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Apr 26, 2024

An Introduction to the 5 Stages of Development (Part 1)

This episode kicks off a new series on the five stages of organizational development. Mark and Cole Abbott begin to explore these stages, inspired by the work of organizational theorist Elliot Jacks. They touch on the increasing complexity and competency required at each stage, with key insights into the specifics of how businesses must strategically grow to support long-term vision and operations.

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Cole Abbott (00:00:01 -> 00:00:08)

So today we're talking about stages of development. Yep. It's probably gonna be, uh, part one Yeah. Of multiple parts.

Mark Abbott (00:00:08 -> 00:00:10)

Yeah. Two or three, I think. Yeah.

Cole Abbott (00:00:10 -> 00:00:18)

Yeah. So we'll see. We'll see how these go. Yeah. Yeah. Um, yeah. Today we're, we're covering what the stages are. Yep. Right? The need time span of

Mark Abbott (00:00:20 -> 00:00:33)

Yeah. So the five stages, um, time span of focus and time span of goals, and maybe get a little bit into structure, just maybe we'll see how it comes, how it goes.

Cole Abbott (00:00:33 -> 00:00:41)

I feel like we probably won't Yeah. <laugh> Okay. Knowing how these go. Yeah. Yeah, yeah, yeah. Yeah. So let's start on the five stages. Yeah.

Mark Abbott (00:00:41 -> 00:27:31)

