GROWTH RATE OF THE INDUSTRY

<< GREINERâ€™S MODEL OF ORGANISATIONALâ€“ EVOLUTION AND REVOLUTION

COORDINATION >>

Change Management MGMT625

LESSON #17

GROWTH RATE OF THE INDUSTRY

The speed at which organisation experiences phases of evolution and revolution is closely related to the

market environment of its industry. Different industries have different growth rates, for example

computers, automobiles and banking all have different growth rates. Evolution can be prolonged, and

revolutions can be delayed. Revolution seems too much more severe and difficult to resolve when the

market environment is poor or going down. Marginal organisation seem to do better market environment

is good or moving up.

Greiner identified five phases of growth each phase of growth is marked by evolutionary progress and

a revolutionary period (or crises). Each evolutionary period is characterised by the dominant

management style used to achieve growth, while each revolutionary period is characterised by the

dominant management problem. Companies in faster growing industries tend to experience all five

phases more rapidly while those in slower growing industries encounter only two or three phases over

many years

It is also important to note that each phase is both an effect of the previous phase and a cause for the

next phase. For e.g. Directive management style in one phase may lead to autonomy crisis (rev.) and

eventually followed by delegation

The principal implication of each phase is that management actions are narrowly prescribed if growth is

to occur. So organisation experiencing crisis of autonomy cannot return to directive management style

for a solution it must adopt a new style of delegation in order to move ahead

PHASE 1: CREATIVITY

At birth stage, emphasis is on creating both product and a market. So the characteristic of the period of

creative evolution are:

· Founders are usually technically or entrepreneurially driven and disdain management activities

· Communication is frequent and informal

· Long hours of work are rewarded by modest salaries

· Control comes from market feedback management acts quickly as the customer reacts

· Leadership crisis occur as individualistic and creative activities help organization to take-off

1. Leadership Crisis

As company grows, needs larger production, needs specialized knowledge about the efficiencies of

manufacturing, marketing and finance or capital, therefore needs increased number of professional

people in all functional areas. All this cannot be managed at an informal level. Formalization,

Proceduralism and bureaucratization come into play for better financial and managerial control.

Founders found themselves with unwanted managerial responsibilities. They still try to act it in the past

ways. Owners enter into conflict with managers. This issue is cited as agency theory in corporate

governance and strategic management courses. At this point crisis of leadership occurs the first

revolution. Founders, often hate to step aside even though they are probably temperament wise unsuited

to be managers. So the developmental choice for founder is to choose strong manager and step aside for

perpetual growth or select week manager and compromise on growth

PHASE 2: DIRECTION

Those who survive by installing strong and capable managers usually embark on a period of sustained

growth under able and directive leadership. The traits of this evolutionary period are:

· Functional org. structure specialization and division of labour

· System and sub-system get developed Accounting for inventory and purchasing

Change Management MGMT625

Budgets and work & Job standards, are adopted

Communication becomes more formal and impersonal as a hierarchy of title and position builds

Lower and upper level conflict becomes obvious as organization grows and have more layers of

hierarchy

Lower level employees find restricted by a cumbersome procedures and centralized hierarchy.

Lower level managers have more direct knowledge of market and machinery than do the leaders

at the top (office-work & govern through paper).

2. Autonomy Crisis

Thus second revolution is imminent as crisis develops from demand for greater autonomy on the part of

lower-level managers. Yet it is difficult for top-managers who were so successful in developing system,

being directive and stay responsible to give-up authority. Moreover lower level managers are not

accustomed to making decisions for them. As a result numerous companies flounder during this

revolutionary period adhering to centralized methods while lower level managers get disenchanted and

leave the organization (turn-over rate)

PHASE 3: DELEGATION

Next era of growth evolves from the successful application of decentralized organization structure

which exhibits the following characteristics:

· More responsibility is given to the managers of plants and market territories.

· Profit centres, incentives and bonuses are used to motivate managers.

· Top executives at headquarters restrain themselves to managing by exception based on periodic

reports from the field

· Management now focuses on making new acquisitions which can be added to the corporation as

decentralized units

· Communication from the top is infrequent, usually by correspondence? Or telephonic or brief

field visits.

Of course now IT has made this communication fast, easier and effective. The delegation proves useful

for gaining expansion through motivation of lower level manager, by giving them authority and

incentives, to penetrate larger markets, respond faster to customers and develop newer and effective

managerial practices

3. Control Crisis

Top executives sense they are losing control over a highly diversified field operations (owing to power-

politics, upward mobility of lower level mangers, fear replacement, etc). Autonomous managers prefer

to run their own shows without coordinating plans, resources, technology and manpower. The

revolution become obvious when top management seeks to regain control over the total company. One

solution is re-centralization which usually fails as company's operation have become diverse and vast.

Other solution is to evolve special coordination techniques.

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