by Ben Badenoch and Louise Lacey

Since 1978, Ben Badenoch has been applying the Theory to business organizations. As a consultant, he has trained executives and managers to begin to understand and recognize the stages, identify their company’s location on the arc, and decide what to do about that.

The Theory has proved to have both predictive and corrective value of great precision, and presumes a sociological evolution of both leadership and employee. Each stage has positive and negative forms.

Stage 1

The startup. Preparation: Everything necessary to open the doors of a business, from the acquisition of the necessary capital, the recruitment of help, finding the location of the place of business, the organization of the product or service up to the point of delivery. One or two people make all the decisions.

Stage 2

The door opens. Operations begin. This may be anything from a Mom and Pop grocery or cleaning business to one entrepreneur’s software company. Employees look to owner for instruction and reassurance, but security is not available here. The doors may close, the employees laid off or fired, any minute. Same one or two people make all the decisions.

Characteristics of Stage 2 Organizations

Operations:
Survival Oriented

Corporate Culture:
Ritualistic
Fear Driven
Instinctive

Ownership:
Incidental

Leadership:
Authoritarian by demand
Pushed by group

Structure:
Group/Family/Tribe
Minimal
Primitive team/Hunt group

Communications:
Mostly Intuitive

Stage 3

The company reaches the level of success. Planning becomes very important. Hierarchy develops, with a centralized focus on the owner, who begins distancing himself. Employees take direction from him – or, in a larger organization, from his clone managers, who relay or interpret his demands. Employees look to him to provide a glory they can reflect. He has the big ego. They want him to personify success, to be their hero, so they can be loyal. They exhibit no initiative because he doesn’t allow it. They just do what they are told. Such a company can become quite large, but there is a point of diminishing returns because he (or his clones, acting in Ms name and as they believe he would want) have to make all the decisions.

Characteristics of Stage 3 Organizations

Operations:
Unfolding
Mechanistic
Conceptual
Rational
Contractual/Lawful
Planned

Corporate Culture:
Expanding
Unconscious
Trauma Driven
Egotistical/Prideful
"Life of its own"

Ownership:
Powerful
Separated

Leadership:
Egotistical
Dictatorial/Despotic
Logical
Formulating

Structure:
Evolving from family
Hierarchical
Centralized
Configured/Shaped

Communications:
Sensory/Redundant
Rational
Justification

Stage 4

Learning. Typically, what happens here is bureaucracy because learning and know how are hoarded by managers, who keep everything secret. Bureaucracy is a reaction on the part of employees to the repeated frustrations of running into this secrecy. Complexity and rules abound, sometimes to the point of ritual. Lots of redundancy here, and trial and error, but real change is impossible within the existing structure. Ego is big on all levels. Leadership is authoritarian, distant, harried. High level of managerial burnout. Employees are often sullen, resentful. Instead of loyalty, now employees feel either competitive or hopeless. Each tends to believe that only he is really doing his job, and he has little if any respect for leadership. Almost all occurrences of employees or ex-employees going amok with a rifle happen in organizations at this stage. Paradoxically, this company, from the outside, is perceived as the most stable and worthy of support from the financial community, because it seems to be “under control.” Usually, nothing could be further than the truth.

The Turn

Breaking out of stage 4 requires at least two things: 1) Imminent failure, and 2) a compelling vision of renewal, presented by new leadership. These are necessary, but not sufficient. Each case is unique.

Characteristics of Stage 4 Organizations

Operations:
Cause and effect
Trial and error
Contractual/Lawful
Deterministic
Competitive
Symbiotic
Quid pro quo
Increasing complexity

Corporate Culture:
Ritualistic
Forged in traumas
Powerful
Based on scarcity
Internal competition

Ownership:
Powerful
Determining

Stage 5

Organizational innovation. Characterized by cooperation, willingness to trust and be accountable. Ego isn’t important anymore; each person knows what he’s doing and is acknowledged as a professional. Leadership is integrative, strategic, unharried. Leader as conductor of the orchestra; ideas are more important than the leader himself. Employees identify their personal development with the development of the organization. Performance increases dramatically. Power flows both ways in the hierarchy strategy flows down, plans and performance flow up. AU share a conscious sense of common purpose. Flexibility, growth, refinement, timeliness and ad hoc teamwork are keywords for the organizational structure. The organization throws off seeds – ideas leave and generate new entities, which often compete with the original organization. What can happen here is that the financial community, represented by the board of directors, can feel threatened by the stage 5 employees and put a “killer” CEO into place who will drag the organization back to stage 4 – or even stage 3.

Characteristics of Stage 5 Organizations

Operations:
Purposeful
Sorted by analysis
Stewardship
Growth-oriented
Synergistic
Responsive
Refined

Corporate Culture:
Professional
Manageable
Cooperative
Willingness to be
accountable.
Trust
Personal development

Ownership:
Intangibles important
Diffuse
Supportive vs. directive

Leadership:
Integrative
Strategic
Unharried

Structure:
Flexible
Ad hoc
Task force-like
Refined

Communications:
Sensory and redundant
Strategy flows down
Plans and performance flow up

Stage 6

Ad hoc networks for common purpose. Virtual corporation. Characterized by mutual respect and goals. May be a very stable small business or a temporary large structure for a short term objective, such as making a Hollywood film. The key is a structure comprised of complementary talents of significant equality. Leadership is flexible, decentralized, nonce authority. (Whoever is momentarily qualified to solve the problem or point out the best direction is in charge.) Employees are likely to hold the status of virtual partner. No secrets: Everyone knows what’s going on. Roles shift as needed and as qualified. High level of creativity. Everyone is there because it suits their very best interests.

Characteristics of Stage 6 Organizations

Operations:
Inexplicable
Small Mobile Units
Miraculous
Stimulative
Co-Creative

Corporate Culture:
Fleeting
Mutual Respect

Ownership:
Incidental

Leadership:
Decentralized
Shifting
Intention Holding

Structure:
Network
Ever changing

Communications:
Intuitive
Redundant
Open

Stage 7

To be defined. Looks at this point to be a virtual corporation of individuals, moving in and out of association with one another as needed. All are likely to be involved in a purpose larger than themselves, and to be led by that purpose instead of any leader.

©1996 Ben Badenoch