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

0

50

100

W.L. Gore&

Associates

Wal-Mart State ArtsAgency

Formalization

Specialization

Centralization

Configuration(%nonworkflowpersonnel)

TECHNOLOGY Manufacturing Retailing Government Service

SIZE (#employees) 6,000 250,000 35

Organization Characteristics During Four Stages of Life Cycle1.

Entrepreneurial2.

Collectivity3.

Formalization4.

Elaboration

Characteristic

Nonbureaucratic Prebureaucratic Bureaucratic Very 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 service

Major product or service with variations

Line of products or services

Multiple product or services lines

Reward and control systems

Personal, paternalistic

Personal, contribution to success

Impersonal, formalized systems

Extensive, tailored to product and department

Innovation

By owner-manager By employees and managers

By separate innovation group

By institutionalizedR&D

Goal

Survival Growth Internal stability, market expansion

Reputation, complete organization

Top Management Style

Individualistic, entrepreneurial

Charismatic, direction-giving

Delegation with control

Team 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): 102-12; B. R. Scott, “The Industrial State: Old Myths and New Realities,” Harvard BusinessReview 51 (March-April 1973): 133-48; Robert E. Quinn and Kim Cameron; “OrganizationalLife Cycles and Shifting Criteria of Effectiveness,” Management Science 29 (1983): 33-51.

Organizational Life Cycle

ORGANIZATION STAGES OF DEVELOPMENT

1.Entrepreneurial

Stage

2.Collectivity

Stage

3.Formalization

Stage

4.Elaboration

Stage

Crisis:Need to dealwith too much

red tapeCrisis:Need for

delegationwith control

Crisis:Need for

leadership

Creativity

Provision of clear direction

Addition of internal systems

Development of teamwork

Crisis:Need for

revitalization

Decline

Continuedmaturity

Streamlining,small-company

thinking

SIZE

Large

Small

Sources: Adapted from Robert E. Quinn and Kim Cameron, “OrganizationalLife 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 BusinessReview 50 (July-August 1972): 37-46.

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, 84-94.

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, trustSource: Based upon William G. Ouchi, “A Conceptual Frameworkfor the Design of Organizational Control Mechanisms,” ManagementScience 25 (1979): 833-48.