Organization life cycle

From CEOpedia | Management online
Organization life cycle
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The concept of the life cycle of the organization can be described through a sequence of successive phases of organizational development in time.

Overall organization life cycle

Overall organization life cycle takes place in the following stages:

  • At the stage of the formation the most important is to attract people with the highest qualifications who will be a source of motivation and professionalism of the organization.
  • At the stage of development the organization invests in expansion of business on the market. Employees have to meet the market demand for products and services.
  • In the maturity stage - its organization structure and culture are stabilized. Managers seek to maintain turnover providing a sufficient number of new jobs. At the same time it becomes important to maintain costs control and sustainable development of work force.
  • At the stage of recession, organizations are faced primarily with resistance to change. An important aspect is to help employees find themselves in a new situation by providing them with career counselling and retraining opportunities.

L.E. Greiner description of life cycle stages of organizations

L.E Greiner identified following phases of the life cycle of the organization:

  • Phase I. Growth through creativity. Management of the organization in this phase is based on entrepreneurship, personal contacts and leadership. In this phase, there is a contradiction between the aspirations for growth of the organization and the effectiveness of management. It could lead to conflict in the relationship between lower-level managers and executives, as well as between young workers and workers with extensive experience.
  • Phase II. The increase in the formalization. In this phase, the increase in the degree of formalization of the organization is observed, as well as centralization of decision-making powers. Conflicts arise against the delay in solving decision problems arising from centralized decision-making rules.
  • Phase III. Growth through delegation. In this phase, the transfer of broad powers to lower-level managers is observed. The main threat to the organization are conflicts between the interests of the organization as a whole and the particular interests of its parts. Such a situation may lead to autonomy (alienation) of the individual units of the organization.
  • Phase IV. Growth through coordination. At this stage of the life cycle managers strengthen internal controls and position of staff units. Conflicts arise between line and staff workers.
  • Phase V. The increase in the interaction. The concept of organization changes: followed by "recovery" organization is in transition to organic structures and collaborative problem solving in group decision-making. Conflicts arise as a result of resistance to new ways of working (e.g., job enrichment, management by objectives) and the reduction of staff (employees who could not adapt must go).

Integrated model of organization life cycle

Phase 1. Entrepreneurship

  • Organizing of resources
  • Lot of ideas
  • Entrepreneurial actions are taken
  • Little need for planning and coordination
  • Started by owner
  • Authority of "causative spring"

Phase 2. Collectivity

  • Communication in informal, structure is loose
  • There is a sense of collective spirit
  • Employees are working over hours
  • Employees have sense of mission
  • Considerable innovation
  • Employees are very involved

Phase 3. Formalization and control

  • Formalizing of rules
  • Stable structure
  • Emphasis on efficiency and balance
  • Organization is more conservative
  • Institutionalization and procedure creation

Phase 4. Refinement of structure

  • Refining of structure
  • Decentralization
  • Extending domain of activities
  • Constant improvement and adjustment
  • Renewal of organization

Not all organizations go through a full life cycle. Many of them never go beyond the early stage of development - some having reached a certain stage remains static maintaining the position, some falls apart.

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