The Greiner Curve: Understanding the Crises That Come With Growth
From idea to maturity, every company undergoes crisis as they grow. Whether attempting to venture into new markets, add staff or improve profitability, growth is one area where entrepreneurs pay close attention to.
And this growth tends to happen in multiple different phases.
Things would be relatively stable once the company reaches a particular peak but there will be crisis, bottlenecks, and challenges on the way. A crisis will arise because they’re systemic in growth.
In 1972, Larry Greiner laid out the six phases of growth known as the Greiner Curve — we’ll examine the phases in detail and learn how to anticipate these crisis and possible solutions.
Whether you’re launching a new venture company or innovating within an existing one, the principles and stages behind the Greiner Curve can help you to understand the phrases and to contain the crisis.
UNDERSTANDING THE THEORY
In a fast-growing company, teams can get overwhelmed with the workloads which tend to increase exponentially.
Given that there are too many arms and environment to control, previously-effective managers start to miss the mark and previously-effective systems start to develop loopholes under increased load.
It’s totally understandable!
Modern managers must develop habits and devise means to handle these damaging situations which are fatal to the organization. That’s why the “Greiner Curve” provides us with a useful approach to thinking and understanding the crisis that organizations experience as they grow.
Once the root cause of many of these problems is identified, fixing it is as easy as dotting the I’s and crossing the T’s.
PHASES OF GROWTH
1. Growth Through Creativity
An important observation in this initial phase of the Greiner Growth Model is that creativity always comes with challenges. This is partly because when creating a new model or system, multiple components such as people, tools, environment, and concept are involved.
Business leaders can foster creativity in their teams but they should also anticipate a crisis along the way. It’s inevitable!
At this stage, the company is relatively young and can be referred to as a small business. Not because of its gross revenue or net revenue, but the decisions they make and their organizational structure.
The organization is also informal and each department still relies heavily on the other departments to function.
As the company starts to experience a dramatic change especially when it’s growing so fast, starts to get complex, and the administrators (i.e., founders, CEOs, CMOs) are no longer able to take adequate stock of the situation.
When this situation lingers, it can result in a leadership crisis. It becomes difficult for the manager or the administrative team to coordinate the processes. Internal control will no longer be organized because the foundation is weak.
Leadership crisis could damage the very ‘essence’ of the organization. In fact, employees could develop satisfaction in their jobs and may even leave. According to a Gallup research of 7,272 U.S. adults, about 50% of employees leave their jobs “to stay away from their manager.”
For most organizations, the most effective way to end leadership crisis is when the founder(s) change their leadership style and assume the role of a manager by coordinating the activities of the organization.
Better yet, they can hire someone new with the right leadership traits to pioneer their decision-making processes — if they’re not capable. After all, research by The Association of Talent Development shows that only 6% of executives say they feel “very ready” to meet their leadership needs.
2. Growth Through Direction
This is an important phase in the Greiner Growth Model because it involves entrepreneurs and senior executives relinquishing some of their power and privileges to a professional manager.
As the leadership crisis heats up, appointing functional managers to take up responsibility is essential because organizational growth is achieved through a directional approach.
In this same phase, middle management is created to ensure effective distribution of resources and control of the primary processes.
Even though the first phase of the Greiner Growth Model is informal, this phase requires the organization to formalize and standardize the Rules, Procedures, and Culture.
Formal communications further lead to visible growth in the organization. This is also a phase where there’s a trend in the incentive schemes replacing stock as a financial reward.
All in all, the central coordination still rests in the shoulders of the founder but the processes and day to day activities are being manned by the functional managers.
In this ‘direction’ phase, the professional manager and key staff members institute the direction that the organization should go. Also, lower level supervisors take up the responsibility of functional specialists than autonomous decision makers.
As these directive management techniques foster the growth of the organization, it can be fun in the beginning but gets complex and diverse later on. This leads to a crisis of autonomy — hence the need to delegate.
Let’s talk about it.
3. Growth Through Delegation
While growth through direction is fundamental to organizational expansion, a state of Autonomy Crisis emerges which calls for new structures and learning. This is where delegation plays a key role.
Through delegation, an organization can achieve more and grow exponentially irrespective of the crisis that may arise.
Successful delegation can be viewed as a tool which promotes specialization; allowing the top executives to hand over tasks to skilled staff who are better aligned to accomplish tremendous results within a period of time.
When delegation becomes the norm in any organization, it allows the executives the time to reflect, prepare for crisis even before they come, and to develop winning strategies. Delegation is an essential ingredient for smart leadership in the organization.
According to North Carolina State University, “the main reason why most leaders fail to delegate is that they feel they don’t have enough time.
This lame approach allows leaders to complete tasks all by themselves (and waste time) rather than training employees. It hurts the company in the long run.”
This is important because as an effective leader, you should be able to work on your business rather than stressing yourself over tasks that you don’t enjoy.
