Chapter 14: The Causes Of Organizational Aging

What causes aging is a decrease in flexibility and an increase in controllability. As controllability increases and flexibility decreases, the organization increasingly loses touch with its environment; the environment changes faster than the organization's ability to adapt. That disintegration with the external environment causes internal disintegration as well. CAPI breaks down because each interest group reacts to those changes differently and starts pulling in its own direction. Breakdown in CAPI decreases the organization's ability to act and react to changes. The organization ages.

Flexibility and control are functions of Entrepreneurship and CAPI. High E and high CAPI make organizations flexible and predictable. Low E and low CAPI make organizations inflexible and brittle.

What affects Entrepreneurship and CAPI?

The Behavior of Entrepreneurship throughout the Typical lifecycle

Of the four PAEI roles, Entrepreneurship is the most critical for changing culture on the typical path.

It precedes and determines the Performance function because it is the long-term component of P. Administration should also be derived from the task that must be Performed. In other words, how we do anything must be geared to what we want to do, and that, in turn, derives from the why we do anything.

Who does it with whom and how-the organic how, the Integration role-on the typical path is derived the same way the mechanistic how is derived- like A is derived from P and thus from E.

Let's examine Entrepreneurship's critical impact on organizational behavior.

E is the locomotive force of an organization. When commitment-E-is born, the organization is conceived. When commitment evaporates, even though some parts of the organization still func- tion, the organization seems to be brain dead.

To understand the lifecycle curve on its typical path, we there- fore focus on the E role. It is a vital sign, and it must be monitored. Figure 14-1 traces E's behavior on the curve.

First, we should note that during Courtship, E is very high. There is a lot of noise, passion, excitement, willingness to take risks, creativity, imagination, and fascination with endless possibilities. This behavior, because it propels the organization into the future, is functional. With no love affair, passion, or excitement, the first challenge could dissolve the commitment necessary for the birth of an organization. The idea might be abandoned.

Figure 14-2: Entrepreneurship over the Lifecycle

It should be noted, however, that excitement remains high so long as there is no risk. When risk is born, E declines rapidly. There is no time to think and no time to create. It's time to get things done. This transition introduces a measure of disenchantment. People begin to ask what happened. "Since we got this organization started, we no longer have the time to imagine, to get excited, to get together. Everyone is just working, day in, day out."

The need to work continuously is normal: The organization must cover its risk and work to satisfy its commitments to itself and to the marketplace. It is time to deliver.

If E stays dormant for too long, the organization might die. Management needs a vision to maintain its interest, to keep its commitment alive, and to ride out the difficulties of Infancy-continuous back-breaking work. If management does not get back to the dream, if it can't define what it is trying to achieve, then the Infant organization is nothing but a source of hard work, and enthusiasm eventually burns out.

It is mandatory to sustain E, at least latently. Eventually, the organization will be freed from cash pressures and the ongoing need to satisfy immediate demands from clients, suppliers, and bankers. Then, when people again have time to think, the dream can resurface in the organizational consciousness. When people are again dreaming, the organization moves into its Go-Go culture. At that stage, E rises, and there is time to try new things. It has already proven that it can survive the difficulties of Infancy.

What happens next? As the organization starts to grow, making bigger mistakes, it discovers the need for A. When the A role-the technocracy, bureaucratization, systematization, and institutionalization of the organization-rises, the structure of who does what, when, and how affects the Entrepreneurial spirit. No longer channeling energy, the Entrepreneurial spirit is channeled by A. People feel the constraints of all the new rules, processes, and forms governing who decides what, with whom, and how.

The E curve from Go-Go through Adolescence is erratic. It zig-zags up and down. The founder and the organization engage in a tug- of-war. Founders want both to maintain control and to reduce their involvement. They want to have their cake and eat it, too. They want central controls and decentralization. Why can't Go-Gos have it all? Because they have yet to develop A.

Delegation is the transfer of P down. Decentralization is the transfer of E down. Founders want to delegate, to transfer P down, but they resent the limits A imposes. P without the boundaries of A can easily have the effect of E. The founders end up decentralizing, losing control, rather than delegating. When they realize they have lost control, they stop delegating and recentralize.