So, um, so the, so the big picture here is that the, the stages of development. We've got a guide, um, at on 90 in the resource library and 90 U, um, that gets into this in detail. It's got like, I don't know, 30 pages or something in it. Um, and, um, and it's a, it's a, it's a, it's a concept that I started to develop a bunch of years ago. Uh, and the big idea behind it, um, sort of owes its development to the work of a guy named Elliot Jacks, who is kind of one of my favorite, um, um, organizational, uh, development guys. Uh, and, um, I think he's, uh, like one of the most important people that most people don't know about when it comes to sort of organizational theory and, and, and how to run a great and build a great company, build and scale. The big idea that I love about Elliot's work is that, um, there's a hierarchy of competencies within an organization, and that, that, that the hierarchy based upon time spans of responsibility, and, you know, to cut to the sh to the short of it, to give an overview of this, it's as an organization evolves, the goals that it can take on, can extend and extend and extend and extend, right? In the early stages, it's just product market fit. Um, but when you've gotten the organization to a place where, um, the business has turned into a company, and a company we've talked about this before, is something that someone would either love to buy from you or take over for you, take over leading for you when you've gotten it to that place. Um, we refer to it as a stage five stage stage five company. And, um, and it tends to have stage five companies have some big goals that are five to 10 years out. And, um, and you really need to have a sense for where the business is gonna be in five to 10 years. Um, you need to have projections as an example, if you wanna sell it, you know, especially if you're using a, a traditional process like having an investment bank involved, they're gonna want to present your, your five to 10 year projections. Um, so stage five company, um, is, is one that has a confident vision in terms of where it's gonna be in five to 10 years and knows how to get from here to there and has all the people it needs to get from here to there. So the five to 10 year, um, vision is one that's associated with, um, actually having five layers or stratums within a company. And what you see is, as a company evolves, it starts to add stratums or layers to the organization, right? So this first stage is, is basically, we call it the survival stage. And it's basically it's just people doing work day to day, week to week. They're really just trying to prove product market fit. Um, no one's really wearing, you know, there's not like this real formal divvying up of, of roles and responsibilities. There's not this really crystal clear, um, uh, focus on having a bunch of unique experts, um, around the organization. It's just survival. So that's, that's stage one. And as I said, it's really all about product market fit. Um, the second stage is where you have typically another stratum, another layer of, of, of humans. Um, and you're looking to, uh, you've, you've kind of proven product market fit, but now you're looking to su sustain the fit. You're looking to see if it's repeatable. Um, you're hiring people in maybe their, you know, their salespeople or maybe their, their, their, their product people. Um, you know, if you're, if you got a painting company, you have painters now, right? And you're, you've hiring a bunch of painters and you're overseeing these painters, and, and it's just now you're just, you're bringing in the revenue. You're trying to make sure it's repeatable. You're hoping that the people will buy, um, from, you'll be repeat buyers, et cetera. So, so you're just really just trying to sustain the bloody thing at that, at, at stage two, at stage three, it's now, now we've proven product market fit. The economic model seems to be working, right? We can hire people, we can pay for them, you know, um, it's clear that it's worth investing in the business, right? It's worth investing in either product. It's worth investing in marketing. It's worth investing in sales. It's worth investing in having someone run the books. And so now, stage three is your scaling, right? Um, you're not at this point able to have a bunch of different experts all around, right? So you don't have it at stage three when you're scaling. You, you, you're just starting to, you're, you, you are going from, well, we'll get into the goals in a second, but you're going from, you're going from sort of, uh, you no longer are day-to-day, week to week, right? The people below you now are thinking out at least 90 days. At least 90 days, and they're hiring and training people. Um, and you may have that a person sitting in a sales seat, you may have another person sitting in operation seat. You may have, you know, a temp, a, a, a fractional person sitting in a finance seat or a bookkeeping seat. And so that's the second layer. And then, and then you're, you're, you're like focusing on, Hey, where can this thing be in a year, you know, or two years, right? And so now you, you, you, you can start to think about hiring really good, like marketing people, head of marketing, or a really good head of operations, or a really good head of product, or a really good recruiter on the people front. And so now all of a sudden, this is when you move into succeeding, right? I can get really good people sitting in, like my marketing head of marketing seat. I can get a really good person sitting in my, in my head of sales seat. I can get a really good person sitting in the head of product seat. I can get a really good person sitting in, um, the finance seat. And what's happening as you go from survive to sustain to scale to succeed, is you're taking off hats, right? So in the beginning, you wore every hat marketing sales, right? Um, et cetera. And, um, and then you, you, you get rid of those hats and you know, and you tend to get rid of the hats based upon what you're least interested in doing, and you're not as good at, right? So I don't, especially if you don't love doing something, you're not great at it, right? Um, you hopefully can start to get rid of those hats. Um, the goal, as I said earlier, is to get to stage five. And that's where you're, it's a stewardship sage. It's where, um, you are focusing on the sort of five to 10 year things, and you've got these