Greiner’s Growth Model is a framework developed by Larry E. Greiner that describes the various stages of organisational growth and the challenges that organisations typically face at each stage. According to the model, as organisations grow, they will go through various stages of development, each with its own set of challenges.
Companies want to expand. Employees expect and desire salary increases, which necessitates growth. They want to work in an exciting and dynamic environment, which is impossible to achieve if the company is stagnant or declining. Furthermore, all environments change over time, so the choice is between growth and decline. Few businesses remain static for an extended period of time. Growth is therefore almost necessary, but it comes with growing pains.
Growing pains can be financially costly. Rapid growth necessitates a large amount of working capital, and it is possible for a company to run out of cash and go bankrupt despite its rapid growth.
Employees can also experience growing pains. Employees say they want their company to grow, but they may be disturbed by the implications. Workloads increase and are stretched in a growing company. Workplace practises evolve and must be adjusted. When new people join organisations, the status quo can be upset.
Greiner recognised these growing pains and created a model that assists businesses in anticipating problems and preparing accordingly. reiner’s Growth Model assumes relatively stable growth phases. This stability does not last forever, and at the end of each phase, the organisation begins to sow the seeds of its own decay, ushering in a new period of revolution.
Greiner’s Growth Model identified six stages of growth that most businesses will experience. Each of these phases has a dominant management approach that eventually becomes ineffective, leading to a period of crisis for the company.
The faster a company grows, the shorter the growth phase. As the company recovers from its crisis, it enters a new phase and continues to grow. Greiner’s six phases are as follows:
Phase 1: development through creativity (crisis of leadership)
During this stage, the organisation is primarily concerned with developing its product or service and establishing a customer base. The main challenge is to generate enough revenue to cover expenses.
A company’s founders start small and are involved in everything. At this point, the company is young and small, and communication is simple – one person to the next. Everyone has access to the boss because the organisation is flat. More people and structure are required as the company expands. Formalizing informal processes is necessary. Professional managers must replace the entrepreneurs who founded the company’s cavalier and maverick approaches. This shift in style may result in a leadership crisis. An improved structure is required.
Phase 2: development through direction (crisis of autonomy)
During this stage, the organisation establishes its direction and vision, as well as the systems and processes required to manage its growth. The main challenge is managing the organization’s increased complexity and size.
In this second phase, formal procedures are implemented. Budgets and objectives must be met. People are overworked as the company expands its offerings. Delegation is becoming necessary, but it is not yet automatic. Even though middle managers have been appointed, the company’s founder is still active and acts as a puppet master pulling all the strings. This stage concludes with a crisis of autonomy. More safeguards are required.
Phase 3: expansion through delegation (crisis of control)
During this stage, the organisation delegated responsibilities and empowered employees to make decisions. The main challenge is putting together an effective management team.
The company has recruited middle managers in this third phase, and the founder is now able to delegate. There is sometimes too much delegation to divisional managers. The company’s top levels have a strategic view of where the company is going, but they are not always strong in ensuring that subsidiaries and divisions are on the same page. Mergers and acquisitions may create new opportunities for growth. There is a risk that the managers of the various business units will diverge in their own directions, threatening the company’s disintegration. It’s a control crisis.
Phase 4: expansion through coordination (crisis of red tape)
During this stage, the organisation concentrates on coordinating its activities and ensuring consistency across departments and locations. The main challenge is managing the organization’s increased complexity and diversity.
Subsidiaries and business units have evolved into profit centres and are becoming more standardised. Their financial performance is closely monitored, and each can be evaluated based on its return on investment. The company may have a strong human resources department that has implemented profit-sharing schemes that are aligned with corporate objectives. Controls have tightened. During this stage of development, the company may encounter a red-tape crisis.
Phase 5: expansion through collaboration and cooperation (crisis of identity)
During this stage, the organisation prioritises collaboration and integration across departments, locations, and functions. The main challenge is managing the organization’s increased complexity and interdependence.
