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.
