Q1.Explain the Greiner's Growth Model of organizational growth in detail.
Ans.
Greiner's Growth Model describes various phases that organizations go through as they grow. All kinds of organizations from design shops to manufacturers, construction companies to professional service firms experience these phases. Each growth phase is made up of a period of stable growth that is followed by a "crisis" when there is a need for major organizational change if the company wants to continue growing.
Crisis here means positive turning point or transition. Originally, Larry E. Greiner proposed this model in 1972 with five phases of growth. Later on he added a sixth phase [12](Harvard Business Review, May 1998). All the six growth phases are described below:
Phase 1: Growth through creativity
Here, the entrepreneurs who have founded the firm will be busy in creating products and opening up markets. There wont be many staff, so informal communication is allowed. Rewards for long hours are through profit share or stock options. However, as more staffs join, production expands and capital is provided then there will be a need for formal communication.
The leadership crisis
As the company grows, new systems will be in demand such as manufacturing, accounting, personnel, etc. The founders usually are not experts who manage this new set of systems and cant motivate new employees. This is called Leadership Crisis and phase one ends with this crisis. At this time the company might bring the management that can manage in this new environment or may struggle as founders and try to maintain the old guard.
Phase 2: Growth through direction
This phase is characterized by the following: Functional organization structure.
Accounting systems. Formal and impersonal communication. Concentrate on directing the new, top managers. Growth continues in an environment that has formal communications, budgets and that focus on separate activities like marketing and production. As a financial reward, incentive schemes replace stock.
However, the situation arises where the products and processes become abundant and there wont be enough hours in the day for one person to manage them all. It is not possible for that one person to know much about all these products or services as that of people in the lower hierarchy.
Autonomy crisis
As the company grows further, centralized management becomes inappropriate. Lower level managers gain better knowledge of the marketplace but wont be able to react quickly. The second revolution comes from a demand for greater independence.
By this, the solution to the first phase becomes the crisis for the second phase. The solution to this crisis is to push decision-making responsibility to lower levels. Managers who fail to do this will see their companies being passed by quicker organizations.
Phase 3: Growth through delegation
This phase is characterized by the following: More responsibility in the place and field marketing managers Use of profit sharing and bonuses for incentives Managing of exclusion by top managers Activating management through acquisitions Infrequent communication from the top With middle-level managers given freedom to react fast to opportunities for new products in markets, the organization continues to grow. The top level management just monitors and deals with the big issues like looking at merger or acquisition opportunities. Many businesses struggle at this stage because the managers whose directive approach solved the problems at the end of Phase one finds it difficult to give the responsibility for middle managers. Even then the middle-level managers struggle with their new roles as leaders.
Control crisis
Field operations will be broadened and inefficiencies come into the system. Top management loses power over planning, money, technology, and manpower. Narrow-mindedness in field operations symbolize this new revolution. Management must solve it by adopting and implementing special coordination techniques.
Phase 4: Growth through coordination and monitoring
This phase is characterized by the following: Merging of decentralized units into product groups. Establishing and reviewing formal planning procedures.
Hiring staff at headquarters to initiate company-wide programs. Reviewing and distributing capital expenditures across the organization.
Measuring field operations through the criteria of Return-on-Capital. Centralizing technical functions such as data processing.
Using stock options and profit sharing to encourage identity with the firm. Growth continues with the previously isolated business units re-organized into product groups or service practices. Investment finance is owed centrally and managed according to Return on Investment (ROI) and not just profits.
Red tape crisis
A lack of confidence starts between the line and the staff, and between the headquarters and the field. Systems begin to survive their usefulness and field managers begin to dislike formalized control by staff managers who do not understand the local markets. Staff personnel dislike the uncooperative line managers. The organization becomes unmanageable and everyone starts disliking the bureaucratic system that has evolved. A new crisis will come into being.
Phase 5: Growth through collaboration
This phase is characterized by the following: Focusing on solving problems through team action. Forming teams for various departments. Reducing and reassigning headquarters staff to teams that consult field units. Developing a matrix organization structure.
Simplifying and combining formal systems. Holding conferences for key managers frequently. Utilizing educational programs to train managers. Using real-time information systems in decision making. Equipping with economic rewards for team performance.
Encouraging experiments in new practices.
Growth crisis
Here, Greiner guesses about the solution to this new crisis that comes from employees who turn saturated emotionally. They become exhausted both emotionally and physically by the intensity of teamwork and the heavy pressure for innovative solutions. He illustrates this with a European company that created a structure that allowed employees to include a reflective period in their daily activities.
Phase 6: Growth through extra-organizational solutions
Greiner's added this sixth phase recently and it suggests that growth may continue through merger, outsourcing, networks and other solutions involving other companies.
Growth rates vary between and even within phases. The duration of each phase depends totally on the rate of growth of the market in which the organization operates. The longer a phase lasts, the harder it will be to implement a transition.
