A very useful model of organizational growth was developed by Greiner. He argues that growing organization move through five relatively calm periods of evolution, each of which ends with a period of crisis and revolution. According to Greiner, ‘each revolutionary period is characterized by the dominant management style used to achieve growth, while each revolutionary period is characterized by the dominant managerial problem that must be solved before growth will continue.’
Following figure presents the various stages of organizational growth.
1. Creativity Stage
The founders of the organisation dominate this stage, and the emphasis is on creating both a product and a market. These founders are usually technically or entrepreneurially oriented and they absorbs their mental and physical energies entirely in making and selling a new product. But as the organisation grows, management problems occur that cannot be handled through informal communication and dedication. Thus the founders find themselves burdened with unwanted management responsibilities and conflicts arises. It is at this point that the leadership crisis occurs and the first revolutionary period begins. Who is going to lead the organisation out of confusion and solve the management problems confronting the organisation? Who is acceptable to the founders and who can pull the organisation together? Such questions arise and in order to solve these problems a new evolutionary phase i.e. Growth through direction begins.
2. Direction Phase
During this phase, the professional managers and key staff take most of the responsibility for instituting direction, while lower level supervisors are treated more as functional specialties than autonomous decision-making managers. Thus, directive management techniques enable the organization to grow, but they may become ineffective as the organisation becomes more complex and diverse. Since lower level supervisors are most knowledgeable and demands more autonomy in decision making, a next period of crisis i.e. crisis for autonomy begins. In order to overcome this crisis, the third phase of growth – Growth through delegation emerges.
3. Delegation phase
Resolution of crisis for autonomy may be through powerful top managers relinquishing some of their authority and certain amount of power equalization. When the organisation gets to the growth stage of delegation, it usually begins to develop a decentralized organisation structure which heightens motivation of the lower levels. 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 shows without coordinating plans, money, technology, or manpower with the rest of the organisation and a crisis of control emerges. The crisis can be dealt with the next evolutionary phase i.e. the coordination phase.