amazing people below you running sales or marketing. Maybe you have an integrator, maybe you have a c-suite, um, maybe you have a president, right? In the, at the, at the, at the, at the, at the fourth layer of the organization. But, you know, this is now to the point where, you know, you're playing this visionary role, you're taking the organization to this and, and, and getting everybody excited about where things are gonna be in, in, in, in five to five to 10 years. And we call that a stage five business. So stage one, survive, stage two, sustain stage three, scale, stage four succeed. And stage five is the stewardship sage. Um, you know, and as, as I said, what happens is, as you add each of these layers that, you know, the time span of focus, um, uh, extends, right? And so, you know, you start starting in the beginning, as I said earlier, you know, you are focused on day-to-day, week to week. Then once you hire some people that can be on that, in that first stratum of the company, now you can focus quarter to quarter, right? At, at stage, um, at stage, sustain at stage scale. You're now focusing year to year, right? Maybe you're focusing out two years out at stage succeed, you're focusing on as the founder, CEO you're focusing on, on, on two to five years. And then, as I said earlier, stage, stage, uh, stage five in the stewardship stage, you're, you're focusing on five to five to 10 years out there. And so with those, with those as your focus or your folk eye, right? Um, you're now, you're, you're now have people below you that are capable of doing the two to five. And then they have people below them that are capable of doing the one to two, and then they have people below them are capable of doing the nine month, the 90 days to one year. And the folks below them are capable of doing the, you know, sort of day-to-day, week to week stuff, uh, in a stage in a stage five company. And so what does that mean, right? It means that, um, at the, at the first, uh, layer of the organization, those folks are working on, um, producing a quality and a quantity and following a process, um, that has been designed by, typically by either stage two or a stage stage, or designed by either Stratum two or a stratum three, um, leader. Um, obviously, you know, what we talk about is, you know, you want 'em to be the right people, which means if they're good core value fits, and then you also want them to be competent in terms of whatever that particular job is, right? And so we talk about competency, we talk about they need to be committed, they really want to genuinely do the job well, and then they need to be, they need to have the capacity to do the job well, right? We talk about it's physical, it's emotional, um, it's intellectual. And, um, and the fourth category that we talk about in terms of capacity is time span capacity to be able to take on the responsibilities. So that's that stratum one seat, I guess, where you are getting into structure, right? That stratum one seat really is, is, is, is, is all about, you know, sort of, uh, just producing a good quantity, producing a good quality. It's about, it's, it's about the people showing up, obviously, right? It's about them being good core value fits. And it's typically they're dealing with relatively simple problems. Um, you know, and, um, hopefully, uh, they're simple enough where a little trial and error will get them through things. Um, they're not doing anything that, um, has a long-term impact, um, on the organization if it fails. So, uh, so those are sort of the, the folks that are at the stratum one, right? And, uh, and their objectives are day-to-day, week to week. And, and they consistently live up to those objectives, can, can accomplish those objectives. The second stratum is, uh, is a, is is are people that are dealing with objectives that have anywhere from three months to one year. They're also, they tend to be team leaders, but a lot of time you have individual contributors there as well. But you know, obviously as a team leader, they're responsible for going out and hiring people and developing people and onboarding people, training them up, making sure they understand the processes. Um, and, and then, you know, uh, really getting the folks to the point where 90% of the time, um, they're just doing their, doing their work. They're great people to work with, um, customers love them, colleagues love them, et cetera. Um, so you know, the difference between the stage, uh, stratum one seat and the stratum two seat in terms of complexity is, you know, we talked about trial and error at the stratum one level, at the stratum two level, you know, you're t typically dealing with, if thens, you know, they have a decent sense for, well, if this happens, then this happens. And if this happens and then this happens, and this is how I should respond to it, and helping others to, you know, navigate those if then moments associated with, uh, that particular area of the organization, um, then we get to, to, to, to the stratum three. And that's where, where, where things get interesting and, and, and much more complex, because you tend to see in almost every stage five company, um, or even even stage six organizations, you see that being really the most commonplace for there to be a department head. And then the question is, what kind of departments do you need, right? Um, in the beginning, um, it could just be there are only three departments. There's a sales and marketing customer service, they're all the same. I mean, it's just one department, right? Um, and so you have that leader, and then you have a head of operations, and then you have a head of finance. So that's kind of your, your, your classic super simple, uh, structure, um, for the first three levels. And then what you want to do is you don't want to, and a lot of people deal with this is really more of a structure conversation than it is just a stage of development conversation. But what you want to do is, is get clear on where you need to be really, really good, right? And so maybe you need to be really, really good at marketing as an example. Um, or maybe you need to be really good at sales. Um, and, and the person you have in there in the beginning is like, they're kind of a jack of all trade, but a master of none. So they're not really a great marketing person, or they're not really a great sales person, or they're not really a great client