Evolution and revolution as organizations grow
Growing organization move through 5 phases of development, each of which contains a relatively calm period of growth that ends with a management crisis. Each developmental phase is strongly influenced by the previous one. Thus by knowing an organization’s development history it is possible to be more prepared for the next developmental crisis. These crises can be used in order to achieve future growth.
Evolution- long periods of growth with no major organizational problem Revolution- crisis periods, where companies need to find solutions to newly occurred organizational problems
This developmental phase is a period of evolution. At its birth stage an organization focuses on creating a product and a market.
So the company’s founders are entirely focused on making and selling a new product. They don’t focus on management activities. Communication among employees is informal.
Long hours of work are rewarded by modest salaries.
The control of activities comes from marketplace feedback.
As the company grows the first revolution period occurs: the leadership crisis: Increased number of employees, needs of additional capital and new accounting procedures demand new management responsibilities. So the first critical development choice is to find and install a strong business manager who is acceptable to the founders and who can pull the organization together.
Phase 2: Direction
Those companies that survive the first phase by installing a good business manager embark on another evolutionary period. A function organizational structure is introduced.
Different business activities occur.
Job assignments become more specialized.
Accounting systems are introduced.
Incentives, budgets and work standards are adopted.
Communication becomes more formal.
New managers take the managing responsibility while lower level supervisors act as functional specialists.
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