GROWTH RATE OF THE INDUSTRY:CREATIVITY, DIRECTION, DELEGATION

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

COORDINATION:COLLABORATION, The Crisis >>

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:

Change Management MGMT625

Functional org. structure specialization and division of labour

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

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.

Table of Contents: