Mgmt 610: Organizational Theory Module 5: Organizational Life Cycles—their Influence

Life Cycle The concept and practice of associating stages of organizational structure/activity with stages of human life and development in order to better grasp needed strategy and management.

Life Cycles –Not All Organizations Look the Same TECHNOLOGY Manufacturing Retailing Government Service SIZE (#employees) 6, ,000 35

Organization Characteristics During Four Stages of Life Cycle 1. Entrepreneurial 2. Collectivity 3. Formalization 4. Elaboration CharacteristicNonbureaucraticPrebureaucraticBureaucraticVery Bureaucratic Structure Informal, one-person show Mostly informal, some procedures Formal procedures, division of labor, specialties added Teamwork within bureaucracy, small- company thinking Products or services Single product or serviceMajor product or service with variations Line of products or services Multiple product or services lines Reward and control systems Personal, paternalisticPersonal, contribution to success Impersonal, formalized systems Extensive, tailored to product and department Innovation By owner-managerBy employees and managers By separate innovation group By institutionalized R&D Goal SurvivalGrowthInternal stability, market expansion Reputation, complete organization Top Management Style Individualistic, entrepreneurial Charismatic, direction- giving Delegation with controlTeam approach, attack bureaucracy Sources: Adapted from Larry E. Greiner, “Evolution and Revolution as Organizations Grow,” Harvard Business Review 50 (July-August 1972): 37-46; G. L. Lippitt and W. H. Schmidt, “Crises in a Developing Organization,” Harvard Business Review 45 (November-December 1967): ; B. R. Scott, “The Industrial State: Old Myths and New Realities,” Harvard Business Review 51 (March-April 1973): ; Robert E. Quinn and Kim Cameron; “Organizational Life Cycles and Shifting Criteria of Effectiveness,” Management Science 29 (1983):

Organizational Life Cycle ORGANIZATION STAGES OF DEVELOPMENT 1. Entrepreneurial Stage 2. Collectivity Stage 3. Formalization Stage 4. Elaboration Stage Crisis: Need to deal with too much red tape Crisis: Need for delegation with control Crisis: Need for leadership Creativity Provision of clear direction Addition of internal systems Development of teamwork Crisis: Need for revitalization Decline Continued maturity Streamlining, small-company thinking SIZESIZE Large Small Sources: Adapted from Robert E. Quinn and Kim Cameron, “Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,” Management Science 29 (1983): 33-51; and Larry E. Greiner, “Evolution and Revolution as Organizations Grow,” Harvard Business Review 50 (July-August 1972):

Organizational Life Cycle Deficiency – Need to Move Forward Decision making is delayed or lacking in quality The organization does not respond innovatively to a changing environment Too much conflict is evident

Differences Between Older/Larger and Younger/ Smaller Organizations LARGER-> Multi-National – Economies of scale – Global reach – Vertical hierarchy – Mechanistic – Complex – Stable market SMALLER- Niche – Responsive – Flexible – Regional reach – Flat structure – Organic – Simple – Niche finding – Entrepreneurs Source: Based on John A. Byrne, “Is Your Company Too Big?” Business Week, 27 March 1989,

Three Management Strategies TYPE Bureaucratic-- older Market—mid- life/larger Start Up Management Controls Rules, standards, hierarchy, legitimate authority Prices, competition, exchange relationship Shared values and beliefs, trust Source: Based upon William G. Ouchi, “A Conceptual Framework for the Design of Organizational Control Mechanisms,” Management Science 25 (1979):