Organizational life cycles: start-up, growth, and maturity phases

Managing Life Cycles in an Organization

The Start-Up Phase

The start-up phase is the first phase experienced by a company at its inception. This phase is also referred to as "birth." Actions taken during this phase include thinking about the business, forming a management group, and writing a business plan. Challenges faced during this stage include acquiring start-up funds, testing marketability of the product or service, and being effective in writing the business plan.

The above-mentioned challenges are closely interlinked with each other. Start-up funds for example is integrated with the marketability and business plan of the product or service. If a product is not marketable, it is unlikely that a sponsor or loan will be found for it. The success of the business is thus dependent upon the quality of planning in this stage.

Marketability is tested by methods such as telephone surveys and questionnaires. The entrepreneur should make sure that a large enough proportion of the market over representative areas is surveyed in order to provide an accurate view of the market. In order for the business plan to be successful, the market and its demographics should be taken into consideration. Marketing experts could be consulted for this. Once the business is declared open, it enters the growth phase.

The Growth Phase

During the growth phase, the business becomes established. Here it is expected that the funds invested in the business would regenerate itself. Revenues are expected to climb, new services and products implemented, and the company also grows in size by hiring additional employees. External challenges faced during this stage could include competition from rival companies, and a lack of customer interest in products or services. Internal challenges, which could include a lack of growth and thus a lack of revenue, are related to external challenges. When the core of the problem is dealt with, all the challenges should then be faced with greater effect.

Competition could then be dealt with by implementing new products and services that the rival has not considered for his or her company. When this is done, marketability of the company should be improved and revenues should grow. The management team should then work together to provide the best possible of service and products in order to deal with this problem. When growth is reestablished, the team should continue to think of ways to improve and supplement products and services in order to maintain market interest. Marketing challenges could be dealt with locally by the management team, or outside experts can be hired.

The growth stage is often the most exciting and most tumultuous in a new business. When a level of revenue is reached that remains stable for a period of time, it can be assumed that the growth stage is over and that the maturity phase has begun.

Challenges in the Growth and Maturity Phases

Challenges in the growth phase are mostly related to issues of revenue generation, and implementing new products and services, as well as employing new people. The focus is on maintaining a steady rate of development. In the maturity phase, the focus is on avoiding dry rot and decline as far as possible. This is done by responding to new products and services from other companies, rather than as such focusing on one's own growth through new products and services. The important factor is recognizing which stage of development is faced by the company, and whether any decline in income is the result of dry rot or simply of the need for establishing a few new strategies. The company's management team should thus be very aware of the stages of growth faced at any particular time.

Decline and Renewal do believe that it is possible for a company in its decline phase to be renewed. Ideally, decline should be avoided altogether. If however symptoms of decline are detected, this should occur as early as possible in the decline phase, because the longer a company is allowed to decline, the more difficult renewal will be.

Several elements play a role in the possible decline of a company. One of these is with management. With a company's mature stage, management also reaches maturity. The greatest inherent danger here is inflexibility: management does the same thing in the same way, but expects results that differ or grow from what they have been before. Other factors that play a role include debt, poor planning, inexperienced management, inadequate leadership, and a lack of revenue.

Renewal is however possible. The most important factor here is that management should change its inflexible paradigm to one of greater flexibility. Some of the already mentioned strategies, such as observation and idea-generating teams, can be implemented to deal with detecting and preventing decline. Decline can be prevented by implementing strategies such as generating new ideas for products and services, and observing the competition and its products and services.

My Organization believe my organization is in its maturity phase. The most obvious sign of this is its years of existence and the profit margins. Our growth has reached stability, and so have our profit margins. I believe that this is a challenging time for us, during which we need to be careful of dry rot and decline symptoms. This is why we should focus on further growth, rather than preserving the strategies we have built up thus far.

Sources

Adizes, Ichak. (1988). Corporate Lifecycles. Englewood Cliffs, NJ: Prentice Hall.

Gross, Susan, Mathiasen, Karl and Franco, Nancy. (1998, Summer). "Organizational Life Cycles: Revisited." In MagNews, Management Assistance Group, Inc. http://www.managementassistance.org/page4k.html

Johannsen, Murray. (1996-2004). "Five Phases of The Organizational Life Cycle." Legacee Management Systems Inc. http://www.legacee.com/FastGrowth/OrgLifeCycle.html

McNamara, Carter. (1999). "Basic Overview of Organizational Life Cycles." Minnesota: Management Assistance Program for Nonprofits. http://www.mapnp.org/library/org_thry/org_cycl.htm

Mills, Steve. (2004). "Organizational Life Cycle." Sprinfield, MO: The General Council of the Assemblies of God.