They say, "I want to decentralize. I want to institutionalize leadership so it won't be necessary for everyone to come to me every time. However," they continue, "don't you dare make decisions before you check with me." Alternatively, they say, "Make any decisions you want, as long as you are sure you're making the decision I would have made, if you had asked me." The organization is locked in a Catch-22 because it is very difficult to predict the decisions the founder would have made: He changes his mind too frequently.

You cannot decentralize unless you first have systems of control. Without A, delegation ends as decentralization, and decentralization becomes abdication.

In Adolescent organizations, the struggle between A and E is a struggle for systematization, order, and efficiency, on one hand; and growth, continuous change, and market penetration, on the other hand. It is a struggle between quantity and quality, flexibility and predictability, function and form. A provides for form, predictability, and quality; while E provides for quantity, flexibility, and functionality. The authority structure of Adolescent organizations manifests those struggles. The founders want to restructure their organizations, to attain systematization and order. At the same time, they want to dominate and control such critical activities as finance, marketing, and product development.

Moving discretionary powers from founders to their organizations, and systematizing and professionalizing decision-making, intensifies the struggle between E and A. Founders might say they are decentralizing and delegating, but people in the organizations can't be sure that the founders mean what they say.

If two partners represent the A and E roles, the conflict can be strong enough to make them split. In such cases, the A personality usually remains, and the E personality departs, leaving the organization's entrepreneurial spirit highly threatened.

What should happen in such cases is that E should temporarily step aside, allowing for PA systematization. Then, in late Adolescence, E should reappear, institutionalized instead of personalized. And that brings us to Prime.

Warning: This is a complicated maneuver: For more information, I refer the reader to Chapter 17 on treating organizations, and to my books, The Pursuit of Prime and Mastering Change.

The institutionalization of E permits the organization to make entrepreneurial decisions in a professional way. The organization assembles relevant information, discusses it as it relates to policies, guidelines, and strategies, and makes decisions independent of any single individual and his or her idiosyncrasies.

What happens after Prime? E declines for reasons I will describe in this and the next chapter. During the Salem City era, when there is no E left, people start looking out for themselves. If there is any Entrepreneurial spirit, it's applied not for the benefit of the organization but for the benefit of the individuals, even at the expense of the organization. During this period, the organization eliminates any traces of E, firing the E types. That is why I show the E curve going below the zero line.

Factors Affecting Entrepreneurship in the lifecycle

What causes changes to E at the various stages of the lifecycle curve? Why do those changes occur? I have spent some thirty years working with organizations of all sizes, in a variety of technologies and cultures. Rejuvenating declining E at the aging stages and institutionalizing it at the growing stages, I have observed that several factors have dramatic effects on organizational E. If we understand those factors, we can take specific steps to deal with potential problems before they become pathological and endanger the organization itself.

The E spirit, both in individuals and in organizations, is a function of the disparity between desired and expected consciousness. As long as people desire more or better than what they expect, they are young. The day a person looks at the future and says, "I like and accept what I expect," accepting the expected as desired, that is the day one begins to age, when there is no inducement to change.

How young or old anyone is depends on how much change he or she is willing to cause or endure.

Entrepreneurship = function of ( desired / expected)

In these thirty years, I have found that four factors affect the disparity between desired and expected, and, consequently, they affect the consciousness of Entrepreneurship. I know that those factors are valid, because by treating them, my associates and I have successfully rejuvenated aging organizations. Their time to market with new products improved dramatically; their market share increased; and the percentage of their revenues generated from new services, products, or markets increased dramatically too.

The four factors are:

People factors	Organizational factors
Mental age of the leadership	Perceived relative market share
Functionality of leadership style	Functionality of organizational structure

Those four internal factors are within the direct control of the company. There are, of course, also such external factors as culture, technology, market conditions, and political climate that strongly influence Entrepreneurship and CAPI. Those external factors can cause an organization to accelerate its aging or-in the case of mar- ket deregulation-even to jump stages. Since this book is oriented to leaders of change, we will consider only those four factors, which are or should be controllable by the organization.

1. Mental Age of Leadership

The first factor is the mental age of those who are the decision-makers-the people who control the organization and comprise CAPI. They are not necessarily owners. Often, the management controls the organization-not the owners who are scattered and badly represented on the board.

