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Identifying an organisation’s position in its lifespan is not easily achieved in a precise way. Ideally, those charged with the direction of the organisation would like to predict the impending onset of each point at which the rate of progression changes, heralding the movement from growth to maturity and from maturity to decline. Where this is possible plans can be made to address the specific issues that are associated with these transitional phases.

Some businesses never reach maturity and disappear from the corporate landscape a few months or years after their introduction. For these organisations spending time looking for the signs of transition is irrelevant as they are destined never to reach critical mass. Many of these will be too immature to survive turbulent times. The fortunate few may be sold to larger companies who are better able to withstand the turmoil. Others will just fall by the wayside.

Calculating the scale that a business needs to achieve in order for it to become established and escape its beginning and confront its becoming is a relatively simple calculation. The point at which it consistently generates cash rather than consumes it is an important signal. The period in which revenue growth accelerates and profits are made and begin to grow at a faster rate than revenue grows is another notable pattern.

When these rates of growth begin to diminish it suggests another transitional stage is approaching.

If one of these natural turning points occurs during a time of general turbulence then the organisational turmoil can be immense and be beyond the manager’s capacity to cope in an orderly way. In general, however, it is usually difficult to identify these points with certainty until they are past and action is directed at the management of the consequences rather than their avoidance or mitigation.

I do not believe that this is sufficient reason simply to ignore these phases and adopt the position that it is impossible to put in place a strategy to address each stage leaving, instead, reactionary tactics as the only viable methodology.

Let me suggest how the approximate position of the organisation in its lifespan can be determined by initially eliminating the phases in which the organisation is not located.

Transit along the lifespan is mostly unidirectional. The early stage of growth is followed by maturity, which precedes decline. By definition decline does not proceed the early stage of growth, although some organisations fail to enjoy a prolonged period of maturity and appear to enter decline shortly after growth ends. Examples of these are organisations and products launched to capitalise on highly fashionable trends or transitory technology such as fan clubs for popular music bands, children’s toys, some financial products based on tax breaks, some software products, vacation resorts, trendy restaurants, TV shows and movies. For these types of organisation the whole of their lives are turbulent as they never encounter the relative stability of a prolonged period of maturity.

The duration of each phase will vary and be different for each organisation but empirical evidence suggests that in a large number of cases (such as fashion products) the more rapid the growth phase the shorter the period of maturity and more rapid the onset of decline.

The presumption that, if unmanaged, the lifespan curve is symmetrical – taking the shape of a normal distribution – is a reasonable starting point. However, empirical evidence reveals that decline to collapse occurs at an accelerating rate and is steeper than the change from infancy to growth. Economic recessions and HILPEs tend to magnify this end stage asymmetry.

A feedback system works at this point. The onset of decline causes organisational turbulence and the emergence of environmental turbulence, such as a recession, tends to accelerate the decline of businesses in late maturity by magnifying their problems, causing additional turbulence in its wake and reducing the options for rectification.

A determination of whether it is likely that the organisation is in maturity or decline may be made by considering what the preceding phase is most likely to have been.

If the organisation is in maturity or decline it will exhibit characteristics that cannot be mistaken for those of an immature organisation in the infancy or growth phase. Some of these characteristics of infancy and growth are obvious:

 The company is still comparatively new and has probably commenced trading within the preceding five years.

 Revenue growth in the last two years will be significantly greater than any preceding period.

 Headcount will have grown to add human capacity to manage the enlarged business.

 Capital spending will probably have been high in relation to the company’s scale and the company will have moved premises at least once in the preceding three years to add physical capacity.

 A significant fraction of revenue growth will be attributable to the acquisition of new customers and not through increased demand from existing buyers.

 Most of the senior management team will have been with the company since its early days.

 Because the business is expanding quickly the process is probably disorganised and turbulent.

 If the company doesn’t have these characteristics the early stage may be discounted and it may be concluded that the organisation is located in the maturity or decline phase. The following are some of the characteristics that indicate a move to maturity and beyond:

 The company will have existed for longer than five years. It is unlikely that a company that has survived for a longer period, probably in a buoyant economy, remains in its infancy.

 Historical revenue growth will reveal a phase of expansion at a rate higher than in preceding years followed, most recently, by a phase of more modest or no growth.

 Return on capital will for several years have ‘normalised’ to close to the industry average and now additional capital will be required.

 Recent profit growth will have been solid rather than spectacular and a loss may be predicted.

If the preceding phase was growth and no discernable period of consolidation or stagnation has been experienced then it is possible but unlikely that the organisation moved from the early stage straight to decline. It is more likely that the organisation has entered maturity.

Early maturity is preceded by recent slowing growth. Late maturity is characterised by recent low growth, stagnation or oscillation between slow growth and intermittent periods of decline.

It is unnecessary to conduct further analysis if there are prima facie indications of late maturity or decline and the general economic environment is turbulent or predicted to be so. In such circumstances management should assume difficulties lie ahead and begin to act accordingly.

This elimination of phase methodology becomes unreliable when only very recent data are used so at least five data points are needed covering a minimum period of 2½ years. These data may be distorted by recent fluctuations within a phase thereby giving the misleading impression that the organisation is in maturity when it is just encountering a pause in growth and the pattern of expansion will resume.

Sometimes complex systems, like the economy or a market, seem to settle briefly at an equilibrium point but then, for no easily apparent reason, they resume momentum, occasionally not in line with the previous trend.

It is also feasible to determine your company’s lifespan position in general terms by evaluating the mode of management, i.e. whether it is concerned predominantly with ‘becoming’ or with ‘being’. However, the problem with this subjective appraisal is that, at the turning point from one phase to the next, it is often difficult to form a conclusive judgement.