Life-Cycle Analysis
Applied to Social Enterprises and
Co-operatives
Wales Institute for Research into Cooperatives
Adizes, I., (1999), Corporate Lifecycles: How and why Corporations
Grow and Die and What to do about it (Prentice Hall, London).
Stage
Characteristics
Courtship
The organisation exists only as an idea. The founder must fall in love
with the idea before making a commitment to its execution. If the
courtship is only an affair, the entrepreneur will lose interest before
executing the idea.
Infant
Once the organisation is born it is immediately vulnerable and in need
of constant care and attention to keep it going. A lack of commitment
or of capital may result in infant mortality.
Go-Go
Once the idea is working, the confidence of the founder grows. Like a
child who has just learned to crawl, the organisation explores every
opportunity. As the organisation grows, the energy of the founder
may no longer be sufficient to fuel it, resulting in the Founder or
Family Trap.
Adolescence
After passing the Founder or Family Trap, the organisation is
reborn. The transition to delegation and professional management is
often painful. Divorce results where the original entrepreneurs no
longer find the environment fulfilling, and this may result in
premature aging. Adolescent organisations are characterised by many
committees, meetings and a degree of in-fighting.
Prime
Prime is the optimal point in the lifecycle curve. The organisation
achieves a balance of control and flexibility. A Prime organisation is
not at the top of the lifecycle curve - it still has room to grow, limited
only by its ability to attract and train enough skilled people.
Stage
Characteristics
Stable
The Stable stage marks the beginning of the Aging process. The
company is still strong, but is starting to lose the flexibility,
creativity and innovation. The number of meetings and
committees starts to increase.
Aristocracy
The organisation is focused on how things get done, and
organisational protocol and tradition dominate. Challenges to the
status quo are frowned upon, thus stifling innovation. Individual
dissatisfactions remain unvoiced, and conflicts are swept under
the carpet.
Early Bureaucracy
Early Bureaucracy is characterised by witch-hunting. The writing is
on the wall for the organisation, and each area seeks evidence
that some other area is to blame. Paranoia freezes the
organisation. Energy is spent on in-fighting and the customer is
seen as a nuisance.
Bureaucracy
The purpose of the Bureaucracy is to support its continued
existence. The internal systems acquire a life of their own. The
organisation becomes dissociated with its original purpose.
Death
Death occurs as commitment to the organisation
dissipates. Clients desert the organisation, followed by employees,
until nothing remains.
Bull, M. (2006), ‘Coming from the Heart (The Road is Long)’, paper
presented to the 29th Annual ISBE conference, Cardiff, 29 October - 1
November.
Company
Founded
employees
income
A
1990
58
2, 000, 000
B
1994
28
300,000
C
1993
4
580,000
Case A
A Charity and Company Limited by Guarantee focusing on public information and sharing
information and raising public awareness about AIDS. Growing out the black community.
Case B
Company B is a Company Limited by Guarantee which aims to ‘enrich needy people’s lives
through empowering disadvantaged groups such as people with disabilities, the elderly and people
with mental health problems to live in the community in their own homes.’ It offers domiciliary care
and is moving in minor repairs.
Case C
Registered as a charity it ‘provides a wide range of arts based training and opportunities for local
residents of all ages who have or are at risk of experiencing mental ill-health and social exclusion.’
Courtship
• The embryonic years were difficult times. In company A
they were cooking for people, tackling isolation,
providing one-to-one care and companionship, raising
awareness, applying for funding, and generally fire
fighting with minimal resources. In company B a similar
story was told of chaos, long hours, reactionary
management and a lack of structure.
• This stage is a struggle: “We’d have to cook food for
people, we’d get our families to cook food, we’d be
taking it round – as well as going to do the prevention
work, the training, the co-ordinating – the whole lot.” [A]
Infant
Adizes suggests that at this infant stage the organisation
is vulnerable and in need of constant care. In all three
cases the board of directors/trustees played a major part
in the care of these businesses. In A, the board
members were self elected through the instigation of the
pressure group. The skills they brought to the table were
health, social and public sector focused; the people were
social care workers, community workers and public
sector civil servants. In B, the board was initially largely
representative of the local community and social care
workers, whose insights and involvement in the start up
of the business were brought together. In C, similarly,
the board was initially made up of tenants from the
locality, community workers and local social care
workers.
Go-Go
• All 3 companies had to learn and adapt very
quickly. The re-organisation of informal and adhoc systems and structures were therefore
prominent features within the growth of these
three organisations. This shows how one
organization responded to the ‘founder trap’:
• “. ……I said to ….[the founder] that we can’t
carry on like this, we have got to have a
structure, we haven’t got any structure, we have
got to introduce training, rotors.”
Adolescence
Adizes calls stage 4 the adolescence stage, as a painful
time for learning during the transition from a holistic team
to that of delegation and professional management. In A
it was noted that the rhetoric changed from a support
network to a business. The focus provided by the
strategic away days brought people together and the
CEO stated the staff began to think of the project work
as something more substantial and professional. In B the
managers wrestled with company law and organisational
development issues. In C it was considered fundamental
to the delivery of their service that they remained
focused on their core beliefs. The internal capabilities of
these organisations were developing which was
attributed to a number of factors.