The benefits of delegation cuts across all industries. It plays a key role in resolving the autonomy crisis.
Here’s exactly how:
Delegation leads to decentralization whereby the entrepreneur or top executives delegate important tasks to skilled managers. These managers, in turn, help in achieving tactical and operational objectives.
The management rarely intervenes in these areas but only concentrates on strategic decisions. This creates a powerful division structure with separate product groups and skilled managers.
Next, we’ll talk about Control Crisis which arises as a result of delegation.
4. Growth Through Coordination
Growth through coordination is the fourth phase of Greiner’s Growth Model.
Coordination is what brings together every piece of the equation together. It synchronizes the entire system and ensures that every arm of the organization is working efficiently.
When a control crisis arises, effective coordination helps to resolve it.
Here’s a case scenario: Imagine that your family finally decided to reunite with every member. You’re expected to have more than 50 family members attending.
To capture this memorable moment, you all decide that a group picture should be taken.
Trust me, it’s easy to make that decision but coordinating where people stand and how in the picture, how the structure would be and getting every member of the family to cooperate is the hard part.
To overcome a crisis in control that usually arises after a proper delegation system is in place already, coordination is important. In this phase, you use formal systems to achieve greater results with the top management as the ultimate decision maker.
Line managers use coordination to streamline the processes. It’s really the key for unlocking that growth pattern that we often see in a large company.
Unfortunately, this could pose some risks and crisis as well. It can lead to a task of conflict between the staff members and departments, between headquarters and field.
There’s resentment, staff members complain about unresponsive line managers, and everyone gets hinged and caged down the bureaucratic paper system.
Another visible crisis that could happen during growth through coordination is a procedure taking precedence over problem-solving. Also, the organization becomes too large and complex to be controlled via formal programs and rigid systems.
Improving workflow coordination through effective communication is important. Where there’s no effective communication within a company (whether small or large), employees struggle being as productive as they’re expected to be.
If one employee deals with a new customer and supports him or here, it’s important that the next employee follows through with an understanding of where the first dialogue ended.
A case study that’s compiled by Dr. Osako Marie from the Argosy University, Chicago, U.S., shows how General Electric Company leveraged coordination to grow by giving every key staff a chance to share their ideas. Regardless of the crisis, the company still exceeded their goal.
A crisis of control can be effectively resolved through centralization and decentralization.
This creates a situation whereby top management takes up the responsibility for coordinating the various divisions and motivating functional managers to engage the entire organization.
5. Growth Through Collaboration
Employees understand the impact of teamwork and collaboration and they crave for it. Top executives need to realize how valuable this can be and foster it.
Greiner spent more time emphasizing on the importance of collaboration and its impact on the organizational growth and expansion. In Collaboration, there’s a simplification and standardization of formal systems, an increase in workshops and educational training programs, and so on.
Although there’s no visible crisis that occurs as a result of collaboration, Greiner guessed that:
“The issue might revolve around “the psychological saturation of staff members who grow and gravitate towards emotionally and physically exhausted state by the intensity of teamwork, the pursuit and pressure for innovative solutions.”
The collaboration phase of the Growth Model requires a hands-on approach since there are behavioral approaches to managing the crisis in a large organization.
More importantly, during collaboration, the management emphasizes greater spontaneity in their decisions and outcomes through teams and creative confrontation of interpersonal differences.
From there, self-discipline and social control become the main factors that take lead from formal control. The impact of effective collaboration can’t be overemphasized. When properly executed, it could be the difference between an organization that cut costs and acquires resources and one that struggles.
For example, collaborating with another organization allows both parties to pool resources and share the load. Often times, partnered organizations split the financial expenses to create a mutually beneficial relationship, allowing for greater profit potential at the end with less risk.
Through collaboration, an organization taps into unique resources which they don’t have, such as unique products and services, marketing channels, and staff strength with specialized skill sets.
A few important characteristics to note in Phase 5 are:
- Collaboration revolves around a more flexible and behavioral management approach.
- The goal is on solving problems quickly through teamwork.
- Teams are merged to handle specific task based on their specialties.
- Staff experts at headquarters are combined into interdisciplinary teams, reduced in number, and reassigned — in a bid to consult field units.
- The matrix-type structure is implemented in order to bring together the right teams that can fix the crisis.
- Formal control systems are combined in a simple manner to function in single multipurpose systems.
- The key managers meet frequently to discuss major problems and how to curtail them.
- Well-crafted educational programs are employed to train managers in behavioral skills. This helps them in achieving better teamwork and conflict resolution.
- Real-time information systems are also integrated to help in the daily decision-making processes.
- Economic rewards are channeled towards team performance than to individual achievement.
- Experimenting with new processes and practices are encouraged throughout the different departments and the organization at large.
As companies evolve, a lot of changes happen to the people, tools, and systems. This fifth stage of evolution (i.e., Collaboration) is where many large U.S. company are now at.