success person. So now all of a sudden it's like, you know what? We really need to start, you know, we, we need to start dividing up and going out and getting an, an expert sales leader or an expert, you know, head of marketing or an expert head of customer service. And so, what a lot of organizations do, and a mistake they made as they navigate these stages of development is they'll throw another layer in here as opposed to keep really tight on the time spans of responsibility associated with your layers, and just now start to spread out the centers of excellence, start to increase the number of centers of excellence. At 90, we got all the way up to, uh, 11 centers of excellence, um, before we went and went from me having them all report to me, to adding on a c-suite, adding on that fourth la fourth layer. So, you know, ultimately we ended up having, we had brand, we had, uh, uh, marketing, we had creative, we had, um, uh, education, we had product, we had data, we had engineering, we had people, and we had finance since we got to nine. And then we decided to split product. And did I miss someone? Yes. Partnerships, yeah. Client success and client success. Yeah. Flipped over those, that group Yeah. That got, yeah, that got to 11, right? Um, and, and rev ops, and yeah, if you wanna include that. Well, that was, that was, yeah. And rev ops then ultimately, right? You got to 12. Before we got to 12, though, we, we said, I can't do this anymore. I can't, I can't oversee this many different departments and be a good leader, right? Be a good leader and a coach. So, you know, we decided to move to, um, the c-suite last year. And so now, you know, we have five layers and we have all those departments, um, and we're actually creating another product group. So in theory, we'd, I think we'll be up to 12, if not 13. Um, then I think about it, maybe even 14, but somewhere between 12 and 13 to 14, uh, reporting up to, as you were putting it. Now we have, uh, we're, we're out looking for A CMO. We have a Chief revenue officer. So the CMO has five different departments reporting to him or her. Um, then the CROI think has four or five. Um, and then we have a head of product, which will have, you know, a number of different pods reporting to, to, to them. And then we have, uh, well, and we have A-C-T-P-O with product and engineering and quality, right? And then we have a head of people, then we have a chief financial officer, and then we also have a chief of staff. Um, so now that's what, six people at the most senior, we call it the c-suite or six of us there. And then there are 14 plus or minus, um, at the, uh, at the department level. And so, you know, we're now to a stage five company. I'm predominantly responsible for the five to 10 year vision. I'm predominantly, you know, responsible for big relationships. I'm predominantly, you know, so responsible for our culture. Um, you know, I'm predominantly responsible for some big ideas and some, some big things that we're working on, uh, some of which may, you know, not even turn into a product for years. Um, and so, you know, the, the, the stages of development and the structure and the goals are all very related, right? So the, the whole, you know, as, as you, as you move through each of these stages from survive to sustain, to scale, to succeed, to stewardship, you're just basically adding these layers. Obviously, the level of competency associated with running the departments at a certain, you know, the seats associated with each layer is long, is, is, is it's more, everything's more sophisticated, more complex, more long-term oriented. Um, the nature of the goals that the organization can take on, um, extend and extend and extend. And so now, like the CRO has goals for two to five years, and the CTPO has goals out there that anywhere from two to five years, and the head of people's working on stuff two to five years, the head CFO is thinking about two to five years as an example, right? We wanted to have the company position to be able to go public, and that's definitely a two to five year thing that he's working on, making sure we have, right? Then we have security stuff that we're working on. That's that, you know, like the SOC two has been taking several years for us to get that all in place that should be done this year. Um, and it's, and so, you know, as the organization evolves, as it grows, as it scales, sort, sort of the nature of our goals extends the complexity of the things that we're working on extends. And, um, and you're constantly, uh, you know, working to make sure that each time you transition that you know, you, the culture, it's hard, right? We've experienced three phase shifts since we've started the company, right? I, in my mind, right? So the first one was when we, um, uh, we really foc we really focused on having really strong heads of departments. Um, and so there were, there were a number of people who came off the senior leadership team because we were pretty flat for many a year. And, and that kind of sucked for them. And, and I hate that that sucks, but that was part of the, you know, so there was, there was, there was, there was, there was, uh, a sucky moment, right? Where some people came off the senior leadership team, but, you know, that was at, that was that stage. Um, and there's obviously stress. And even though we really lean in hard to, um, the concept of work life harmony at, at the company, and we, you know, lean hard, you know, into the idea that people shouldn't be working more than, you know, in the first couple of different stratums, they shouldn't be working more than 45 hours a week. Um, and we really do, I think, do a damn decent job of that. But the reality is, is that when change is taking place, even if you're only working 40 to 45 hours a week, you can't help it feel the stress at night and you're thinking about things. And, and so every time we've gone through these, these phase shifts, these transitions, there's been stress. Um, that's, that's inevitable because the change taking place, you know, we've had leaders, uh, come and go, um, more so over this last phase shift than we've ever had, um, and, uh, people who we love having. But once the CTPO came in, you know, um, you know, that, that our head of engineering was like, this is a time for me to go and build my own company. I love this journey. Um, Randy's been amazing. We love Randy, but we respect that