Organizations are seen as having several different stages in their life cycle, with specific implications for management at each stage. The stages are, roughly, birth, growth, decline and death, depending on which model of the organizational life cycle is used. While the details on the life stages of an organization differ, the strategies are different for each, and management must be able to differentiate each stage, and make the right moves accordingly. It could also reasonably be argued that the stages are dynamic, rather than distinct, and that the passage from one stage to the next can take place gradually, incrementally, and that management can actually affect this process (Hanks, 2015).
The initial stage of organizational development is the birth stage. At this stage, the organization is founded, its purpose identified, and it is given the resources needed to survive. The life cycle metaphor is apt at this stage, because as with living beings, the ability of the organization to survive and thrive is typically determined early in its existence. An organization with the necessary resources to survive (capital, talent) will tend to do so, while organizations that fit a specific niche within their ecology will also be more likely to survive. Organizations that serve no particular purpose, that compete against more established organizations for resources directly, or that simply do not have the means by which they can ensure their survival, will all be challenged.
The organization has to have a plan to ensure its survival, along with those very early stages of growth. This can be tricky, because survival often means finding trade-offs between scarce resources. The margin for error, as with young lifeforms, is smaller the younger the organization is. There are simply more threats, and greater vulnerabilities that must be overcome. Thus, at the birth stage, survival is the most critical objective, and may take up a fair amount of managerial energy.
The growth stages receive a substantial amount of attention in the organizational life cycle. First, this is the point where the organization's ultimate size and scope is usually defined. Second, growth is something most managers, and investors, seek out, so understanding the antecedents of growth is important for people in business, and studying business. Greiner's explanation of how organizations grow illustrates a couple of key points. One, the rate at which an organization can grow depends on the size and growth rate of the industry. If no man is an island, then no organization is, either, and the external environment dictates a lot of what an organization is capable of, especially in the early years when it has less ability to influence its industry (Greiner, 1998).
Another facet of the Greiner model is that there are a number of crises that typically occur along the way. Growth is not assumed to come in a smooth, upward-trending line. Instead, each organization in the course of its growth will face a series of tests, and in the course of these tests it will find solutions, and these solutions will facilitate the further growth of the organization. Thus, the Greiner curve emphasizes not only the fact that crises exist in growing organizations, but that they are a normal and indeed essential part of such growth (Manktelow, 2015). For the manager working in a growing organization, this is critical knowledge, because the manager not only needs to expect such challenges, but ideally to build the company around the idea that such challenges will exist, and that overcoming these challenges is part of the growth pathway that will lead to bigger things.
Greiner noted that there are several different types of crises -- autonomy, control, red tape and internal growth. These crises typically reflect shifts in the way that the organization is managed. At the birth stage, there is little structure, and the point is simply to find ways to survive and to continue growing. Through the growth stage, the metaphor is moving through childhood into adolescence. There is significant organizational learning during this phase, and the organization must over time come to adopt more structure in order to perform at a higher level as a larger organization. Managers must handle the crises through learning how to delegate and create new positions, through finding ways to formalize processes and procedures that were once informal, and through instilling formal organizational structures...
Some of the largest companies in the world are continuing to become larger even today. Where the crises are resolved by means of changing how the organization is managed, Greiner (1998) calls these periods of revolution. Roughly, the growth and crises periods run from creativity in a near-birth growth organization through direction, delegation and into coordination and collaboration as the organization reaches maturity.
Decline and Death
There are two other phases of the organizational life cycle, decline and death. For some, these ideas are not as interesting as growth, because managers do not usually embrace these stages, but nevertheless they are natural stages for most organizations. Nothing in this world is permanent, and even the strongest, oldest companies will fall at some point. The Greiner model does not address these stages, for example. As the organization slips into decline, the first response of most managers will be to address the decline, and seek to reverse it. Finding ways to renew the organization's growth trajectory becomes the first managerial priority.
Should this be impossible -- a company like Eastman Kodak seems to be a good example of a company utterly unable to avoid decline -- management needs to start re-envisioning the business. This means thinking about breaking it up, focusing on the businesses within the organization that do have some growth potential, and funnelling resources into that form of organizational restructuring (Smith, Mitchell & Summer, 1985). The focus is not on the decline, but on finding ways to get at least some parts of the organization back into growth. One of the reasons for this is that investors want managers to focus on growth, but another reason is that many declining businesses are still highly profitable. A good example of this might be Coca-Cola, which saw revenue and net income peak in 2012. The company still makes a lot of money and still has #1 market share, but the business is entering into decline. Managers at Coca-Cola are putting a lot of effort into either selling in new countries, or developing new products, as a means of shifting organizational focus back to where the growth is. This can mean a renewed interest in creativity, innovation, and other hallmarks of growing organizations. Organizational structures are loosened in order to encourage more innovation, cutting the constraints that were put into place in the latter stages of growth.
But where the end of the business is inevitable, it will often come quickly. The death stage of the organizational life cycle is a matter of divesting assets and unwinding structures. This is a unique management challenge, because the manager is still focused on extracting the best value for the shareholders. But in some cases, the end comes with bankruptcy, which usually is awful for shareholders. The managerial strategies for ending the organization can also mean finding a buyer, so there is still opportunity for management to extract value, but the end of the organization is much less about organizational structure and managerial responsibilities as it is to find the best way to recoup some value for shareholders, and maintain operating quality in the face of challenge.
The different stages of an organization's existence come with different managerial challenges. Managers must be aware of the organizational life cycle, and plan their actions accordingly. The management style will likely need to change at several points during this process. The birth process is usually characterized by ad hoc management, where survival is constantly at risk, and in the midst of different crises the organization is founded and begins to seek its pathway to success.
The growth stage is arguably the most important. Greiner notes that how fast an organization grows is dependent in part on the pace of growth within the industry. Moreover, growth comes with a number of different stages. Greiner identifies these as management stages, where a variety of different crises occur, and management must respond to each. The response will often mean a change in management style, something that is part of organizational learning, and helps the organization to navigate growth to become a successful, mature entity. The growth stage can last for a very long time, in some organizations, partly because managers typically seek to extend the growth phase of the organization for as long as possible.
The decline and death stages are less popular to talk about, but they do occur, and in these stages the emphasis…
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