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 rganizational problems Phasel : Creativity 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 rocedures 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 tunctional specialists However these techniques become eventually inappropriate for controlling a larger and more complex organization.
This is when the second revolution occurs: the autonomy crisis: Lower-level employees find themselves restricted. They feel being torn between following procedures and taking initiative on their own. So lower level managers demand more autonomy. The solution adopted by many companies is to move toward greater delegation. Yet it is difficult for top managers to give up esponsibility. And lower-level managers are not accustomed for making decisions for themselves.
As a result many companies struggle during this revolutionary period, because many lower level employees leave the organization since they stick to centralized methods. Phase 3: Delegation The next evolution period evolves from the successful application of decentralized organization structure. Much greater responsibility is given to lower-level managers. Bonuses are used to stimulate motivation Top executives manage by exception based on periodic reports from the field
Management focuses on new gains, which can be lined up beside other decentralized units However a serious problem eventually occur: the control crisis: when top executives feel that they are loosing control over a highly diversified field operation because of autonomous field managers. In order to move ahead companies need to find a new solution in the use of special coordination techniques. Phase 4: Coordination During this phase the evolutionary period occurs by the use of formal systems for acheveing greater coordination and by top executives taking responsibility for the dministration of these new systems.
Decentralized units are turned into product groups Many staff personnel are hired to control and review line managers Capital expenses are carefully weighed and distributed across the organization Each product group is treated as an investment center Certain technical functions are centralized at headquarters, while daily operating decisions remain decentralized. Stock options and companywide profit sharing are used to encourage identity with the firm as a whole. All these new coordination systems prove useful for achieving growth through more fficient allocation of a company’s limited resources.
But lack of confidence builds between line and staff and between headquarters and the field. This is where red- tape crisis is created. Organizations have become too large and complex to be managed through formal programs and rigid systems. ase 5: Collaboration The last phase gives importance to strong interpersonal collaboration in order to overcome the red-tape crisis. This evolution phase builds around a flexible and behavioral approach to management. The focus is on solving problems through team action.
Teams are combined through task group activity Headquarters staff experts are reduced and are combined into teams to consult with team units Previous formal systems are simplified Educational programs for teamwork and behavioral skills are introduced Team performance becomes more important Experiences in new practices are encouraged The revolution after the 5th stage of evolution is still unclear. Predictions have been made that the employees will eventually become exhausted by the intensity of teamwork and the pressure for innovative solutions.
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