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Greiner's Growth Model

Greiner's Growth Model

Greiner's Growth Model

Use this framework to recognize phases of company growth

Larry Greiner developed his organisational growth model and published an article entitled Evolution And Revolution As Organizations Grow in the Harvard Business Review in 1972. His theory is based on the belief that organisations go through a sequence of stages at the end of which there is a crisis.

Greiner recognised companies suffer growing pains and developed a model that helps anticipate the problems so leaders can prepare accordingly. Understanding where a company stands at any point of time within these different stages of development is important. If leaders of companies are aware of which stage they are in, the will know the right way to act.

His framework assumes phases of growth which are relatively stable. This stability doesn’t last for ever and towards the end of each phase the organisation begins to sow the seeds of its own decay which leads to another period of revolution.

Greiner identified six phases of growth that most companies are likely to face. Each of these phases has a dominant management approach which eventually becomes ineffective, leading the company into a period of crisis. The faster a company grows, the shorter the phase of growth. As the company deals with its crisis, it moves into a new phase and carries on growing.

The six phases identified by Greiner are:

Phase 1: Growth through creativity (crisis of leadership)

The founders of a company start small and are involved in everything. At this stage the company is young and small and communication is easy one person to another. The organisation is flat and everyone has access to the boss. As the company grows, it needs more people and more structure. Informal processes need to be formalised. The cavalier and maverick approaches of the entrepreneurs that started the company have to be replaced by professional managers. This change in style can create a leadership crisis. There is a crying need for an improved structure.

Phase 2: Growth through direction (crisis of autonomy)

Formal procedures are installed in this second phase. There are budgets and targets to be met. The company expands its offer and people are overloaded with work. Delegation becomes a necessity but it hasn't yet become automatic. The founder of the business is still active and is a puppet master pulling all the strings, even though middle managers have been appointed. This phase ends with an autonomy crisis. There is a need for more controls.

Phase 3: Growth through delegation (crisis of control)

In this third phase the company has recruited middle managers and the founder is able to delegate. Sometimes there is too much delegation to the divisional managers. The top levels of the company have a strategic view of where the company is going but they are not always strong in ensuring that subsidiaries and divisions are in line. New opportunities for growth may arise such as mergers and acquisitions. There is a danger that the managers of the separate business units head off in directions of their own, threatening a breakup of the company. It is a crisis of control.

Phase 4: Growth through coordination (crisis of red tape)

The subsidiaries and business units have by now developed into profit centres and are becoming standardised. Their financial performance is tightly controlled and each can be judged in terms of its return on investment. The company may have a strong human resources department which has introduced profit-sharing schemes aligned to corporate goals. Controls have become tight. It is during this stage of growth that the company might find itself in a red tape crisis.

Phase 5: Growth through collaboration and cooperation (crisis of identity)

As growth continues in phase 5, new structures are introduced to manage the much larger size of the organisation. The hierarchical structure of control is replaced by a matrix. Managers are involved in meeting after meeting. Enterprise software knits together the different parts of the company. There is a danger that this phase could see the end of growth for the company unless it can develop external alliances. The phase ends with a crisis of internal growth.

Phase 6: Growth through alliances

Growth is still possible though now more likely through partnerships with other companies. Mergers, acquisitions and outsourcing take place. There is a danger that the business has become so large it is more focused on alliances than its core business and its customers. The old and the regional businesses are lost as a result of the obsession with outsourcing and acquisitions.

The model recognises that growth involves pain. If managers can spot the pain, they can prepare for the next phase of growth. Pain becomes something that they should embrace because it is an indicator of a growth opportunity.

Some things to think about:

  • The model recognises that growth involves pain. If managers can spot the pain, they can prepare for the next phase of growth. Pain becomes something that they should embrace because it is an indicator of a growth opportunity.

  • A thread that runs through Greiner’s model is the style of leadership and degree of control that is imposed. Collaboration and communication is important at every stage and is a key to growth.

  • The Product Life Cycle is another framework that shows how businesses evolve over time -

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