What is mental age? In one's own mind, it is the disparity between desired and expected. Mental age is not necessarily related to chronological age. Some individuals are young at 50, and others are old at 25. Do they accept the expected as desired or do they desire something different from the expected? The difference is expressed not only in quantity. Perhaps they don't want more quantity-just more quality. But they must want more something-quality or quantity. People who want nothing are aging. They accept things as they are, or, even worse, as they are going to be.

What about older people? They want something more. They want their youth back. That brings us to the point of controllability. It is not enough to want more and/or better. You must believe that you can achieve it with your own efforts. Otherwise it is only wishful thinking. Those who can do more and better but have no wish to do anything different are young in body and old in spirit.

When the mental age of the people controlling an organization is such that they accept the expected as the desired, the organization starts to age. The mental age of the organization is, in such cases, a function of the mental age of the leadership. The organization ages288 Analyzing Organizational Behavior behaviorally because there is no drive and no impetus for change, which originates, as expected, at the center of control.

1. Functionality of Leadership Style

What do I mean by the functionality of leadership style?

As the organization proceeds along its lifecycle, it needs different styles of leadership. What kind of leadership is desirable? If an organization needs a certain consciousness, which functional type of leadership can provide that consciousness? Leadership implies a dynamic process that can take an organization from one level of consciousness to the next, from one stage of the lifecycle curve to the next. In other words, a leader is someone who can take a company from one set of problems to the next, resolving the problems of yes- terday, while preparing the company for the problems of tomorrow.

Moses, for example, took the Hebrews from the problems of Egypt to the problems of Canaan. Leadership doesn't mean taking a system from a stage where there are problems to a stage where there are no problems. It means progressing to the next level-the next generation-of problems. In this way, organizations grow. You are as big as the problems you confront.

Figure 14-3: Organizational Styles over the Lifecycle

There is an interdependency between followers and leaders. In the growing stages, the leadership style affects organizational culture. The leadership is the driving force. In the aging stages, the organization is the driving force, and the organizational culture determines who will emerge as the leader. The saying "people deserve the leaders they get" applies to aging organizations.

Before we proceed with the desired leadership styles, let us learn how to use the PAEI model to codify styles in general.

Management Styles and the Nature of Conflict

Since the PAEI roles are incompatible, it is rare that any individual can fulfill and excel at all four roles simultaneously.

When at least one role is not being performed at all, I term that a mismanagement style. If the roles are performed to the threshold of necessary performance, I call that a managerial style, with its normal, human deficiencies.

Mismanagement Styles: I am deliberately presenting extreme cases of mismanagement. It is easier to identify mismanagement styles than management styles. The difference between the two is a question of degree only.

In the extreme case of P000, the leader has the P quality to the exclusion of all the other roles. Such leaders are Lone Rangers, focusing on the task at hand, but unable to administer and lacking the vision or willingness to take risk consciously. They are not entrepreneurial, and they lack sensitivity to people, values, and group dynamics. They are doers, and that's it. They earn managerial posi- tions because they are diligent, dedicated, hardworking, and loyal. They are productive despite their lack of Administrative, Entrepreneurial, and Integrative capabilities.

How about their style? They work very hard. Their timetable is neither FIFO (First in, First Out) nor LIFO (Last in, First Out). It is FISH-First in, Still Here. Their desks are a mess. They manage by crisis. There is no delegation, no training, no long- or short-range planning, and their subordinates are gofers. Lone Rangers react, they don't anticipate. They focus almost exclusively on what now, not on how, when, or even why.

How about the 0A00 style? I call such leaders Bureaucrats. They arrive and leave on time, regardless of what needs to be done.

Their desks are clean, and their papers are in neat piles. Subordinates learn that what is important is not their accomplishments, but how they do their work. What the subordinates do is not important so long as they arrive and leave on time. Bureaucrats manage by the book. While Lone Rangers never hold staff meetings (they have no time), a Bureaucrat is always having meetings. The way they run the meetings, however, remind us of Captain Queeg from The Caine Mutiny. Their focus is not on the war, but on who stole the strawberries. Bureaucrats run very wel—controlled disasters; their companies go broke-right on time.

And the 00E0 style? I label such individuals, Arsonists. When do they come to work? Who knows? When do they leave? Who knows? But the subordinates know they must be there before the boss and not leave until after the boss goes. Since no one knows when Arsonists come and go, their people are on call 24 hours a day, 365 days a year.