As the organisation grows in phase 5, new structures are introduced to manage the much larger size. A matrix replaces the hierarchical control structure. Managers attend meeting after meeting.
Enterprise software connects the various parts of the business. There is a risk that this phase will mark the end of the company’s growth unless it can form external alliances. The phase concludes with an identity crisis.
Phase 6: expansion through alliances
Growth is still possible, but it is now more likely through collaboration with other companies. Mergers, acquisitions, and outsourcing occur. There is a risk that the company has grown so large that it is more focused on alliances than on its core business and customers. As a result of the obsession with outsourcing and acquisitions, old and regional businesses are being lost.
Useful lessons from Greiner's Growth Model
Greiner’s Growth Model is a framework that describes the various stages of organisational growth and the challenges that each stage typically presents. This model’s key messages are as follows:
- Organizational development is not a straight line: Organizations will progress through various stages, each with its own set of challenges.
- Each stage of development necessitates a distinct leadership style: Organizations will require different types of leaders with different skills and abilities as they progress through the stages of growth to effectively navigate the challenges of each stage.
- Structure and control become more important as organisations grow: Organizations will need to put systems, processes, and structures in place as they grow to manage the increased complexity and size of the organisation.
- Proactive change management is essential for success: Organizations that can anticipate and manage the challenges of growth are more likely to succeed.
- Growth can result in a leadership crisis: As organisations progress through the stages of growth, they may experience a leadership crisis, which can impede their ability to achieve their goals and objectives.
- Organizations must be ready to adapt and restructure as necessary: Organizations that can adapt and restructure as needed in response to growth challenges are more likely to succeed in the long run.
What are the benefits of the Greiner's Growth Model?
Greiner’s Growth Model offers several benefits, including:
- It provides a framework for understanding the various stages of organisational growth: The model assists organisations in determining where they are in the growth process and understanding the challenges they are likely to face.
- It emphasises the importance of having different leadership styles at different stages of development: The model emphasises that organisations require different types of leaders with different skills and abilities to effectively navigate the challenges of each stage.
- It emphasises the significance of proactive change management: To be successful, organisations must anticipate and manage the challenges of growth.
- It helps organizations in identifying and addressing potential leadership crises: The model emphasises the risk of a leadership crisis as organisations progress through the stages of growth.
- It encourages organisations to restructure and adapt as needed: The model emphasises the importance of organisations’ ability to adapt and restructure in response to growth challenges.
- It provides a straightforward and simple framework that can be applied to various types of organisations, regardless of size or industry.
- It assists organisations in determining what stage they are in and what the next step is for them to move forward.
What are the disadvantages to Greiner's Growth Model?
Greiner’s Growth Model has some drawbacks, including:
- It is a linear model: The model assumes that organisations will progress through the stages of growth in a linear fashion; however, organisations may not follow this linear path and may experience multiple stages concurrently.
- It ignores external factors: Although the model focuses on internal organisational factors, external factors such as the economy, industry changes, and competition can all have a significant impact on organisational growth.
- It can be difficult to determine an organization’s stage: Organizations may find it difficult to determine which stage of growth they are in because the characteristics of each stage can overlap.
- It might not be appropriate for all organisations: The model is primarily intended for organisations in rapid growth, but it may not be as applicable to organisations that are not growing as quickly or are in a mature phase.
- The model does not offer a solution for each stage: It only describes the general characteristics of the stage and the required leadership style, without providing a specific plan of action.
- It may result in oversimplification of the growth process: The model depicts the growth process as a linear progression of stages, but the growth process can be much more complex and multifaceted in reality.
- It does not consider the cultural, political, and social factors that organisations may face and overcome.
When using Greiner’s Growth Model, it is critical to keep these limitations in mind and to supplement it with additional information and analysis to gain a more complete understanding of the organization’s growth process.