. That's when the untrained children start fighting with the professional managers about money. There is no Papa to keep the children under control, and chaos overtakes the organizations. Management can't act professionally under those conditions. Some quit, and the family squabbles over who will assume leadership. Ego trips and personal interests dominate, overshadowing organizational needs.

For the most part, this analysis applies to companies in the western world. I have observed that birthrights are more acceptable in the eastern cultures, and, in terms of CAPI, succession there is more stable.

During Adolescence, interests diverge. A is risk-averse; E wants growth. If A wins, risk-averse interests dominate, and the organization drifts into premature aging. If E dominates, the organization returns to the Go-Go stage. If A and E move together, the organization progresses to Prime.

In Prime, interests coalesce. Management deals with a coalition of interests: stockholders' concerns about returns on their investments, management's own interests in growth, and labor's interests in security. The company is not under the control of an individual. Its plan-its strategy-unites and reflects the interests of each of the different groups.

After Prime, interests again begin to diverge. The stockholders' separation from management, when it occurred in Adolescence, was desirable. It produced Prime. But such separation has increasingly negative implications as time passes. Management becomes more self-interested than owner-interested, and its self-interest has negative impact not only on the stockholders but, over time, it has its effect on labor as well. That is not true for young companies in the Silicon Valley in which stock options make all employees stockholders, and the interest in stockholders' value is high. So how does CAPI break down after Prime? It comes with the silo syndrome. Each division or department has its goals and gets rewarded by its performance, but overall responsibility for tying everything together rests with the CEOs. They can't do it. They can't be stronger than the whole organization. They can't alone hold together the parts that are falling apart. The emperor is nude, even if he is leading by walking around.

In Aristocracy, the organization can afford the split in interests because each of those interests is milking the company. Since the company is fat, there is plenty of milk. But peaceful coexistence is over as soon as there is no more fat. Then, instead of carving up the organization, people start carving each other.

The stockholders are the first to lose. They see their investment beginning to dwindle. Next, the company starts to fire people, and labor loses. The managers are usually the last to lose, but eventually top management gets ejected too, flying away with golden parachutes.

To verify an organization's location on the lifecycle, ask who has control; not ownership, but behavioral and managerial control. Is the organization under the behavioral control of an individual or a system? If an individual is running the whole show, the organization has not yet reached Adolescence. If the organization has a system of governance that exercises control, the organization has progressed past Adolescence, and if there is a commonality of interests among the groups comprising CAPI, the organization is in Prime. If there is no commonality of the interests comprising CAPI, the organization has moved beyond Prime. Has the chronic infighting started? If not, the organization is in the Fall or Aristocracy. If there is chronic infighting, the organization has reached Salem City.

The breakdown of control can also be attributed to external causes. Such forces might be political, as when government gets involved and makes new rules or guidelines that affect control of the organization. Governments of many countries, for example, have interfered with organizations to the extent of transferring power to the workers. For political reasons, governments bring workers into decision-making positions. Management finds itself forced to negotiate with subordinates about subjects that in the past had been its exclusive prerogative. Decision-making gets stymied, and if this is part of a total anti-entrepreneurial campaign, management leaves the country, sending capital out first. Perhaps the government has legislated what and how things must be done, changing the rules of the game. In Scandinavia and Germany, workers' representatives must serve on corporate boards of directors. That requirement can lead organizations over the Adolescent hump into Prime, but if management cannot handle the diversity of interests, the company will proceed into Aristocracy.

Japan reached Prime quickly, because behaviorally, rather than legally, management tried to optimize the interests of labor, ownership, and management. Japan has a culture of mutual trust and respect and minimum internal marketing, all of which enabled Japan to reach Prime quickly. And Japan dominated the economic scene for a while. Eventually, it lost its leadership position and started aging because of the growth of A, which, together with the enormous culturally based I, caused bureaucratization. Japan's E is weak. Its educational system is geared to memorize, to know, not to learn and create. It will have to struggle to get out of its slump, change its educational system, or it will have to find strategic partners who can give it what it lacks in PAEI roles. Organizations in other Asian nations- Malaysia, Hong Kong, and Singapore, for example-are still battling their ways through Adolescence, frequently falling into the family trap. In those countries, the hierarchy of birth is not an anathema, and the family trap is not nearly so dangerous as it is in the West. CAPI, therefore, is not yet broken. In western cultures, family feuds are more common. As people of Asian countries become westernized, unless they develop formal systems to maintain I, they will also suffer the managerial diseases-CAP! breakdown-of the West.

We have completed our discussion of why things happen, the analytical part of the book. Now we will address the question of what to do. As I indicated in the introduction to this edition, I have kept this part of the book short because since the first edition of this book, I wrote Pursuit of Prime. That book deals exclusively with prescriptions.

Readers who are interested in clinical training may address their inquiries to the Graduate School of the Adizes Institute.