Phases of Organisational Growth

When organizations grow from a young to mature stage, they pass through five phases of evolution where each phase ends with a period of crisis and revolution. Evolutionary periods are characterized by the dominant management styles to achieve growth, while Revolutionary periods are characterized by the dominant problems that must be solved before growth continues.

  • Phase one of a newly-born organisation is characterized by creating a viable product in a promising market. However, by the end of the first phase, a crisis of leadership emerges. The solution usually lies in locating and installing a strong business manager who is acceptable to the founders and who can pull the organisation together.
  • Phase two happens when the manager is given a free hand and zealously accepts most of the responsibility for initiating direction. In the course of growth for the organisation, the lower level managers demand more autonomy in decision-making and the stage is set for the crisis of autonomy to come to the fore.
  • In phase three the crisis of autonomy is resolved through the delegation of authority which helps in gaining expansion through heightened motivation at lower rungs. But one serious problem that eventually evolves is the loss of top management control over highly diversified field of operations. The crisis of control emerges here when field managers run their own shows without aligning plans, money, technology, or manpower with that of the organization. In order to achieve more efficient allocation of the organization’s limited resources, an elaborate network of cording mechanisms is usually introduced at of the organization’s growth.
  • In phase four the organization becomes typically much more formalized; rules, regulations and rigidities increase almost exponentially. For some time, the new systems prove useful for achieving growth through coordinated efforts. But soon procedure takes precedence over problem-solving, the chronic conflict between line and staff become acute. The organization becomes too large and complex to be managed through formal programs and rigid systems. Thus begins the crisis of red-tape.
  • Phase five of an organization’s growth is characterized by strong inter-personal collaboration in order to overcome the crisis of red-tape. Developing the team becomes the theme, social conflict and self-discipline take over formal control, more flexible and behavioural approaches are adopted to attack the problems of managing a large organization.

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