now he wants to go and have his, his journey. Um, and even though it sucks, you know, I'm very proud of the fact that, you know, I've been a leader who's created leaders, who's created leaders who, and, and I have a lot, I don't know, 10, 20 people that have worked for me over the years have now become CEOs or presidents, um, at least I'm, I'm, I think closer to 20 than 10. And, and I'm very proud of that. But every single time it happens, it's like, you know, you know, you don't like it, um, but you know, it's the right thing to do. We're going through that sort of the stress associated with this, this the transition to the c-suite right now. Um, and, uh, you know, so that's just part of the stages of development. And what's helpful about the model is that, you know, it gives you a sense of where you are and what you need to be, you know, focusing on. So, you know, when you're at that first stage, you're just focusing on product market fit, right? Um, and you don't even need to be really like perfect on brand. You don't need to be perfect on, um, ideal client. You know, you don't need to have that purpose, passion cause nailed for, for recruiting purposes as an example. Uh, you don't need to have, you know, a one year goals and three year goals, right? You don't need to have a big, hairy, audacious goal. Um, it's, it's bloody simple. And as the, as the organization evolves, all of a sudden it's like, okay, so when do I need to like, worry about adopting an operating system? Right? Um, there are components of the operating system, like the vision component that I think every startup should at least start working on, right? Um, but like I said, you don't have to nail it all, but you don't have to nail structure obviously at stage one. You don't have to nail structure at stage two, I would argue you don't even need to nail structure at stage three, but you certainly have to nail structure transitioning from stage three to stage four. Um, and, uh, and you certainly have to have a decent perspective on layering between stages three and fours, because too many people, in my opinion, go out there and mess layering up. And what sucks about that is they create too many layers and you get this quote unquote middle manager, and we all know that when times get tough, that layer is, you know, tends to be laid off. And that's not cool, right? I, as you know, I deeply believe that, you know, one of my back to my, as a leader, one of my most important responsibilities is to do everything I can to never lay a person off. I have gone on public and said, I will, I will take zero salary if I after have to, before I will ever lay anybody off. That's just, that's, that's a bat on me as a leader. Um, and so it, so nailing structure somewhere between three and stages three and four is really, really important in my opinion. Um, and I think that, you know, somewhere between three and four nailing, um, the purpose, passion just cause um, is really important if you want to attract and retain great people, right? Because ultimately, um, we all wanna matter and we wanna work for a company that matters. And, and, and if we don't have that purpose, passion, just cause what I, I actually was writing about this last couple of days and it's, it's, it's something that I, I I, I still haven't nailed getting this right in communication wise, but everybody's got all this stuff going on. And if you can nail a great purpose, passion, just cause that is kind of like this, this, this star that's shining all the bloody time, right? And, and it helps everybody just make decisions, right? So is this, you know, you know, building high trust relationships and helping people thrive at work is what I'm doing, right? Consistent with that, right? As an example, so that, you know, constantly doesn't matter where you are within the organization, that why is informing, um, and helping you make decisions. Um, and so I think, you know, the why is super important, right? Nailing the ideal customer is super important. Is this an ideal customer? If yes, I really need to do everything I can to create a high trust relationship with 'em. If it's not you, no. Don't lean into it, right? That they're not buying what we're selling and, and we can't, you know, I, I, as you know, I, I like guys, don't listen. I don't wanna, I don't mean to be a bad guy when I say this, but, you know, don't listen to people who are non-ideal customers because we're not building for them. We're not solving for them. You know, if someone comes and says, well, you know, I, I just want the cheapest product out there, great. It, that ain't us, right? So, so, so, so go find that, that provider, um, and by the way, you know, that's, that's on you. Sorry. Not, I mean, it's, we are who we are and, and we'll do everything we can to help, you know, our ideal customers. But, you know, don't worry about the non-ideal people. Be really clear on the unique value proposition, guys. This is what we are, this is what we stand for. This is what we deliver, right? We help people focus the line and thrive. And, um, and, you know, if, if there's something else that they want, I, we respect that, but that's not who we are, right? This is who we are. So it's somewhere between stages in three and four. Um, you know, I think that's where you really wanna nail upgrading the operating system so everybody's on the same page, right? Structure and KPIs and processes. And so by the time you get to stage five, right, you can present yourself and say, look man, we're solid. Right? Every, you know, we got great people, we've got great processes, we know how to scale. We're great at recruiting, we're great at retention. Um, you know, our customers love us and, uh, and everybody, and this is an organization where people genuinely, um, you know, they love working, they love promoting it. They, they honor the things that we care about. And, um, and, and, and you know, it's, you've built a business or a company now that, you know, I like to say you can love forever.

Cole Abbott (00:27:32 -> 00:27:36)

Yeah. That was on solid foundation. Yeah. Earn your way up there. Yeah.

Mark Abbott (00:27:36 -> 00:27:44)

Yeah. So that was a summary. Maybe the next time we'll get into a little bit more detail, but, uh, that's a summary of the five stages.

Cole Abbott (00:27:45 -> 00:27:50)

Yeah. Little overview first, then we'll get into it. Yeah. Cool. Look forward to it. Alright.