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The SME Spiral

This article was published in the January 2005 edition of Quality World, the magazine of the Insitute of Quality Assurance (Brtain’s – and arguably the world’s! – foremost institution for the development and propagation of quality). It was written in response to expressions of frustration by consultants working with SMEs in the magazine’s August 2004 issue.

A draft of the article was published on this web site for several months under the title ‘SMEs and ISO 9000’. The revised version above is identical to that published in Quality World – save for references to the models used. (In the IQA version, readers were directed to sidebars containing basic introductions to Adizes LifeCycle and Spiral Dynamics. Here, the links are to other pages containing information on the models.)

My thanks to Quality World editor Nicky Farmer for her input in refining the article for commercial publication.

Since the heady days of the DTI Enterprise Initiative in the late 1980s, survey after survey has failed to show any real improvement in the competitiveness of the SME end of British industry. Why is this?

ISO 9000, Investors in People, business planning schemes, marketing projects, NVQsModern Apprenticeships, SMART innovation awards – the list is endless – have all failed to have the desired wide-scale impact their developers dreamed of.This is particulary true with SMEs.

To almost any student of management sciences, these schemes should undoubtedly increase effectiveness, efficiency or turnover of any company applying them…. But, as is often the case with SMEs, what if the company isn’t ready?

The nature of a business lifecycle
Only a few ‘gurus’ have really explored the concept of organisational stages of development and of them only Ichak Adizes (1988) has developed a full-scale practicable ‘business lifecycle’ – from dream to death.

The work of Larry E Greiner (1972) was seminal in establishing the idea of organisational stages of development and his work on the corporate or ‘peak’ stages is still unbeatable. John Macmahon’s Forum 21 model provides some useful insights into the functions of the smaller end of the SME market.

However, neither model has the comprehensiveness or the cohesiveness of that of Adizes’. Adizes has affected a number or countries’ economic policies around the world. In particular, he has been a key advisor to two consecutive but very different Mexican administrations and is often credited as the man behind the ‘Mexican economic miracle’.

Adizes also tackles the psychological aspects of an organisation’s stages of growth. In this he is well-served through a meeting of minds with Don Beck, co-developer of Spiral Dynamics (Don Beck & Chris Cowan,1996), arguably the most advanced map of emerging human motivational systems so far conceived. Spiral Dynamics was used in designing the South African transition from Apartheid to multi-cultural democracy in the 1990s.

It is Adizes LifeCycle and Spiral Dynamics which I shall be using primarily to explain the attitude of SMEs to business improvement initiatives and ISO 9000 in particular.

Spiral Dynamics is built on the work of psychologist Clare W Graves (1970) and details a hierarchy of emerging levels of greater complexity. Graves linked internal motivational (or values-oriented) systems (coded N-Z) with external environmental conditions (coded A-M). Graves went as far as to suggest N-Z were neurological systems in the brain.

This effectively produced an explanation of how people are motivated to deal with or cope with the often very different circumstances in which they can find themselves. The concept is in many ways an expansion of Albert Bandura’s Reciprocal Determinism (1977), in which we shape the external environment through our behaviour but the feedback (positive or negative) we receive from the external environment may produce a shift in our own values. Spiral Dynamics shows how different internal systems will respond to external feedback. The levels were later ‘colourised’ by Don Beck’s colleague, Chris Cowan, in an effort to make them easier to remember.

Spiralling into control
Adizes LifeCycle and Beck & Cowan’s Spiral Dynamics provide a useful explanation of the attitude of SMEs to business improvement initiatives and ISO 9001 in particular. The page on Adizes LifeCycle outlines the basic stages of the model and details the key characteristics of each stage. The page on the vMEMES of Spiral Dynamics provides a brief overview of each level of thinking it describes.

Readers, viewing the Adizes page, will be able to see how I have applied the Spiral Dynamics colours to Adizes’ stages of development. The colours shown reflect the level of thinking most likely to be driving the organisation at that stage of the LifeCycle.

To complete the linking of the two models, it is useful to consider the 4 roles Adizes identifies in any and every organisation and the type of thinking identified in Spiral Dynamics:-

  • Production 
    Production is the actual doing of the work – get the order, make the product/deliver the service, raise the invoice, collect the payment. Adizes labels this Short-Term Effectiveness. It is most likely to be driven by C-P RED thinking which is energetic and focused on the immediate tasks.
  • Administration
    Administration is the control of the work. This is Short-Term Efficiency and lends itself to D-Q BLUE thinking which focuses on the need for consistency, reliability, order and, of course, quality.
  • Entrepreneurship 
    Entrepreneurship is the creation of new ideas – what the organisation should be doing in the future. So this is Long-Term Effectiveness and needs the creativity of E-R ORANGE thinking which is future-focused and encapsulates strategic thinking.
  • Integration
    Finally there is Integration. Long-Term Efficiency created by having a set of values that all the stakeholders buy into. To be truly ‘Integrative’ requires what Graves and Beck call 
    2nd Tier Thinking – the G-T YELLOW and H-U TURQUOISE levels.