Do they hold staff meetings? Yes, but no one knows when. Is there an agenda? There is none that anyone knows about in advance or that even the Arsonist respects. Do they expect their subordinates to be prepared anyway? You bet! So people come to a meeting with their whole office in a mental suitcase. They have no idea what will be discussed or for what they will be attacked. Who does all the talking? The Arsonists. What do the subordinates do? They roll their eyes ("here we go again ...") and hope their bosses will forget what they say they want. After all, they change their minds so frequently, nobody can keep track of final decisions. "It's too late for you to disagree with me. I already changed my mind," is a common retort to subordinates' questions. Subordinates just wait around for the dust to settle so something can be done. The more Arsonists try to acti- vate their people, the less those subordinates do.

I call the 000Is the Super Followers. They don't lead; they super-follow. Before everyone else, they sense shifts in the power winds, and they know how the undercurrents are changing. They then posi- tion themselves as leaders of the new current. To test the changing political climate, Super Followers send up trial balloons, "I have a suggestion to make, but I don't know if I agree with it." Or, "I suggest we declare dividends, but I don't feel too strongly about it." In Mexico, they call this slippery type pez enjavonado, soaped fish. You can't grab hold of them. Their subordinates serve as informers, telling them what's going on. These mismanagers hold many meetings, but who is talking? Everyone else. They listen, keeping their cards very close to their vest. Subordinates have a hard time concluding what direction they should take. While they are waiting for clear instructions, the Super Followers are sniffing the air, attempt- ing to discover what it is the subordinates will agree to.

What organizations need is PAEI-style leadership: people who are task-oriented, dedicated, hardworking, organized, efficient, thor- ough, conservative, creative risk-takers with a global view; and sensitive, people-oriented team builders.

The problem is that there are not too many people like us left around! It is such a rare breed, you can't count on finding them. Such PAEI people exist only in textbooks, and that's what is wrong with the whole management or leadership theory. It's based on the perception that such people exist and other people can be trained to be like them.

We are all mismanagers to different degrees because none of us are perfect.

To achieve leadership of organizations that are productive, systematized, proactive, effective, and efficient in the short and the long run, we need complementary teams.

One such complementary team is the PaEi-pAel team. Such teams run Mom-and-Pop stores-even when the store is a multi-billion dollar enterprise.

Professor John Kotter of Harvard Business School made a name for himself by drawing a distinction between managers and leaders. I have coded the two roles according to the differences he describes: Managers are Paei people, and leaders are paEI people. While I accept the distinction he draws between managers and leaders, I disagree with his conclusion that we need more leaders and fewer managers. We need both!

Because managers and leaders have different styles, there will be conflict. Let's address that inescapable reality.

Conflict is a necessary and indispensable ingredient of good teamwork.

The Nature of Conflict: Zen writings remind us that "if everyone is thinking alike, no one is thinking too hard." People who do not like conflict should not be leaders or managers. As Harry Truman used to say, "If you can't stand the heat, get out of the kitchen." The considerable short-term discomfort is necessary for long-term success.

Why?

Try the following exercise. Stand very steadily on both legs with your hands clasped in front of you. You feel comfortable and in control, don't you? If it's comfortable, this must be the normal state. Right? Wrong! If you stay this way for long, you'll certainly die. You can't leave to eat, go to the bathroom, or sleep, and the need to perform any of those actions requires change.

Now try another posture. Stand on one leg, extend the other in the air as if in mid-step, stretch one hand forward and one hand back. Because you are out of balance, you'll find it difficult to stand this way for long. To maintain "balance" requires minute but continuous adjustments. Balance is not a state, but a process.

That position seems neither comfortable nor normal, does it? No, but it is a desirable posture because you are between points. You are coming from getting food and going to do something else. What seems comfortable in the short run is very uncomfortable for the long run, and what seems uncomfortable for the short run is comfortable for the long run.

Lack of conflict is very comfortable in the short run, but, in the long run, it leads to death. Conflict is uncomfortable in the short run, but it can be constructive in the long run, depending on what we do with that conflict. Conflict can be a source of either growth or frustration. The first is constructive; the second is destructive.

What distinguishes functional from dysfunctional conflict? We can look to personal experience for an illustrative example.

