Organizational life cycle

The organizational life cycle is the life cycle of an organization from its creation to its termination.^[1] It also refers to the expected sequence of advancements experienced by an organization, as opposed to a randomized occurrence of events.^[2] The relevance of a biological life cycle relating to the growth of an organization, was discovered by organizational researchers many years ago.^[3] This was apparent as organizations had a distinct conception, periods of expansion^[4] and eventually, termination.^[5]

Development

Although various theorists and academics were involved in the development of the organizational life cycle model, Mason Haire is commonly identified as one of the pioneers of this concept. He was amid the initial few,^[6] who suggested that organizations may adhere to a certain path of uniformity in their course of expansion.^[7]

Subsequently, much research has been done on the organizational life cycle theory, and can be found in various literature on organizations.^[8] Examples include, the various stages in an organization's life cycle, phases of growth experienced by an organization during expansion and implications for these phases of growth.^[9]

Stages

Generally, there are five stages to an organization's life cycle^[3]

• Stage 1: Existence : Commonly known as the birth^[10] or entrepreneurial stage,^[11] “existence” signifies the start of an organization’s expansion. The main importance is centered around the acknowledgement of having an adequate number of customers to keep the organization or business active.^[3]
• Stage 2: Survival : At this stage, organizations look to pursue growth,^[12] establish a framework and develop their capabilities.^[11] There is a focus on regularly setting targets for the organization, with the main aim being to generate sufficient revenue for survival and expansion.^[10] Some organizations enjoy adequate growth to be able to enter the next stage, whilst others are unsuccessful in achieving this and consequently fail to survive.^[3]
• Stage 3: Maturity : This stage signifies the organization entering a more formal hierarchy of management (hierarchical organization).^[11] A frequent problem encountered at this stage would be those associated with “Red Tape”.^[13] Organizations look to safeguard their growth as opposed to focusing on expansion. Top and middle level management specialize in different tasks, such as planning and routine work respectively.^[3]
• Stage 4: Renewal : Organizations experience a renewal in their structure of management, from a hierarchical to a matrix style, which encourages creativity and flexibility.^[3]
• Stage 5: Decline : This stage initiates the death of an organization. The decline is identified by the focus on political agenda and authority within an organization,^[4] whereby individuals start to become preoccupied with personal objectives, instead of focusing on the objectives of the organization itself. This slowly destroys the functionality and feasibility of the entire organization.^[3]

Phases of growth

According to L.Greiner, there are 5 phases of growth in an organization, each indicated by an evolutionary and subsequently, a revolutionary phase.^[14]

An evolutionary phase, refers to an extended duration of expansion enjoyed by the organization with no significant disruptions. Similarly, a revolutionary phase refers to a period of considerable disturbance within an organization.^[14]

Phase 1: creative expansion → leadership crisis

Creative expansion (evolutionary phase) leads to a leadership crisis (revolutionary phase). Initially, the organization enjoys expansion through the creativity and proactive nature of its founders.^[15] However, this leads to a crisis of leadership, as a more structured form of management is required. The founding members must either assume this role, or empower a competent manager to fulfill this if they are unable to.^[14]

Phase 2: directional expansion → autonomy crisis

Directional expansion (evolutionary phase) leads to a crisis of autonomy (revolutionary phase). As the organization experiences expansion through directive leadership, a more structured and functional management system is adopted.^[11] However, this leads to a crisis of autonomy. Greater delegation of authority to managers of lower levels is required, although at the reluctance of top tier managers who do not wish to have their authority diluted.^[14]

Phase 3: expansion through delegation → control crisis

Expansion through delegation (evolutionary phase) leads to a crisis of control (revolutionary phase). As the organization expands from delegating more responsibilities to lower level managers, top tier directors start to lessen their involvement in the routine operations, reducing the communication between both levels.^[3] This eventually leads to a crisis of control, as lower level managers become accustomed to working without the intrusion of top-level directors. This leads to a conflict of interest with the directors, who feel that they are losing control of the expanded organization.^[14]

Phase 4: expansion through coordination → red tape crisis

Expansion through coordination (evolutionary phase) leads to a crisis of red tape (revolutionary phase). As an organization expands from improving its coordination, such as through product group formation and authorized planning systems, a bureaucratic system develops.^[3] This eventually leads to a crisis of red tape, where many administrative obstacles reduce efficiency and innovation.^[14]

Phase 5: expansion through collaboration

At this stage, the organization seeks to overcome the barrier of red tape through adopting a more flexible and versatile matrix structure (matrix management). Educational courses are arranged for managers, to equip them with the skills of solving team disputes and to foster greater teamwork. Complex and formal systems are also made simpler, and there is an increased emphasis on the communication between managers, to solve crucial problems. Although Greiner identified expansion through collaboration as the evolutionary phase, he did not specifically identify the succeeding crisis (revolutionary phase), as there was little evidence due to most of the organizations still being in the collaboration phase. However, Greiner predicted that the crisis might involve the exhaustion of members in an organization, due to a strong requirement for innovation and teamwork.^[14]

Implications for growth phases

There are certain implications for managers in organizations with regards to the phases of growth:

Recognizing one's position in the course of expansion

Top tier managers should be aware of their organization's current stage, to be able to execute relevant solutions to the type of crisis faced.^[16] Managers should also not be tempted to surpass their current phase due to eagerness. This is because there may be vital experiences from each phase to be learned, that will be required to tackle future phases.^[14]

Recognizing the restricted variety of solutions

It becomes clear in each phase of revolution that there are only a specific number of solutions that can be applied.^[14] Managers should avoid repeating solutions, as this will prevent the evolution of a new phase of growth. It is also important to note that evolution is not a mechanical event, and organizations must actively seek out new solutions to the current crisis that are also suitable for the next stage of growth.^[17]

Recognizing that solutions result in crisis

Managers should realize that past actions are factors of future consequences. This would help managers in formulating solutions to cope with the crisis that develops in the future.^[14]

See also

• Enterprise life cycle
• Small Business
• SME

References

External links

• Management Help - Basic Overview of Organizational Life Cycles
• Reference for Business - Organizational Life Cycle
• INC - Organizational Life Cycle