Greiner’s Model of Organizational Growth – Phases of Organizational Growth and Crisis

All organizations pass through various stages of growth and at each stage the organization is required to solve some specific problems.

A very useful model of organizational growth has been developed by Larry E. Greiner.  In his 1998 Harvard Business Review article entitled “Evolution and Revolution as Organizations Grow,” Greiner outlined five phases of growth punctuated by what he termed “revolutions” that shook up the status quo and ushered in the successive stage.

Greiner’s Model of organizational growth is based on certain assumptions about the organization which are as under: First assumption is organisations are rigid, bureaucratic, control-centric, and centralized entities. Second, organisations fail to see that the future success of an organisation lie within their own organisation, and also fail to assess their evolving states of development. Therefore inability of a management to understand its organisation development problems can result in organisation becoming frozen in its present stage of evolution (failure to evolve) regardless of market opportunities

Before discussing the Greiner’s Model of organizational growth, first let us define the two terms: evolution and revolution. Evolution is used to describe prolonged period of growth ­ where no major upheaval occurs in organisation practices. The term revolution is used to describe those periods of substantial turmoil in organisational life. Each evolutionary period creates its own revolution, as organisation progresses through developmental phases. For instance centralized practices eventually lead to demand for decentralization. Moreover the nature of management’s solution to each evolutionary period determines whether organisation will move forward into next stage of evolutionary growth.

Greiner's Model of Organizational Growth - Stages of Organizational Growth

There are five phases in Greiner’s Model of organizational growth – creativity, direction, delegation, coordination and collaboration followed by a particular crisis and management problems. It can be argued that growing organizations move through five relatively calm periods of evolution, each of which ends with a period of crisis and revolution.

  1. Creativity Stage. Growth through creativity is the first phase. This phase is dominated by the entrepreneurs of the organizations and the emphasis is on creating both a product and a market. However, as the organization grows in size and complexity, the need for greater efficiency cannot be achieved through informal channels of communication. Thus, many managerial problems occur which the entrepreneur may not solve effectively because they may not be suited for the kind of job or they may not be willing to handle such problems. Thus, a crisis of leadership emerges and the first revolutionary period begins. Such questions as ‘who is going to lead the organisation out of confusion and solve the management problems confronting the organisation; who is acceptable to the entrepreneurs and who can pull the organisation together arise. In order to solve the problems a new evolutionary phase – growth through direction – begins.
  2. Direction Stage. When leadership crisis leads to the entrepreneurs relinquishing some of their power to a professional manager, organizational growth is achieved through direction. During this phase, the professional manager and key staff take most of the responsibility for instituting direction, while lower level supervisors are treated more as functional specialists than autonomous decision making managers. Thus, directive management techniques enable the organisation to grow, but they may become ineffective as the organisation becomes more complex and diverse. Since lower level supervisors are most knowledgeable and demand more autonomy in decision making, a next period of crisis – crisis of autonomy begins. In order to overcome this crisis, the third phase of growth – growth through delegation – emerges.
  3. Delegation Stage. Resolution of crisis for autonomy may be through powerful top managers relinquishing some of their authority and a certain amount of power equalization. However, with decentralization of authority to managers, top executives may sense that they are losing control over a highly diversified operation. Field managers want to run their own show without coordinating plans, money, technology or manpower with the rest of the organisation and a crisis of control emerges. This crisis can be draft with the next evolutionary phase – the coordination stage.
  4. Coordination Stage. Coordination becomes the effective method for overcoming crisis of control. The coordination phase is characterized by the use of formal systems for achieving grater coordination with top management as the watch dog. The new coordination system proves useful for achieving growth and more coordinated efforts by line managers, but result in a task of conflict between line and staff, between head quarters and field. Line becomes resentful to staff, staff complains about un-cooperative line managers, and everyone gets bogged down in the bureaucratic paper system. Procedure takes precedence over problem solving; the organisation becomes too large and complex to be managed through formal programmes and rigid systems. Thus, crisis of red – tape begins. In order to overcome the crisis of red-tape, the organisation must move to the next evolutionary stage – the collaboration stage.
  5. Collaboration Stage. The Collaboration stage involves more flexible and behavioral approaches to the problems of managing a large organisation. While the coordination stage was managed through formal systems and procedures, the collaboration stage emphasizes greater spontaneity in management action through teams and skillful confrontation of interpersonal differences. Social control and self – discipline take over from formal control. Though Greiner is not certain what will be the next crisis because of collaboration stage, he feels that some problems may emerge as it will center round the psychological saturation of employees who grow emotionally and physically exhausted by the intensity of team work and of the heavy pressure for innovating solutions.

Organization comes to the breakpoint while accumulations and tensions in one phase is calm, and revolution is created to cause radical changes in organizational structure. According to Greiner’s Model of organizational growth, every structure is valid for a specific time period and organizational change triggers radical structure changes. Changing organizational structure solves the problems in that time, and prepares infrastructure for the problems may occur in the future.

Greiner’s Model of organizational growth is a useful way of thinking about the crises that organizations experience as they grow. By understanding it, managers can quickly understand the root cause of many of the problems likely to experience in a fast growing business. More than this, managers and strategists can anticipate problems before they occur, so that you can meet them with pre-prepared solutions.

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