Most couples divorce for the same reason they married in the first place. They marry because of their complementary styles. The two people were attracted to one another because of their differences, but if they cannot work out those differences, destructive conflict can lead to divorce. But conflict can also mean growth; it can strengthen a marriage. We move closer to one another after a fight. We bond because of our disagreements and conflicts, not in spite of them.

What makes the difference? Why should the same conflicts be destructive in one marriage and in another, constructive and love-enhancing?

Conflict is functional and constructive when it is handled with mutual trust and respect.

Let us define our terms. "Functional" means that the conflict, when resolved, produces desired changes. If the friction we cause by moving our soles against carpet is the result of the steps that took us to the refrigerator for an ice cream treat, that friction was functional. If, on the other hand, our feet rub uncontrollably against the carpet giving us a sore, that friction served nothing: It is not functional. Mutual respect implies each party's acknowledgment of the legitimacy of the other's divergent position. Mutual trust exists when there is a perception of common interests.

When there is mutual trust and respect, we are willing to learn from one another. Such learning is the occasion of personal and mar- ital growth. With no mutual respect and trust, conflict is all pain and no gain.

There is both abnormal and normal conflict. Normal conflict impels organizations to develop the strength they need in order to function. Abnormal conflict leads the organization, the individual, or the system to repeat itself, to replicate, rather than proceed forward. It does not promote evolution or change. Abnormal conflict does not allow the organization to explore differences and perspectives; in normal conflicts, organizations explore differences that emerge as problematic. This exploration leads to change and growth, to life.

Now that we have clarified the issue of styles and the need for their complementarity, let us return to the question of leadership.

Leadership Styles

During the growing stages, the leadership style should reflect the next organizational style on the lifecycle. The leader's style is a model for the organization's next stage. That's why the person is a leader and not a follower. That is why a leader often outpaces the people she leads. Modeling the next stage of the lifecycle provides functional leadership only in the growing stages.

In the aging stages, unless the leader models earlier stages, the leadership accentuates the organization's decline, making therapeutic rejuvenation even more difficult. Leaders of aging companies have to swim against the current, and those of a growing company have only to swim faster than the rest of their organization.

Perhaps that explains why leaders of growing organizations have no sympathy for functional leaders of aging organizations. They can't understand what is taking so long and why everyone is so cautious. They don't understand that swimming against the stream is politically more difficult than having to swim faster with the current. In an aging organization, leadership must make painful choices and still survive politically. In the growing stages, the decisions are less painful and, except during Adolescence, the leaders are less vulnerable politically.

Leadership Styles over the Lifecycle: What kind of leadership is needed for Courtship, for conception? The answer is E. Right? Only partially right. As will become clearer later in the book, a minimal amount of I is necessary for the Entrepreneur to be aware- conscious-of needs. That consciousness is what triggers ideas for new ventures and solutions. And the difference between the typical path and the optimal path is a function of an organization's level of I. The other PA roles must meet the threshold levels as well. Otherwise the organization will run into difficulties at a later stage when their time comes to be developed. On the typical path, then, leadership into a healthy Courtship calls for a paEi style.

Consider now what it means to lead organizations into Infancy and assume risk. Which leadership style is functional at that stage? How about leadership that emphasizes administration or A? That won't work at all, will it? An A constantly says, "No, no, no." Nothing would happen; the organization would never be born although it was conceived. We would have an organizational miscarriage.

What kind of leadership-Performance, Administration, Entrepreneurship or Integration-can stimulate an organization to be born, coalesce, take risk, and make things happen?

It has to be a P person. Such a person is the one who says, "I'm putting in the first $5,000, and I'm taking the risk first. Let's go. Let's do it. I'm ready." This is a doer, because for the organization to be born, it takes a real commitment in action-not just words and dreams. It takes someone who sets a tone of doing, providing a behavioral model for an action-oriented organization.

A leader who is only dreaming does not give birth. A doer who has no dreams does not conceive. Thus for a healthy start up, if it is led by one individual, the organization needs a leader who can both dream and do, a PaEi.