A word of explanation here: Graves’ research, conducted over a period of 30 years, indicated that, in his Spiral of ever-growing complexity, the 7th level (G-T YELLOW) had 4x the problem-solving capability of the 6th level (F-S GREEN). However, Graves (1971/2002), who equated G-T YELLOW with Abraham Maslow’s Self-Actualisation (1956), then discovered evidence of an even greater complexity of thinking: H-U TURQUOISE – a level dubbed Transcendence by Maslow (1971) with whom he frequently compared notes. Graves considered the difference in the quality of thinking between the 6th and 7th levels so great that he speculated that G-T YELLOW initiated a 2nd Tier or 2nd Hierarchy.

As said, Graves equated his YELLOW Level to Maslow’s Self-Actualisation which, in Maslow’s own Hierarchy of Needs, was a level significantly beyond – abstracted from or meta to – the lower levels. Thus, in Graves’ model, the 2nd Tier initiated by YELLOW thinking understands the needs of the lower systems whilst being uncompromised by them. From the 2nd Tier, it is possible to mediate between and integrate lower level needs.

The relationship of Production, Administration, Entrepreneurship and Integration over the LifeCycle is shown in the graphics on the Adizes page.

Considering how crucial the role of Integration is to successful development and considering how few people think in a 2nd Tier way, you can begin to understand why so many businesses develop in a rather dysfunctional manner! (The black rectangles in the graphic all represent potentially-fatal blocks to growth.)

ISO 9001 on the Adizes LifeCycle
To look at a practical example, I once dealt with a two-person company in the Infancy stage of the LifeCycle. They had a £5,000 start-up loan and no sales in the order book but they were enthusiastically writing quality procedures because,“we want to be a quality company from the start”. This was commendable but I advised them to save their procedures in a drawer and go out and get some orders first, before there was no longer a company to be a ‘quality company’.

What is an appropriate intervention at one stage of the LifeCycle will not be appropriate at another. The huge benefit of Adizes-Spiral Dynamics approach is that it enables us to understand the diversity of organisations and the mentalities of the people who lead them.

Unless it is required for statutory compliance, a formal management system like ISO 9001 is not what most organisations in Infancy need. Customers, sales, work and payment are what is needed to reach some kind of stability. Production has to be the role which dominates if the organisation is to survive. Anything else is likely to lead to what Adizes terms Infant Mortality.

The ongoing high-rate of business start-up failures is indicative of how many people going into business – and their advisers – fail to understand this.

Once a company has an established a customer base, is building a good reputation and has repeat business, it can be considered to have entered the Go-Go stage on the LifeCycle. This is the sort of business which organisations like Business Link tend to target because they have shown some growth potential. However, many of the products that Business Link promote are tools for Administration (health and safety, human resources systems, ISO 9000) and Entrepreneurship (business planning schemes, marketing projects). Depending on the psychology of the organisation’s leader (usually in Infancy and Go-Go there is a single driving figure) Entrepreneurship may be possible but true Administration is often way off .

If the leader’s thinking is fixed in the RED mode, which was necessary to power the short-term effectiveness Production role through Infancy and into Go-Go, the approach suggested by Business Link will be too sophisticated.

ISO 9001 – a step too far?
Under pressure from customers and competitors, leaders of companies in Infancy and early Go-Go will sometimes take on ISO 9001. However, ISO 9001 is essentially BLUE in nature and though the 2000 version does have something of an ORANGE sheen with the emphasis on customer focus and continuous improvement, conceptually it is beyond someone whose thinking has not developed beyond RED.

This is why the leaders of organisations in Infancy and early Go-Go often only pay lip-service to a QMS and are either major non-conformers at assessment or else abandon the project.

ISO 9001 does provide an excellent framework for the consolidation and restructuring stage of Adolescence when an organisation will transform from the RED feudal king style of leadership to the more BLUE/ORANGE corporate style we tend to think of as ‘professional’.

It is, however, usually a painful transition. Leaders in late Go-Go often recognise the need for bringing in a more professional management structure. However, letting go emotionally and allowing others to control the organisation with systems is a different matter. This is why it is not uncommon for organisations to fail to make it through Adolescence. The leaders with the least sophisticated mindset give up and sell the company – the ‘Divorce’ shown on the graphic on the Adizes page.

RED and BLUE and chalk and cheese
It really should not surprise us that so many SMEs do not mix well with 
ISO 9001. RED energy and BLUE systems are like the proverbial chalk and cheese. Unfortunately, our business support ethos all too often leans towards the one-size-fits-all mentality and terms like ‘less sophisticated’ are seen as derogatory rather than simply descriptive.

Rather than insisting on an idealised benchmark of ‘best practice’, business advisers need to map the state of the company and the mentality of its management. What stage of the LifeCycle is the organisation at? Does it need to peak or to consolidate? Is it ready to move on? What is the mindset of its leadership? Is that leadership appropriate to the company’s position on the LifeCycle? Only when such questions are answered, can possibilities be truly identified.

Such mapping, of course, must be in relation to the (changing) market environment. Some companies have the luxury of growing more slowly than others. When the business and its leadership are mapped accurately and their potential gauged in relation to the environment, then options can truly be evaluated.

ISO 9001 is a powerful tool, sketching the structure of a management system for organisations which need or are ready to be systemised. While implementing elements of ISO 9001 may prove invaluable, a company in Infancy, run by someone with high RED in their thinking is simply not ready for the full-blown standard. Consultants and business advisers need to concentrate less on what they think an organisation should have and learn to focus more on where a company is and what that tells them it needs.

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