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Evolution and Revolution as Organizations Grow - Larry Greiner

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Downloads to date: N/A | Words: 2967 | Submitted: 13-Nov-2011
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Description

Lifecycle of a growing company based on the article Evolution and Revolution as Organizations Grow by Larry Greiner

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Change in Organizations

Based on a summary of a Harvard Business Review article, "Evolution and Revolution as Organizations Grow," written in 1972 by Larry Greiner, this article outlines the stages that a company goes through from its inception to maturity, and it details each management crisis and the solutions that lead to the next phase of growth.

"A small research company chooses too complicated and formalized an organization structure for its young age and limited size. It flounders in rigidity and bureaucracy for several years and is finally acquired by a larger company.

"Key executives of a retail store chain hold on to an organization structure long after it has served its purpose, because their power is derived from this structure. The company eventually goes into bankruptcy.

"A large bank disciplines a "rebellious" manager who is blamed for current control problems, when the underlying cause is centralized procedures that are holding back expansion into new markets. Many younger managers subsequently leave the bank, competition moves in, and profits are still declining."

These problems are actually rooted in past decisions rather than present events or dynamic market dynamics. It is important for management to understand where the company is in its evolution, and where it is going.

Key Forces in development

There are 5 key dimensions that are essential for building a model of organizational development:

Age of the company

Size of the company

Stages of evolution

Stages of revolution

Growth rate of industry

Phases of Growth

During its life, a company goes through well-defined phases, each characterized by a gradual, evolutionary period followed by a shorter, revolutionary period. Greiner describes 5 such phases in the growth of a company. These are shown graphically in the following diagram:





Phase 1 - Creativity

The first phase is characterized by the following:

Founders are technically or entrepreneurial oriented

Communication is frequent and informal

Long hours and modest salaries

Reactive to feedback from the marketplace

The Leadership Crisis

As the company grows, new systems are needed - manufacturing, accounting, personnel, etc. The founders usually do not have the expertise to manage this new set of systems nor can they motivate new employees. this is the Leadership Crisis . The company may bring in management who can manage in this new environment or may flounder as founders try to "maintain the old guard."





Phase 2 - Direction

This phase is characterized by:

Functional organization structure

Accounting systems

Formal, impersonal communication

Direction centralized to the new, top managers

Autonomy Crisis

As the company grows further, centralized management is inappropriate. Lower level managers come to possess better knowledge of the marketplace but are unable to react quickly. The second revolution comes from a demand for greater autonomy.

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