Chapter 12 Organization size and life cycle Group 1 Marcus Depaul Ula Ou Carrie Haung Vincent Kuo Ruby Tsai Jeremy Chang Serena Chang Maggie Lee Samantha

Chapter Contents Organization size Organizational life cycle Size bureaucracy and control Bureaucracy in a changing world Bureaucracy Vs other forms of control Decline and downsizing

Organization size: is bigger better? Pressures for growth Size enables to acquire resources, bargaining power, compete on the global market and avoid stagnation. Growth might be prioritized to other goals such as profits or quality. Dilemmas of large size Large. Access to large capitals and global markets enables to take risks and make investments otherwise out of reach. Small. Fosters inter-group dedication and entrepreneurial spirit. Also enhances innovation. Hybrid. Obtained trough a divisional structure

Organizational life Cycle Stages of life cycle development Entrepreneurial. Focus in on providing the product/service, market it and survive. Crisis occurs for lack of leadership. Collectivity. Departments and specific job assignments are developed. Formal systems start to appear in a strong top down leadership environment. Crisis arises due to need for delegation

Organizational life Cycle II Formalization. Internal control and operative systems are created, the bureaucratic body of rules and procedures concretized and communications formalized. Crisis occurs due to mid management immobilization and rigidity. Elaboration. Collaboration between divisions is enhanced without increasing bureaucracy. The latter is simplified and the organization might be split in smaller units. Crisis might emerge as the company becomes over-complexity, over-bureaucratized and sluggish. Renewal is required.

Organizational life Cycle III Characteristics during the life cycle

Size bureaucracy and control Definition

Size bureaucracy and control II Size and structural control Formalization. Larger size requires more formalized to achieve standardization and control. Centralization. In a centralized organization decisions are made top bottom. Contrary to how bureaucracy would suggest larger companies tend to decentralize.

Size bureaucracy and control III Personnel ratios

Bureaucracy in a changing world Organizing temporary systems The formalized hierarchical structure is used during stable periods. When external contingencies require it procedures can be managed trough a loosed temporary structure which enables to respond promptly. Other approaches to busting bureaucracy Bullpen sessions Geographic region based teams Empowerment to researchers Professional training at all levels

Bureaucracy Vs other forms of control Bureaucratic control Control is achieved trough rules, standard procedures and bureaucratic mechanism. Positions are legitimated by Rational legal, Traditional or Charismatic authority. Market control Price mechanism and competition are used to evaluate performance. Clan control Behavior is controlled by enforcing shared values, commitment, traditions and beliefs. Used in high uncertainty contingencies.

Decline and downsizing Definition and causes Atrophy. The company becomes inefficient and unable to adapt to a changing environment. Vulnerability indicated inability to prosper in the company’s environment. Environmental decline or Competition. This is experienced when the external resources become insufficient to maintain the company operative.

Decline and downsizing II A model of decline stages Blinded Stage. Internal or external changes pose a treat to long term survival. Inaction stage. Decline is consciously or unconsciously denied and no action is taken. Faulty action stage. Future failure to adjust would be fatal. Clear guidelines and possible downsizing are necessary. Crisis stage. The organization faces chaos. Major reorganization and redesign are necessary. Disillusion stage. Irreversible decline has happened and ordered shutdown is the only option.

Decline and downsizing III Downsizing implementation Search for alternatives. If possible managers should try to avoid layoffs by alternative measures (work sharing, pay cuts etc…) Communicate more. If future layoffs are a concrete possibility open communication is highly recommended. Provide assistance to displaced workers. Company is responsible for assisting its layoffs, thuus shall provide severances, benefits and outplacement assistance. Help the survivors thrive. Managers should acknowledge how downsizing effects remaining employees feelings and provide support and reassurance.

