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Fast-growing and dynamic organizations face various opportunities and challenges at every stage of their lifecycle. With the expectation of attaining high returns from markets that have started yielding higher growth rates, companies agree to take higher stakes in them to succeed. Every endeavor to bring change in an organization for higher growth or to gain a competitive advantage always has an element of risk. However, the rewards for taking such high risks are commensurately great as well.
Knowing the pool of available resources and how much of them can be plowed into new ventures, managers must be willing to rigorously access what levels of the stretched resources they can commit to new ventures. Hence, it is essential for management to comprehend the organization’s stage of evolution and where it is going. The magnitude of the challenges faced by an organization decides the extent of the change. Consequently, the management must necessarily identify the type of change required. Identifying the context, blockages, and other forces that may hinder the change is essential. There are various phases that a company grows through. The stages are dependent on the following five aspects of the concerned organization: The organization’s age, the organization’s stage of evolution, the organization’s size, the organization’s revolution and the rate at which the industry is growing.
Here are the five phases and crises that an organization goes through in its lifespan.
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Phase one – Creativity
In this phase, founders focus on technicalities or entrepreneurship skills. There is more communication, though informal. All the employees and management personnel work long hours for relatively lesser salaries. Also, there is an immediate reaction to feedback received from the market at this phase. However, when a company grows to a certain level, new systems and processes are required. Usually, the founders are not equipped with such knowledge and solutions. They also start failing to keep the employees motivated any further. This leads to a leadership crisis. The solution is to either bring in respective experts.
Phase 2 – Direction
A well-functioning organizational structure characterizes this phase. There are defined systems of accounting in the organization. Communication is more formal and impersonal. The direction to the newly appointed department heads is centralized. As the company continues to grow, the centralized management begins to deteriorate. The on-field and the front line staff start understanding the market’s needs better but fail too do much about it. Another change arises when the low-level managers demand to be given autonomous rights and responsibilities. Accordingly, the solution to the first phase becomes the crisis for the second phase. The solution to this crisis is to push decision responsibility to lower levels. When managers do not take corrective measures and lose control of such a situation, the rivals surpass the organization in the market share.
Phase 3 – Delegation
In this phase, the plant and field-marketing managers are given higher responsibilities. They receive bonuses as well as profit shares as incentives. The management leaves micro-managing and instead engages in acquisition activities. Alongside, diversity in field operations increases, and the system starts becoming inefficient. Top management begins to lose control over the operations of the organization. Parochialism starts creeping up. The need to bringing in team building and coordination techniques arise.
Phase 4 – Coordination
The merging of product groups characterizes this phase. Plans and processes are made formal and executed. They are also reviewed regularly. More people are hired to develop company-wide programs. Return-on-capital becomes the criteria for measuring field operations. Many processes are automated. ESOPs are given out to employees to gain loyalty and retention.
Conversely, in this phase, confidence begins to reduce in the staff, lower and mid-level managers, and the management at the headquarters, too. Some systems and procedures become redundant. While field managers find it challenging to follow redundant guidelines, they start resenting the authorities of their managers, as they are not aware of the evolving market needs. Bureaucracy creeps in and invites new and more extensive crises.
Phase 5 – Collaboration
Problem-solving with the help of teams is the main characteristic of this phase. Every functional manager is allotted a team. Even the staff at the headquarters were reassigned to teams to support and consult with field and operating units. Key people in the organization often hold conferences and seminars to train the crews. Hence, educational training becomes a priority. They also make use of technology and automation to get real-time information. This helps the management to make better decisions, and teams are incentivized heavily.