Organizational Growth
Identifying and Surviving the First Four Stages of Organizational Growth
11 organizations pass through various stages of development. These stages are, at least in part, determined by the organization's size, as measured by its annual revenues (or for nonprofits, in terms of annual budget). This chapter presents a framework for identifying and explaining the major stages through which all organizations grow and develop as they increase in size. It should be noted that this framework applies to a division of a large company, as well as to an independent organization. First, we identify the various stages of organizational growth and examine the first four stages from the inception of a new venture to organizational maturity. Next, we examine the emphasis on each level in the Pyramid of Organizational Development that is required at each growth stage and explain the nature of the transitions to different stages. Then we discuss the differences between an entrepreneurship and a professionally managed firm and what must be done to make the transition between these growth stages. Finally, we discuss some implications of this framework for the management of entrepreneurial organizations.
A
STAGES OF ORGANIZATIONAL GROWTH
Seven stages of growth of a company's life cycle can be identified: 1. New venture II. Expansion 26
IDENTIFYING AND SURVIVING THE FIRST FOUR STAGES OF ORGANIZATIONAL
GROWTH
27
III. Professionalization IV. Consolidation V. Diversification VI. Integration VII. Decline and revitalization The first four stages characterize the period from inception of a new venture to the attainment of organizational maturity. This period includes the development of an entrepreneurship through the stage when the firm becomes a professionally managed firm. Stages V through VII all deal with the period of a company's life cycle after the attainment of organizational maturity. Because the principal focus of this book is on the development of companies
11 organizations pass through various stages of development. These stages are, at least in part, determined by the organization's size, as measured by its annual revenues (or for nonprofits, in terms of annual budget). This chapter presents a framework for identifying and explaining the major stages through which all organizations grow and develop as they increase in size. It should be noted that this framework applies to a division of a large company, as well as to an independent organization. First, we identify the various stages of organizational growth and examine the first four stages from the inception of a new venture to organizational maturity. Next, we examine the emphasis on each level in the Pyramid of Organizational Development that is required at each growth stage and explain the nature of the transitions to different stages. Then we discuss the differences between an entrepreneurship and a professionally managed firm and what must be done to make the transition between these growth stages. Finally, we discuss some implications of this framework for the management of entrepreneurial organizations.
A
STAGES OF ORGANIZATIONAL GROWTH
Seven stages of growth of a company's life cycle can be identified: 1. New venture II. Expansion 26
IDENTIFYING AND SURVIVING THE FIRST FOUR STAGES OF ORGANIZATIONAL
GROWTH
27
III. Professionalization IV. Consolidation V. Diversification VI. Integration VII. Decline and revitalization The first four stages characterize the period from inception of a new venture to the attainment of organizational maturity. This period includes the development of an entrepreneurship through the stage when the firm becomes a professionally managed firm. Stages V through VII all deal with the period of a company's life cycle after the attainment of organizational maturity. Because the principal focus of this book is on the development of companies