As powerful as collaboration may be, it often ends with a crisis of Internal Growth — since further growth can only be made possible by developing strong partnerships with organizations within and outside the industry. Let’s discuss it briefly…
6. Growth Through Strategic Alliances
The 6th phase in Greiner’s Growth Model wasn’t there initially since most organizations do not pass through the same growth pattern.
New businesses may not have fully embraced collaboration yet, whereas established large companies may no longer be sold on the idea of growth through creativity since they have gone beyond that phase.
According to Greiner, there’s a need for this sixth phase — because organizational growth may continue through merger, networks, technology, outsourcing, and other effective solutions involving other companies in their locality and globally.
There comes a time when the market controls the growth rate of an organization. This can pose a problem with transitioning to new markets and terrains if the market has a strong influence on the organization.
Truly, alliances are on the increase. According to PwC, “Strategic alliances and joint ventures are a viable means of achieving growth in 2018.
Through strategic alliances, an organization is able to establish a strong growth strategy. This provides an alternative to the organic means of building a new venture from scratch.
It also streamlines that inorganic option of making an acquisition — thus paving a channel for consistent growth and expansion of the company.
PwC, in its 21st annual CEO survey results, found that 47% of US CEOs plan to pursue and embrace a new joint venture or strategic alliance with the sole intent of driving corporate growth or profitability.
This interest and trend in forming strategic joint ventures have increased in North America with 53% of CEOs planning to initiate a strong alliance in the coming year.
A successful strategic alliance can be formed by understanding and implementing these seven factors, according to the same PwC’s 21st CEO Survey.
USING THE GREINER CURVE FOR YOUR ORGANIZATION’S GROWTH
If you’re starting a new venture or looking to grow an existing business, you’re better equipped to anticipate the crisis that may occur if you study the Greiner Growth Model closely.
This model helps you to plan effectively so that you can cope with the next growth transitions.
Follow these steps to effectively apply the Greiner Growth Model in your organization:
Step #1: Understand where your organization’s position.
There’s a leadership pattern in every phase of the Greiner Growth Curve. This leadership pattern most often tends to sabotage change. How?
Consider the senior leaders, top executives, and founders who have been at the forefront of the organization; thinking, exploring, and debating about the change they want to see in the organization.
When they finally announce plans for a new system or initiative, it could get the staff confused or sad, to say the least, especially if the initiative doesn’t suit their personality or internal culture. Employees can lose focus and attention.
Maintaining and managing employees’ focus could be one of the organization’s most valuable asset. You a conscious effort to keep employees engaged at work.
Focus on solving the pressing problems in the organization.
“Business leaders often solve the wrong problem or focus on the left when the threat or opportunity is coming from the right” — Paul Shoemaker
Since the staff members were not a part of the discussions and are not acquainted with all the ‘so-called’ nice reasons for the change, leaders experience resistance from their followers.
That’s why knowing where your organization is at the moment positions you to either take a particular decision or leave it for the future.
If you’re a Tech. Company, for example, you need to understand that the end-user also matters in your decision-making processes.
Step #2: Understand your organization’s growth phase and prepare for the next transition.
This could be the best time to analyze your processes and determine whether the organization has reached the first second or third phase of growth.
Is it approaching a ‘crisis’ period or transition?
Look out for these signs of “crisis”:
- Staff members are not happy with managers and feel that company procedures are hindering them from doing their best work.
- People feel they’re underpaid or not fairly rewarded for the work they do, the unseen gestures they extend, and even the extra hours they worked in the organization.
- There’s a higher staff turnover than is expected. They’re not just happy.
If you notice any of these signs or even similar signs in the organization, then it may not be the right time to transition or implement a new strategy — because it can disrupt the processes in the organization.
Give it more time to bring the employees to a place where they’re prepared and ready to embrace a new initiative.
Step #3: Anticipate and plan for change.
Change management is an important metric that deals with assessing people and culture to determine how previous changes and a proposed new change in business strategies, organizational structures, technology, processes, and design will impact the organization.
In order to successfully plan for change, the management must consider employees and joint ventures.
Otherwise, their change may not go well with the system. According to Pulse Learning, “70% of change initiatives fail due to unproductive management behavior and negative employee behaviors.”
Anna Sacio-Szymanska shared a case study of a large private company from fast-moving consumer goods (FMCG) sector, based in Poland.
The company utilized the methodology of foresight to clearly understand the employees and end user before embracing a change. They anticipated what the outcomes would be beforehand.
No matter the crisis that comes with growth, an entrepreneur could fly above it by anticipating and planning for change; which is inevitable.
When an entrepreneur knows exactly what needs to be achieved in the organization and how to anticipate change, it’s time to take action based on the plans.
By clearly defining the crisis that occurs at different organizational growth levels, it’s a lot easier to fix the problems.
You should revisit Greiner’s Growth Curve Model regularly (every 6-12 months) and you’ll understand how the current phase of growth in your organization impacts the employees, the customers, and the external partners.
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