Growth Model

Greiner (1972, 1998) describes how companies go through a series of phases as they grow and develop.

Creativity

When companies form and enter the Creative Phase, they are typically driven by the creative force of the founder and the new products and services that create value for customers. Innovation is natural and people do whatever is needed to make things work.

Leadership crisis

Initially, the founder (or the startup team) is able to cope with the demands of leadership, but as the company grows, they are pulled more and more in different directions until they are unable to fulfil their duties.

The increasing complexities of the firm may lead to challenges to the leader's ability, who may originally be the inventor and developer of the company products and who may find management and leadership a difficult challenge.

Direction

The response to the leadership crisis is to get more professional in management, for example by hiring managers who have got more experience and education in the subject, typically at a larger firm.

Professional managers know more about planning and tactics and help out with strategic thinking and operation plans. Rather than rushing around doing what seems to be needed at the time, a longer-term view starts to emerge, giving direction and focus to proceedings.

This stage also includes separation of activities such as budgeting and marketing, although these are probably not yet done by a separate department.

Autonomy crisis

As professional managers start to direct the proceedings they typically have a greater interest in their own areas of interest than those of others or the overall firm. They seek personal success and will fight to achieve this. When they own all the resources they need, this is fine, but as the firm grows they fall into conflict with one another, arguing over resources and rewards.

The question hence arises of how to give managers and individuals the freedom to choose and succeed in a way that also helps the whole company.

Delegation

The response to the autonomy crisis is to divide and conquer with greater structure and deeper hierarchy, where individual departments and operational units have individual managers and are delegated greater autonomy.

This is the time when middle managers appear, running multiple operational units where they manage managers rather than give direct orders to the front line.

Control crisis

There are problems in delegation and in particular as it gets more complex in a growing firm, for example where the communicated requirements are not always understood, and where managers make autonomous decisions that, while they may make sense at their level are suboptimal for the overall organization.

Not knowing enough about what is really going on at the bottom of the organization, middle and senior managers at the end of this stage start to lose control over everyday operations.

Coordination

The response to the loss of control is to put additional effort into reporting up and communicating in all directions. Isolated business teams and product organizations are joined up in business units and other collective organizations.

Finance is still managed centrally and becomes more sophisticated, looking at such as business unit return on investment. Reporting becomes more sophisticated with increasing demands on business units for information about all aspects of the business.

Red tape crisis

This coordination does not come at a price and the increasing reporting and control adds layers of bureaucracy at all levels. Layers in the company face off against one another and perhaps play cat and mouse games of reports that looks good and audits that seek hidden problems.

Collaboration

The growing antagonism of cold coordination is addressed by attention to human connection and more collaborative, supportive approaches. Bureaucracy is simplified and trust is rebuilt with a greater focus on common organizational goals.

Structures may be implemented to connect people in multiple dimensions, such as the use of matrix management. Reward systems may also be realigned to promote team and organizational success rather than just individual performance.

Growth crisis

While a collaborative organization is better in many ways than previous forms, there are now problems in how to grow further without overloading current systems and processes.

Alliances

The final stage is to address the crisis of internal growth by looking externally. One approach is to pursue growth through mergers and acquisitions. Another way is to create a virtual super-organization by forming partnerships and alliances where the business value created can benefit everyone. A typical way this happens is where each partner contributes particular skills and competences to a total customer solution.

No doubt there are crises beyond this phase, but Greiner's model does not discuss them. Typical problems include a repetition of earlier phases, but on a grander scale. For example where communication between partners is weak, leading to more formal coordination. Mergers and Acquisitions are also subject to failure, often because of cultural and personal differences.

Discussion

Stage models have two ways of transitioning between stages. The change can be smooth or it can be punctuated by crisis and struggle. This is a crisis-based transition model. There is an implication in this where firms that do not successfully negotiate these crises will stagnate and possibly fail. The human development parallel is where a person becomes stuck and unable to fully develop to adulthood (this is the cause of many neuroses).

Within each phase, the organizational design is initially suitable for the company size and context. As growth continues, the design becomes unwieldy and the very factors that at first made it suitable now lead to a crisis that triggers the redesign and transition to the next phase. This pattern then repeats the cycle of initial appropriate design followed by increasing tensions as growth causes new problems.

This echoes a kind of storytelling pattern, whereby realistic stories are not linear narratives but have twist and turns in the plot. There is also a yin-yang cycle, where the solution for one crisis holds the seeds for the next crisis. There is even a parallel in political systems which cycle between stability and revolution.

A clear with evolution can be identified whereby the business evolves as it grows, adapting to the internal and external forces that it finds. Along the way, selection takes place as those that do not adapt, fail.