Organizational Life and Death (1): As the images unwind
Like a circle in a spiral, like a wheel within a wheel / Never ending or beginning on an ever spinning reel / As the images unwind, like the circles that you find / In the windmills of your mind - Alfred Marshall
"Somebody said that football's a matter of life and death to you, I said 'listen, it's more important than that'." - Gwyneth Paltrow
Ka Mate! Ka Mate! Ka ora! Ka ora!
We sometimes talk about organizations as if they are people. If they have particularly charismatic or powerful leaders, the leader and the organization are fused into a single being. Steve Jobs and Apple. Jeff Bezos and Amazon. Mark Zuckerberg and Facebook Meta. Jack Welch and General Electric. Bill Gates and Microsoft. Now to an extent this is just the corporate version of the Great Man Theory of History where we assign everything about a situation to a certain heroic individual. But it also acknowledges that these individuals do or used to wield extraordinary power of these organizations. Other organizations lack such figures but we still speak of them as though they are singular entities with motives agency - e.g. IBM, Goldman Sachs, Telstra. These labels are sort of a cognitive shorthand as we know these aren’t alive, still less people. Are they?
Well organizations are created and sometimes grow in terms of size and power and sometimes cease to exist in a recognizable form. So various models have been put forward to explain these organizational life cycles. These discussions go back to at least the 1890s, when British economist Alfred Marshall compared individual companies to trees in the forest. For Marshall, the creation and destruction of businesses was part of the natural order of things as such businesses were tied to the commercial abilities of their owners. However something new was upsetting this order.
“And as with the growth of trees, so was it with the growth of businesses as a general rule before the great recent development of vast joint-stock companies, which often stagnate, but do not readily die.”
What Marshall described here is what we know as the modern corporation - with stockholders, limited liability, and professional managers. For Marshall, the corporation is a Sisyphian gamble to cheat death. Corporations are in some sense already the undead.
However discussions on corporate lifecycles really pick up in the post-World War 2 period, the Golden Age of American Industrial Management. In 1950, economist Kenneth Boulding went the whole hog and treated commercial entities as organisms in an effort to unite economics and ecology. They are capable of birth, growth, and death. They are organisms in their own right and should be considered as such. Meanwhile, in Strategy and Structure in 1962, Alfred Chandler Jr more modestly divided the stories of his organizations into four chapters as though they were biographies - or perhaps works of fiction.
In 1972, Larry Greiner presented a different model of the organizational lifecycle in Evolution and Revolution as Organizations Grow. Rather than a smooth upward trajectory, Greiner proposes that organizational life consists of a series of periods of evolution broken up by revolution.
“I have termed these turbulent times the periods of revolution because they typically exhibit a serious upheaval of management practices. Traditional management practices, which were appropriate for a smaller size and earlier time, are brought under scrutiny by frustrated top managers and disillusioned lower-level managers. During such periods of crisis, a number of companies fail--those unable to abandon past practices and effect major organization changes are likely either to fold or to level off in their growth rates.”
Greiner’s model is reminiscent of a few things in completely different fields - Isaac Asimov’s Seldon Crises in the Foundation series, Joseph Campbell’s Hero’s Journey, and Erik Erikson’s model of psychosocial development. Perhaps the most resonant was also published in 1972, the punctuated equilibrium model of biological evolution. This also postulates periods of quiet broken up by frantic change in response to environmental shocks.
Greiner’s model is wrong (as all models are wrong) but it is useful. It behoves employees, managers, and investors to consider where an organization is in terms of its growth trajectory (while recognizing that guesses about the future of this trajectory may be incorrect). Small, young organizations need to be managed in different ways to older, larger ones. They are different to work in (for both better and worse). And the kinds of the returns they yield will be different.
Organizations can evolve for lengthy periods of time. These periods are good for managers but bad for would-be revolutionaries. However periods of crisis are inevitable. And then the old ways of working cease to, well, work. You need to do something new and that may require new people to do it. But even these solutions are not stable. Greiner notes: Companies therefore experience the irony of seeing a major solution in one time period become a major problem at a later date.
Organizations are not people (although we will continue to talk of them as though they are). Whether they are organisms is not a debate that interests me. What does interest me is understanding the patterns of change within them and whether the actions that you or I want to take align with those patterns of change or contradict them. Because that is a crucial determinant of our success or failure.