Prime
A comment typical of the prime stage coming
from B: “We have evolved into a self sustaining
business, and not only that but one that takes
into account the service user and a choice of
individuality and the quality of service. We have
evolved into that and I can see us being the
flagship for services offered to people that are
vulnerable and disabled in this City. I can see
the vulnerable and disabled communities in this
City have completely changed and got better
because of the service we provide to them and
that gives me great pleasure to be able to do
that.”
Growth in Social Economy?
• Appropriate scale conflict with economies
of scale
• Corporations benefit from hidden
subsidies, such as national infrastructure,
Lisbon Agenda
• Social enterprises more committed to
‘human scale’
• Co-operatives committed to democratic
decision-making
Why does a conventional business
seek to grow?
•
•
•
•
•
To meet growing demand for your product
To restrict competition
To achieve economies of scale
To create local employment
To enrich the stakeholders and venture
capitalists
Two contrasting models of growth
• Sustainable growth—using retained profits: a
lifestyle company
• Rapid growth—requiring a large injection of
capital
• The second can obviously lead to loss of control,
although it could be based on equity finance.
• Lifestyle companies can tick along, perhaps as a
family unit. They are priotising livelihood and
earning a living over making a profit. They stay
small and independent and are often run by their
founders.
Horizontal growth
Selling more products to more customers
• Rebranding, e.g. lucozade, or greening
Groundwork?
• Developing new products, e.g. Smile bank
• Attracting new customers, perhaps reducing
prices or marketing
• Extending geographically through exports, e.g.
Eroski into France
• Linking with other companies via franchises,
licensing, rights and royalties.
Vertical growth
Expanding activities along the supply chain
• Oil companies control the whole chain from oil well to
filling stations
• Extending upstream to gain control of raw materials, e.g.
the Toad Lane shop
• Extending downstream to gain control of distribution and
retail, e.g. co-operative group buying more shops
• Increasing the amount of goods that are controlled, e.g.
Co-op own brand
• Partnerships and mergers, e.g. CRS
How do you tell optimum size?
•
•
•
•
The aim is appropriate scale
Spin-offs rather than empire-building
Naturally limited by governance form
What happens when you expand?
What do you have to pass on?
•
•
•
•
Capital
Skills
Networks/customers
Work
What can an apprentice offer?
• Employ another at fair and negotiated rates
• Employ an apprentice for less but share skills
• Secondary co-op
What models could you use?
•
•
•
•
Mentoring
Support you later, especially with heavy work
It is about the relationship and community
Pass on the skills you have learned
And now for something completely
different
Degeneration Thesis
• Essentially the degeneration thesis states that
worker co-operatives will have to adopt the
same organisational forms and priorities as
capitalist business in order to survive. As a result
co-operatives will gradually become dominated
by a managerial elite who will effectively take
decisions in the co-operative and so undermine
democracy and the influence that other workers
can exert.
• (Cornforth, 1995)
Criticism from the Marxist left
• Marxists believe that external economic forces make degeneration
inevitable
• Marx ‘acknowledged that co-operatives demonstrated the feasibility
of certain aspects of a socialist mode of production, he also felt that
while they operated in a capitalist system they were doomed to
reflect that system’
• Beatrix Potter and Sidney Webb (1921): ‘The most enthusiastic
believer in this form of democracy would be hard put to it to find, in
all the range of industry and commerce, a single lasting success. In
the relatively few cases in which such enterprises have not
eventually succumbed as business concerns they have ceased to
be democracies of producers themselves managing their own work;
and have become, in effect, associations of capitalists on a small
scale...’
• The Marxist tradition is threatened by the syndicalism and loss of
central control inherent in e.g. The Miner’s Next Step.
Four stages of degeneration
1.
2.
3.
4.
High idealism and commitment which enables the association to
get off the ground. However, over time there are clashes ‘between
a direct democracy jealous of its prerogatives and an economic
activity still badly established’. The need for greater efficiency
leads to the establishment of full-time administrators or coordinators who come to be seen as a directors.
The second phase is a period of transition in which, if the
enterprise survives, further economic consolidation takes places
and conventional principles of organisation are increasingly
adopted. These changes are not always accepted peacefully, and
conflicts continue between idealists and managers.
In the third phase co-operatives lose their radical ideals and
market values are accepted. Democracy becomes restricted to a
representative board, and the gap between managers and
workers increases as the business develops and production is
rationalised.
During the fourth phase members and their representatives lose
all effective power as control is assumed by managers because of
their superior expertise and ability to control information.
Meister A. (1984) Participation, Associations, Development and Change. New
Brunswick: Transaction.
Cornforth’s study
Name
Sector
Period
studied
Suma
Wholefood
wholesaling
Wholefood
retailing,
wholesaling
and bakery
Language
school
Bicycle shop
and hire
1974–85
35
1971–85
20
1978–85
8
1977–83
7
‘Wholegrain
Foods’2
Lake
‘Recycles’2
Employees
Concludes degeneration is not
inevitable
Pressures toward degeneration include:
• The need for specialisation to achieve efficiency
• Growth increases the cost of collective decision-making
‘processes of regeneration have followed periods of
degeneration’
Two main challenges to avoid degeneration:
• Need to ‘reproduce’ an active, committed membership
• How to introduce greater specialisation and division of
labour without undermining democracy