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EVOLUTION AND

REVOLUTION AS
ORGANIZATIONS
GROW
GREINER
AGE OF THE ORGANIZATION

• Life span.
• Life cycle – introduction, growth, maturity, decline.
• History illustrates that the same organizational practices are not maintained throughout the life span of a
company.
• Managerial problems and practices are rooted in time.
• Do not last throughout the life of an organization.
• The passage of time relates to cultural development, attitudes, perspectives, and values.
• Attitudes become deeply embedded and institutionalized – rigid, outdated, and difficult to change.
SIZE OF THE OARGANIZATION

• A company’s problems and solutions tend to change as the organization gets larger and
larger – more employees, more problems, greater complexity.
• Size implies more sales and revenue.
• Problems of coordination and communication magnify, new functions emerge, different
hierarchy, different organizational requirements and structure.
HOW COMPANIES GROW

• Companies in high-growth industry.


• Companies in medium-growth industry.
• Companies in low-growth industry.
• Evolution represents stages of growth.
• Revolution represents stages of crisis.
STAGE OF EVOLUTION

• Prolonged growth is termed the evolutional period.


• Usually 4-8 years before a crisis sets in.
• No major economic set back during this extended period.
STAGES OF REVOLUTION

• 10 percent of companies fall off of the Fortune 500 list annually.


• No guarantees that companies remain successful.
• The critical task for management in each revolutionary period is to find a new set of
organizational practices that become the basis for managing the next period of growth.
• Not uncommon for managers to see that the solutions implemented during an earlier
phase become the centralized managerial problem today.
FIVE PHASES OF GROWTH

• Two variables under consideration – x axis – age of organization from young to mature –
obviously this represents time.
• Y axis – size going from small to large.
• Stages of growth are creativity, direction, delegation, co-ordination, and collaboration.
• Stages of crisis – leadership, autonomy, control, red tap, the unknown.
• Each period is characterized by a dominant managerial style.
PHASE 1: CREATIVITY LEADING TO A CRISIS OF
LEADERSHIP
• Birth of the company – difficult phase.
• Founder usually technically or entrepreneurial oriented.
• Generally distain managerial activities.
• Physical and mental energies are absorbed entirely by making and selling a new product.
• Communication amongst employees is frequent and informal.
• Long hours of work are rewarded by modest salaries and promise of ownership rewards
in the future.
CREATIVITY PHASE

• Decisions and motivation are highly sensitive to marketplace feedback.


• Logic of managerialism related to customer reaction and service.
• Highly individualistic.
• As company grows, the aforementioned becomes problematic.
• Larger companies have different requirements for success.
• Increasing the number of employees cannot be managed through informal means of
communication.
CREATIVITY PHASE

• Additional capital is required.


• New or complete accounting system required.
• Conflict increased.
• Longing for the good old days.
• Founders become burdened with an increasing number of responsibilities – only 24
hours in a day.
• A crisis of leadership occurs.
CREATIVITY PHASE

• Who will lead the company out of the confusion!


• Managers likely unsuited for the job as it grows.
• Strong leadership required.
• Managers need to start to manage.
• New ways of doing is necessary.
• Company is evolving very quickly.
• New techniques, style, and the logic of managerialism must adapt and change.
PHASE 2: DIRECTION LEADING TO A CRISIS OF
AUTONOMY
• Those companies that have survive the first phase by installing a capable business
manager tend to embark on a period of sustained growth.
• A functional organizational structure is introduced.
• Departments are formed.
• Marketing activities for example become increasingly specialized. Selling is not
marketing…
• Accounting systems for inventory and purchasing are introduced.
DIRECTION

• Incentives, budgets, and work standards are adopted.


