Basic Information of Evolution and Revolution as Organizations Grow
Author: Larry E. GreinerPublisher: HBR
Case Number: 98308
Publication Date: May 1, 1998
Course Category: Management
Case Summary of Evolution and Revolution as Organizations Grow
• Companies go through a series of developmental phases as they grow. Each phase is characterized by:1. Period of Evolution – brings steady growth and stability
2. Period of Revolution – substantial organizational turmoil & eventually, change
Five Key Dimensions Which Shape an Organization
1. Age of the Organization
- management problems are rooted in time
- the same organizational practices are not maintained throughout the org’s life
- org. procedures tend to become too rigid & outdated with time
2. Size of the Organization
- problems change as organization grows e.g. problems of coordination, communication, increasing hierarchy levels, new jobs created
3. Stages of Evolution
- also called prolonged growth period
- typically 4-8 yrs of growth w/o economic setbacks or internal disruption
4. Stages of Revolution
- serious upheaval of management practices – new ones are needed to foster next period of growth
- note that a major solution in one period will eventually cause problems for the next period
5. Growth Rate of the Industry
- evolutionary periods tend to be shorter in fast-growth industries & longer in mature or slow-growth industries
- evolution may be prolonged & revolutions delayed when profits come easily
Phases of Growth
• Each evolutionary period is characterized by the dominant management strategy and each revolutionary period is characterized by the dominant management problem
• Each phase is a result of the previous one and a cause for the next
1. Creativity Phase
- new orgs tend to have an emphasis on creating a product and market; founders are usually technical or entrepreneurial in nature
- characterized by frequent & informal communication, long work hours, modest salaries, management acts as customers react
- but larger production eventually requires increased manufacturing efficiencies, more employees require formal communication, more capital will be needed, etc.
- a crisis of leadership occurs
2. Direction Phase
- characterized by a functional org structure, specialized job assignments, formal accounting systems, more formal communication & growing hierarchy
- GM & key supervisors institute direction, lower-level supervisors are treated as functional specialists rather than autonomous decision-makers
- but employees eventually resent directive techniques, they have more knowledge than supervisors
- a crisis of autonomy occurs
3. Delegation Phase
- characterized by greater responsibility for lower-level managers, bonuses to motivate employees, infrequent communication from top mgt, etc
- larger markets are penetrated & new products developed
- eventually top management will lose control over a too-decentralized organization
- a crisis of control occurs
4. Coordination Phase
- characterized by formal systems to coordinate groups, established planning procedures, each product grp. is treated as an investment center, stock options and profit sharing, etc
- the company’s limited resources are more efficiently allocated; local managers learn to look at bigger picture & justify actions to HQ
- eventually the numerous systems lead to resentment & procedures take precedence over problem-solving
- a red-tape crisis occurs
5. Collaboration Phase
- characterized by self-discipline, problem-solving through cross-functional teams, simplified control systems, increased experimentation team performance-based awards
- most U.S. orgs are at this phase, and the author can only speculate on what comes next
- a crisis may arise out of employees who are physically and emotionally exhausted from team pressures & constant innovation
- may be solved through programs that allow employees to periodically rest, reflect and revitalize themselves
- some examples currently in practice: sabbaticals for employees. 4-day workweeks, interchangeable jobs & cross-training, etc.
Guidelines for Managers of Growing Organizations
1. Know where you are in the developmental sequence – know when time for change has come, but learn from and develop strengths from previous phases
2. Recognize the limited range of solutions – each stage can only be resolved by certain specific solutions, usually different from ones used before
3. Realize that solutions breed new problems – managers should look at current problems with historical understanding instead of blaming current market factors; this will also enable managers to predict problems & prepare solutions
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