What happens when, as in a revolution, there is a complementary leadership team of dreamer-doers? There are the ideologues- the intelligentsia, the educated well-meaning theoreticians-and following them are the peasants, the down-to-earth guerrilla fighters who speak less and do more. When the revolution succeeds, and the new country takes form and is born, what happens to many of those ideologues? They are shoved aside, put in prison, or executed. If they were lucky enough to die natural deaths right after the success of the revolution, they remain pictures on the wall. The action-oriented, hard-nosed doers take over. Doing, not talking, is what makes it pos- sible for an organization to survive Infancy. The style for Infancy is, then, Paei.

What is next? Go-Go. A new vision and new possibilities are called for. If the doers do not develop that vision, the system remains small and undernourished. The new vision helps companies to expedite their emergence from Infancy. So to get to Go-Go from Infancy we need E again, and the style is paEi. If there is no complementary taking the organization from Courtship to Go-Go, the PaEi style meets the bill.

Figure 14-4: Leadership Styles for Courtship and Infancy

Figure 14-5: Leadership Styles for Go-Go and Adolescence team

The PaEi is the most common style of founders on the typical path. These founders are Arsonist and Firefighter all at once. They start their own fires, and they are the ones who then rush to get the flames under control and start another one before the first one is fully extinguished.

By creating difficulties and then managing them, they force their companies to grow by leaps and bounds. These founders are hard-working dreamers. They thrive in an atmosphere of crisis-by- management.

In the Adolescent stage, organizations must be organized, systematized, and stabilized. At this point, quality is more important than quantity. What is the desirable leadership? A bias toward Administration is called for. Characteristically, companies at this stage experience difficult leadership transitions. The transition from Go-Go to Adolescence requires a switch from PaEi leadership style to a pAEi style. That spells trouble. First, an A style is altogether different from a PE style. A is slow, thorough, analytical, and risk-averse. Details matter. PE is fast, and has no interest in details or risk taking. The two leadership styles are incompatible. Es want their subordinates to be on the job when they get there and to stay even after the Es themselves have left. But, because nobody knows when the bosses arrive or leave, their subordinates behave erratically. The E types expect their subordinates to be on call at all times.

The A style is completely different. As arrive at work on time and leave on time. That makes E types feel cheated. They consider the As insufficiently loyal to the company, they think that the A types don't try hard enough. The E types shoot from the hip; an A likes to think things over. E decides first and thinks later. A thinks, and then decides. A types feel as if they must always follow the Es with a shovel to clean up the mess. The E types, for their part, resent being kept away from the sandbox, where they can do as they please.

A and E are bound to clash. Under an Arsonist 00E0, A, alone, might end up as deadwood (0000), and although A might survive personally, that would be at the company's expense. As deadwood, A cannot fulfill the role the organization needs.

Entering Adolescence, the organization needs to become PAei. Thus, it calls for PAei leadership.

But we must be careful. If the organization is a PA00, it will reject and eject the PaEi leader of Go-Go, and the PAei leader will cause premature aging. Once the PAei stage in the lifecycle is completed, the organization calls for the E role back, and this calls for a pAEi style of leadership. What is needed to link E and A is new leadership of the AE type, a pAEi, not just an 0A00. Most good consultants are AEs. The organization can solve its leadership problem by hiring a consultant to guide the design of the organization chart, the budgeting system, and the manuals. Later, it should hire that person as a chief operating officer in the Administrative role.

Introducing changes from an outside person has several advantages. First, it enables the founder to observe whether the outsider might be the right person. It is a test under live fire. The two of them watch one another to see whether they are compatible in spite of having different styles. If there is no ongoing mutual trust and respect, they are the wrong combination. What's more, it's easier to lead a cultural change from the outside than from the inside. You can test that easily enough. Try teaching your own tomboy child how to play piano.

There is no need to change leadership if the current leader can change his or her style from PaEi to pAEi. I found that ability is not so rare as it might seem. It depends on the magnitude of their I. The bigger their I, the more flexible their style of leadership.

It's difficult to manage an organization during its transition from Infancy to Adolescence because the leadership must either change its style, or the leadership itself must be changed. Managing an enterprise is not a marathon race; it is a relay race, and when individual leadership cannot change styles in response to changing conditions, the leadership role must move from one person to another.

This transition of leadership is universal. Take raising children. Parents are a complementary team. A male child grows attached to his mother for a few years, later he grows attached to his father, and later still, he seeks friendship away from the parents. Children seek the model, the leadership they need to grow in a balanced way. It is difficult for a single parent to raise a child. Children need both the yin and the yang energies.

