An American Entrepreneur Manages across the Life Cycle

Article excerpt

ABSTRACT

Entrepreneurship research points to the need for professional mangers as organizations move into a more mature stage of the business life cycle. This paper explores the successful navigation of all phases of the life cycle, excluding decline, by a famous American entrepreneur, Fred Smith. The life cycle history of his company, FedEx, is chronicled, with particular attention given to Smith's personal influence on the organization's transition from one stage to the next. His ability to strategically manage FedEx through a fast-paced, competitive, and turbulent thirty years provides valuable insight for today's entrepreneurs.

INTRODUCTION

The literature on entrepreneurship demonstrates that many founders have management skills that are suitable only for the start-up stage of the organizational life cycle (Boeker & Karichalil, 2002). As firms grow and develop, the founding entrepreneur either loses interest or feels unqualified to administer the larger, more mature organization. The need to focus more closely on managerial tasks, rather than the more exciting quest to make something new a reality, sometimes leads firms to replace founding entrepreneurs with seasoned, professional managers (Hambrick & Crazier, 1985; Willard, Krueger, & Feeser, 1992).

The life cycle literature supports this notion that as organizations move through the progressive stages of the organizational life cycle, different management approaches are necessary for optimal success (Adizes, 1999; Cetro, Covin, Daily, & Dalton, 1992; Greiner, 1972; Hanks, 1990). Research demonstrates that strategically managing the life cycle (Lester & Parnell, 1999; Miller & Friesen, 1984) requires well-rounded managers who can understand the changes an organization needs to enable it to stay competitive at each stage of its development. Examples abound of companies whose entrepreneurial founders left to be replaced by managers who took the firms forward and who were better suited to the management of the firm after startup (Auletta, 1998).

Yet, all evidence to the contrary, some entrepreneurs [true entrepreneurs who create new markets and new customers through new products and services (Drucker, 1985), not people who merely start another new enterprise], manage to remain viable, respected leaders of their companies, long after the start-up stage has passed. This study examines one such American entrepreneur, Fred Smith, whose company, FedEx, created a new business, indeed a new industry, in 1972 with the advent of the overnight air express package delivery concept.

LITERATURE REVIEW

Researchers have posited the concept of an organizational life cycle for decades (Downs, 1967; Greiner, 1972; Miller & Friesen, 1984; Penrose, 1952; Quinn & Cameron, 1983). Organizations progress through various stages of growth and development over the course of their 'lives' (Dodge, Fullerton, & Robbins, 1994; Mintzberg, 1984; Torbert, 1974). Yet, research has demonstrated that this progression need not be evolutionary nor deterministic (Kimberly & Miles, 1980; Lester & Parnell, 1999; Lohdal & Mitchell, 1980; Miller & Friesen, 1984). It is not inevitable that all firms will follow a natural progression from birth to growth to maturity to decline.

A more realistic perspective is that large firms do eventually reach a mature stage of development (Miller & Friesen, 1984), yet smaller organizations that may be decades old never leave the first or second stage of the life cycle (Churchill & Lewis, 1983). This perspective reveals a somewhat more strategic view of the life cycle (Lester & Parnell, 1999) indicating that strategic choice (Child, 1972) plays an important role in organizational development. The life cycle is actually a collective interpretation of the organization's environment based on an assessment by top management. As noted in the literature (Drazin & Kazanjian, 1990; Miller & Friesen, 1984) through proactive strategic choice, organizations can revert back to an earlier stage, remain in one particular stage for a very long time (Miller & Friesen, 1984), or fail to progress past an early stage, regressing to decline or death without experiencing a maturity stage (Churchill & Lewis, 1983). …

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