• Communication becomes more formal and impersonal.
• Managerial division of labor, departments required – hierarchy.
• Separation of upper managers or founders from supervisory roles.
• Need to process more information.
• Greater knowledge required – HR function for example.
PHASE III: DELEGATION LEADING TO CRISIS OF
CONTROL
• Evolves from the successful application of a decentralized organization structure.
• Increasing the level of responsibility to managers.
• Profit centers and bonus are used to motivate employees.
• Management by exception rather than daily and micro-intervention.
• Communication from the top is infrequent and usually occurs by telephone, email, or
brief visits to field locations.
DELEGATION PHASE

• Allows companies to expand by means of the heightened motivation of managers at lower


levels.
• Organization is highly decentralized so as to penetrate larger markets, respond better to
customers, and to develop new products.
• A series problem eventually emerges as top level management begin to feel that they are
loosing control over a highly diversified field operation.
• Autonomous field managers prefer to run their own show without interference.
• Field managers tend to breed a parochial attitude.
• Firm eventually falls into a crisis of control.
PHASE 4: COORDINATION LEADING TO A CRISIS
OF RED TAPE
• Steady creation of more formalized reporting system for achieving greater coordination.
• Decentralized units are merged into product groups.
• Formal planning procedures are instituted.
• Centralized teams in head-office set up to create programs used to manage line
managers.
• Capital expenditures are carefully weighted and parceled out across the entire
organization.
• Each product group is treated as an investment center – ROI measured and compared.
COORDINATION

• ROI is used to help allocate resources.


• Certain technical functions such as data processing are centralized at headquarters, while
daily operational decisions remain decentralized.
• Stock options and companywide profit sharing are used to encourage employees to
identify with the company as a whole.
• All these activities contribute to the growth of the company.
COORDINATION

• The systems that are created prove useful for achieving growth and the efficient
allocation of resources.
• A lack of confidence builds between line and staff as relationships get bogged down.
• Systems and system analytics become more important than ever. People don’t matter,
rather systems do.
• Red tap follows suit due to bureaucracy.
• The organization tends toward bureaucracy rather than achieving outcomes.
PHASE 5: COLLABORATION LEADING TO A
UNDEFINED CRISIS
• The next phase has an emphasis on the development of strong interpersonal
collaboration in an attempt to overcome the red-tape crisis.
• This phase empowers people.
• Focus becomes solving problems through team action.
• Teams are combined across functions to handle team action.
• Staff experts reduced at head-office, reassigned and combined into interdisciplinary teams
that consult as opposed to direct – staff v. line.
COLLABORATION

• A matrix-type structure is used so as to assemble teams.


• Formal controls systems are simplified.
• Conferences of key managers are held frequently to focus on problems.
• Educational programs are used to train managers in behavioural skills – teamwork and conflict
resolution.
• Real-time information systems are integrated into daily decision-making processes.
• Economic rewards are geared to team performance.
• Experimentation with new business practices is encouraged.
COLLABORATION LEADING TO ?????????

• What is the next crisis?


• Too often, it is tempting to choose solutions that were tried before, but that actually
make it impossible for the new phase to emerge.
• It is important to know where your are in the developmental sequence.
• It is important to recognize the limited range of solutions.
RECOMMENDATIONS

• Need to be aware of the stages.


• Cannot skip a stage.
• Go with flow and work with it.
• It is evident that a stage can only be closed if solutions are suggested and implemented.
• Too tempting to used solutions used before rather than finding new ones.
• Management must be prepared to dismantle current structures and change before a crisis
emerges.
RECOMMENDATIONS

• Survival is not always possible.


• To move ahead, companies must consciously introduce planned structures that solve a
current crisis but also fits the next phase of growth.
• Solutions will breed new problems.
• Solutions to solve today’s problems frequently become tomorrow’s problems.
• Regarding large organizations, can they find new solutions for continued evolution?
• If not, the government will break these companies up or regulate them.
RECOMMENDATIONS

• Cannot wait for conclusive evidence before educating managers to think and act from a
organizational development perspective.
• The intriguing paradox is that by learning more about history, we may do a better job in
the future.
• It is not possible to manage complex organizations without knowledge of the past.
GREINER: CONCEPT MAP
large
Growth
through
collaboration
Growth
through ?!
Growth coordination
through
Size delegation
Growth Red tape!
through
direction CRISIS!
Control!
Growth
through
creativity Autonomy!

Leadership!

small
young mature
Age

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