After Adolescence, when the organization is moving into Prime, the leadership style of those managing it should emphasize I.

Why?

In Prime cultures, the P, A, and E roles are performed by executives other than the leader. The role of leadership during Prime is to hire the right people, to integrate the desirable conflicts that emerge in a correctly structured organization, and to give direction. The structure is good, and the right people are in the right jobs. P and A are delegated, as is E, which is now institutionalized. Now the organization needs a leader who can integrate it all-a leader who emphasizes the I role.

Figure 14-6: Leadership in Adolescent and Prime Organizations

At any point in the lifecycle, the necessary styles of leadership are the styles that will guide the organization from its current stage into the next. During Courtship, the organizational culture requires leadership that dreams, paEi, and when it gives organizational birth, leadership that acts: It must be Paei. To move into Go-Go, organizations need E again-PaEi, and when the organization moves into Adolescence it needs A to cool Go-Go tendencies and prevent the organization from overloading itself. The functional style of Adolescence is pAEi. Getting into Prime now requires I, and staying in Prime requires E. The desired functional style for Prime should be paEI.

Figure 14-7: Lifecycle of the Organization and the Styles of Leadership

The leaders of the Fall organizations need to retard organizational aging. Now they need to start working against the current,300 Analyzing Organizational Behavior swimming upstream. They need not only E, but P, as well. Soon, in Aristocracy, P will start to decline. An organization in Aristocracy must go back to concentrate on the basics-hard-nosed decisions, blocking and tackling-right away. Because organizations lose P during Aristocracy, the functional style that retards deterioration is PaEi.

The PaEi style, which is necessary for both the Fall and Aristocracy, is different from the PaEi style of a start-up. Aristocracy requires professional managers with the style of an Entrepreneur- professional soldiers, not guerrilla leaders. They must be able to make decisions and have vision for their large organizations. This is a significant distinction. Often organizations that are losing flexibili- ty merge with or acquire Go-Gos with the explicit goal of acquiring Go-Go leadership. It doesn't take long for Aristocratic companies to discover that Go-Go leadership lacks the political maturity to deal with the internal politics that plague their aging organizations.

An Aristocracy needs to identify what business it is in and the value it has for its clients. It must get close to its clients, paying more attention to the why and what than it pays to the how. lt must derive the how from the why and what, rather than letting the how dictate the why and what. That is a PaEi style.

Figure 14-8: Founders vs. Statesmen

Figure 14-9: Leadership in Aristocracy and Salem City

Many organizations in Salem City-failing organizations owned by government or those being nationalized-make the following mistake. Rather than appoint a P to lead the organization out of its difficulties, the government appoints an Administrator or an Integrator. Why? From a political point of view, the purpose of nationalization was not to increase unemployment but to save employment. Leadership's explicit instructions are to save jobs-not the company. What happens? Instead of rejuvenating the organization, the A and I now create a bigger Bureaucracy, and that accelerates the decline of the company. In situations where the organization is big enough, it can accelerate even the decline of the country.

This, then, is the principle: Leadership style should, at every growing stage of the lifecycle, reflect the style of the organization in the stage from which it is departing and the culture and style of the stage to which it is moving. The reader should recall that the organizational culture determines the required leadership style during the growing stages. It is the style that leads the organization to the next stage of the lifecycle. After Prime, however, the desired leadership is not what the organization's culture will become. It is just the opposite. The appropriate leadership style is the one that will retard that development, or, I might say, retard the decay.

In the growing stages, the leader projects- behaviorally models-the style for the organization. ... In the aging states, the organization selects leaders who reflect its culture.

During periods of growth, people have faith, and leaders can lead, knowing that the people will follow faithfully. To reverse aging on the other hand, means to request sacrifices, to induce pain. The organization experiences fear, not faith. The decaying organization chooses leaders who reinforce its culture, not necessarily making sacrifices. It seems as if this process is built into a mutually consis- tent, dynamic system: It enables growth and then enables death. For a growing company, leadership can come from within. For aging organizations, leadership should come from the outside. If leaders do rise through the ranks, defying the culture that raised them, they, like Mikhail Gorbachev and Frederick de Klerk, pay with their careers.