This is one of the useful models but not all businesses go through these crises in this order.
Ans.
Greiner's Growth Model describes various phases that organizations go through as they grow. All kinds of organizations from design shops to manufacturers, construction companies to professional service firms experience these phases. Each growth phase is made up of a period of stable growth that is followed by a "crisis" when there is a need for major organizational change if the company wants to continue growing.
Crisis here means positive turning point or transition. Originally, Larry E. Greiner proposed this model in 1972 with five phases of growth. Later on he added a sixth phase [12](Harvard Business Review, May 1998). All the six growth phases are described below:
Phase 1: Growth through creativity
Here, the entrepreneurs who have founded the firm will be busy in creating products and opening up markets. There wont be many staff, so informal communication is allowed. Rewards for long hours are through profit share or stock options. However, as more staffs join, production expands and capital is provided then there will be a need for formal communication.
The leadership crisis
As the company grows, new systems will be in demand such as manufacturing, accounting, personnel, etc. The founders usually are not experts who manage this new set of systems and cant motivate new employees. This is called Leadership Crisis and phase one ends with this crisis. At this time the company might bring the management that can manage in this new environment or may struggle as founders and try to maintain the old guard.
Phase 2: Growth through direction
This phase is characterized by the following: Functional organization structure.
Accounting systems. Formal and impersonal communication. Concentrate on directing the new, top managers. Growth continues in an environment that has formal communications, budgets and that focus on separate activities like marketing and production. As a financial reward, incentive schemes replace stock.
However, the situation arises where the products and processes become abundant and there wont be enough hours in the day for one person to manage them all. It is not possible for that one person to know much about all these products or services as that of people in the lower hierarchy.
Autonomy crisis
As the company grows further, centralized management becomes inappropriate. Lower level managers gain better knowledge of the marketplace but wont be able to react quickly. The second revolution comes from a demand for greater independence.
By this, the solution to the first phase becomes the crisis for the second phase. The solution to this crisis is to push decision-making responsibility to lower levels. Managers who fail to do this will see their companies being passed by quicker organizations.
Phase 3: Growth through delegation
This phase is characterized by the following: More responsibility in the place and field marketing managers Use of profit sharing and bonuses for incentives Managing of exclusion by top managers Activating management through acquisitions Infrequent communication from the top With middle-level managers given freedom to react fast to opportunities for new products in markets, the organization continues to grow. The top level management just monitors and deals with the big issues like looking at merger or acquisition opportunities. Many businesses struggle at this stage because the managers whose directive approach solved the problems at the end of Phase one finds it difficult to give the responsibility for middle managers. Even then the middle-level managers struggle with their new roles as leaders.
Control crisis
Field operations will be broadened and inefficiencies come into the system. Top management loses power over planning, money, technology, and manpower. Narrow-mindedness in field operations symbolize this new revolution. Management must solve it by adopting and implementing special coordination techniques.
Phase 4: Growth through coordination and monitoring
This phase is characterized by the following: Merging of decentralized units into product groups. Establishing and reviewing formal planning procedures.
Hiring staff at headquarters to initiate company-wide programs. Reviewing and distributing capital expenditures across the organization.
Measuring field operations through the criteria of Return-on-Capital. Centralizing technical functions such as data processing.
Using stock options and profit sharing to encourage identity with the firm. Growth continues with the previously isolated business units re-organized into product groups or service practices. Investment finance is owed centrally and managed according to Return on Investment (ROI) and not just profits.
Red tape crisis
A lack of confidence starts between the line and the staff, and between the headquarters and the field. Systems begin to survive their usefulness and field managers begin to dislike formalized control by staff managers who do not understand the local markets. Staff personnel dislike the uncooperative line managers. The organization becomes unmanageable and everyone starts disliking the bureaucratic system that has evolved. A new crisis will come into being.
Phase 5: Growth through collaboration
This phase is characterized by the following: Focusing on solving problems through team action. Forming teams for various departments. Reducing and reassigning headquarters staff to teams that consult field units. Developing a matrix organization structure.
Simplifying and combining formal systems. Holding conferences for key managers frequently. Utilizing educational programs to train managers. Using real-time information systems in decision making. Equipping with economic rewards for team performance.
Encouraging experiments in new practices.
Growth crisis
Here, Greiner guesses about the solution to this new crisis that comes from employees who turn saturated emotionally. They become exhausted both emotionally and physically by the intensity of teamwork and the heavy pressure for innovative solutions. He illustrates this with a European company that created a structure that allowed employees to include a reflective period in their daily activities.
Phase 6: Growth through extra-organizational solutions
Greiner's added this sixth phase recently and it suggests that growth may continue through merger, outsourcing, networks and other solutions involving other companies.
Growth rates vary between and even within phases. The duration of each phase depends totally on the rate of growth of the market in which the organization operates. The longer a phase lasts, the harder it will be to implement a transition.
This is one of the useful models but not all businesses go through these crises in this order.
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