Life Cycles in Organizations Organizations'

Life Cycles in Organizations Organizations' life cycles can be broken down into four distinct phases: pioneering, expansion, maturity and decline. The pioneering firm enters a relatively unpopulated market where there is a lot of unexploited market potential. The company's market share and market power are high, but its initial sales volume is quite low. This low sales volume results in lower profit margins, and this is attributable to the high start up costs and associated one time fixed costs of doing business.

Also, this funds crunch leads to a lot of borrowed funds, low liquidity and no dividends. (Pashley, 1181) There are some unique challenges associated with managing a company in this pioneering phase. First, there is the concept of buy-in. Employees and investors alike must be convinced of the viability of doing business in that particular arena.

Is the company at an advantage because it serves a lonely market? Or is it a lonely market because for whatever set of reasons, there is no revenue to be earned in it? This is the question that must be answered, and it must be answered in the positive and that answer must be believed by the employees and investors. Without buy-in here, the organization is bound to fail in the pioneering phase. Managers must constantly stay on point by stressing the innovation associated with pioneering in their market.

They must not allow the organization to lose focus or move onto tangential businesses. They must stress the importance of sticking to the core competency being developed in this pioneering market. During the growth phase of an organization, the managers' key challenges are entirely different. They already have buy-in, or the organization would not have progressed beyond the pioneering phase. (Pashley, 1182) Here, the managers must concentrate on the day-to-day functions associated with steering the organization. The work is less visionary and more methodical.

How do you motivate the employees to be persistent and shelve further innovation for exploiting a formula that has been shown to work? And of course, at the same time, the managers must not breed complacency at the organization either. The trick is truly to achieve a balance between the same creative energies that got the organization past the pioneering phase in the first place, and to institute practical day-to-day strategies that will keep the organization growing rather than becoming spread too thin.

In the maturity phase, the challenge is actually the reverse of the challenge that managers face in the growth face. This is the time to maintain core competency but to expand the market with new product development and ancillary products. So, in essence, the maturity phase represents a return to creativity. (Cosier, generally) In the maturity phase, management must create the opportunity for employees and investors to encourage new products and markets that will help stave off the last stage, decline, for as long as possible.

This will come by pushing creativity over stagnancy and changing compensations structures such that innovative thinking and opening up new (tangential) markets are rewarded. Often, the ability to rescue an organization that has reached the decline stage depends on the work done to expand the market and discover new markets in the maturity phase. If the maturity phase exhibits much profit-taking and resting-on-laurels as many large corporations are tempted to do, the decline phase may be final.

However, if management has encouraged new product development and creative ancillary product development during the maturity phase, the decline phase can be stretched out for a longer period of time, and even reversed with the right management strategies. (HBR, 2003) The focus in all of these stages is balance. Management must know in which stage the organization is at the moment, and must capitalize on that knowledge.

At all times, management must be open with employees and investors with regard to the present stage and the plans to act upon that knowledge. Withholding financials and long-term goals from middle managers and investors does not create an environment in which the organization can successfully work towards increasing profits in the pioneering phase, lengthening the growth phase, managing liberally during the maturity phase to create new markets and hopefully avoiding the decline phase.

(Dewar, 216) Life cycles in organizations are as important for management to understand as are the market and the potential customers and supply chains themselves. Fighting the stage the organization is in, or denying it, does not create a successful venture at all. Instead, managers must acknowledge the stage before they can work to lengthen it or reverse it.

For instance, if an organization refuses to acknowledge that it is in the maturity stage, it will fail to create new products or explore new markets, and the same old business model will tire and the decline stage will occur much quicker than earlier thought likely or even possible. Or, in the pioneering stage, if the management team focuses too much on profit-taking, the growth phase may never be reached.

Managers must understand that liquidity will be low and profits perhaps nonexistent or negative during the pioneering phase as new markets are being plumbed with huge start-up costs. That is why life cycles in organizations are so critical to successfully managing and growing a.