But how does leadership style affect organizational aging?

It depends on whether the leadership style is functional, serving the needs of the organization and advancing it to the next stage in its growth or retarding its decay.

Start-ups, from Courtship to Adolescence, require PaEi leaders who are aggressive dreamers-doers. Once leaders are successful, however, they become entrenched in their positions, and they remain long after they have stopped fulfilling the needs of the organization. PaEi refuses to make way for pAEi, and pAEi leaders, once entrenched, either refuse to yield to the next necessary leadership style, or are unable to change styles. An organization can, therefore, age if leadership is not transferred functionally at the right point in time on the organizational lifecycle. To change leadership itself or its style, there must be a clear need-real pressure from the organization. If we review the description of the organizationallifecycle, we can see that there is no pressure to change leadership in Prime, the Fall, or Aristocracy. In Prime, everything is fine. In the Fall, the problems are only latent. In Aristocracy, the company is liquid with good balance-sheet ratios, and the Finzi-Contini syndrome prevents people from expressing dissatisfaction with complacency. During this calm before the storm, there is no pressure to change leadership. So, A leadership that is functional and necessary to lead the organization through Adolescence, later becomes dysfunctional when it no longer offers what the organization needs and the conditions aren't politically ripe to force a change. The style of leadership and the needs of the organization are not in sync.

In the aging stages of the lifecycle, what retards rejuvenation is that the chosen leader is the one who reinforces the culture, not one who changes it. This leader surely wants to avoid making waves. They might topple the boat. In the aging stages sacrifices have to be made, and the organization needs a leader who does not watch the polls. Here we need a statesman-not a politician-to worry about the next generation, not the next election.

3. Perceived Relative Market Share

The perceived relative market share is the next factor that can affect Entrepreneurship. A company's market share is the percentage it reaches of all possible clients whose needs it could satisfy. In business language, it is the company's share of total sales of similar products that satisfy the same need. What, then, does perceived mean in this context?

A company's market share can be 100 percent or 0.001 percent with the same revenues. The definition of market share depends on the denominator-the reference market.

A company can claim any market share, depending on how it defines its market.

A company can have 100 percent market share by defining its market as only those people who buy its products. It can easily be the largest, biggest, best in the world at something. Its leaders need only identify where it excels uniquely. For instance, one of my clients is the largest, privately-owned, computerized, multi-media alarm com- pany in the world. If you narrow your definition enough, you can be the leader of whatever you are doing. My point is that whatever mar- ket share companies believe they have, it is only a perceived market share.

Relative market share refers to a company's share of the mar- ket as compared with its largest competitor. Now let us assume a company has a perceived relative market share of a multiple of two. That means that it has 35 percent of the market, and its next largest competitor has about 17 percent. Will knowing that make the company competitive or complacent?

Being the largest, biggest, or best at anything is like being a champion in sports. One needs a challenging competitor to stay in shape. When a company's leadership believes it no longer has to compete in order to satisfy the perceived needs of its clients, that is, it believes its clients are a captive audience with no alternatives, the entrepreneurial spirit and the desire and propensity to adapt to a changing environment suffer. The company expects its customers to adapt to its needs, rather than having to adapt to the customers' changing needs. Organizations arrive at that stage when they believe they have the majority of their marketplace. The decision-makers think, "This is it! We've made it! We are there!" That is an attitude that can irreparably damage the creativity of organizations. They have forgotten that once they are at the top of a mountain, there is only one way to go: down.

Being a champion can make a company complacent. To stay in condition and at the top, there must always be a strong challenger. Market dominance is a goal that should be savored for no longer than one night of celebration. The organization needs to seek new visions, redefining its market. That new definition introduces new competitors into the picture. Horizons must move as organizations move, or people's eyes will focus lower and lower until they see only the tops of their toes. That's when they stop moving altogether.

4. Functionality of Organizational Structure

The fourth factor that impacts aging is organizational structure. In recent years, specifically the 1990s, structure has been seen as a con- cept that has become "politically incorrect." Today, open systems, open architecture, non centered enterprises, vision, values, and cultures are the preferred alternatives. Many people consider structure to be synonymous with bureaucracy.

I disagree completely with the current theory and practice of "modern management." In fact, I disagree so strongly that I am ded- icating the next chapter to a discussion of this factor.