Case Study

What is IKEA? Founder: Ingvar Kamprad Established in 1943 in Sweden. Largest furniture retailer. I: Ingvar K: Kamprad E: Elmtaryd A: Agunnaryd

ORGANIZATIONAL PRACTICES IN THE FIVE PHASES OF GROWTH CATEGORY PHASE 1 Entrepreneurial Stage PHASE 2 Collectivity Stage PAHSE 3 Formalization Stage PHASE 4 Elaboration Stage PHASE 5 Management Focus Make and sell Efficiency of operation Expansion of market Consideration of organization Problem solving and innovation Organizational Structure Informal Centralized and functional Decentralized and geographical Line staff and product groups Matrix of terms Top-Management Style Individualistic & entrepreneurial Directive Delegative Watchdog Participative Control System Market results Standards and cost center Reports and profit centers Plans and investment center Mutual goal setting Management Reward Emphasis Ownership Salary and merit increases Individual bonus Profit sharing and stock options Team bonus Source: Larry E. Greiner, 1972. Evolution and revolution as organizations grow.

IKEA’s Life Cycle Expand market out of Sweden Design its own furniture Entrepreneurial Stage (1943-1956) Collectivity Stage (1956-1962) Formalization Stage (1960s-1980s) Elaboration (1982-) Design its own furniture Establish of IKEA Group

Entrepreneurial Stage Management Focus: Make and Sale 1943 IKEA is founded by Ingvar Kamprad 1948 Furniture is introduced into the IKEA range 1951 The first IKEA catalog is published 1953 Furniture showroom opens in Älmhult, Sweden

Collectivity Stage Management Focus: Efficiency of Operation 1956 Designing furniture for flat packs and self-assembly 1958 The first IKEA store opens in Sweden 1959 The 100th co-worker joins IKEA

Collectivity Stage Management Focus: Efficiency of Operation 1960 The first IKEA restaurant 1961 Product testing begins 1962 Develops strong relationships between IKEA and Polish suppliers during the 1960s

Formalization Stage Start from 1960’s 1965 Management Focus: Expansion of market Start from 1960’s Expand market out of Sweden 1965 Largest IKEA store opens in Stockholm, Sweden The opening of a self-serve warehouse

Formalization Stage 1976 Management Focus: Expansion of market The Testament of a Furniture Dealer: It documents IKEA's vision and business idea and has a strong influence on the development and vitality of IKEA's culture.

Stichting Ingka Foundation Elaboration Stage Management Focus: Consideration of organization 1982 IKEA Group is formed 1985 IKEA now has 10,000 co-workers and 60 stores in the IKEA Group INGKA Holding Stichting Ingka Foundation

Elaboration stage 1986 Management Focus: Consideration of organization New president and CEO Ingvar Kamprad retires from Group Management to become an advisor to the parent company INGKA Holding B.V. Anders Moberg becomes President and CEO of the IKEA Group

Elaboration stage 1990 Management Focus: Consideration of organization The first environmental policy at IKEA (Our responsibility) The IKEA Group develops an environmental policy to ensure that the company and its co-workers take environmental responsibility for all activities conducted within its business

Elaboration stage 1991 Management Focus: Consideration of organization Swedwood – the industrial group of IKEA IKEA acquires its own sawmills and production plants and establishes the industrial group Swedwood to produce wood-based furniture and wooden components

Elaboration stage Management Focus: Consideration of organization 1997 IKEA on the web: www.IKEA.com The first forestry manager is employed at the IKEA Group 1999 The IKEA group grows to 50,000 co-workers and has 158 stores in 29 countries. A new President and CEO: Anders Dahlvig becomes President and CEO of the IKEA Group, taking over from Anders Moberg.

Elaboration stage Management Focus: Consideration of organization 2004 The 200th IKEA store opens in US 2006 The IKEA Group exceeds 100,000 co-workers and operates in 44 countries IKEA Food is launched

After Elaboration Stage The firm demonstrates considerable focus, will and capability Focus: Well-defined target market Will: Good quality and simple design products are available Capability: High quality and low cost Innovative business strategies Learning oriented

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