Strategic Management: Formulation and Implementation

Change And The Organization's Life Cycle

All organizations are open system that share some features of biological system, especially in their growth patterns. Like biological organisms, organisations experience a life cycle of birth, growth, maturity, deterioration, and death.

The life cycle of organization shows how the organization is dependent on the outside environment as it goes through its lifecycle stages. As the organization passes from one stage to the next in this life cycle, it changes. The concept of "growth" is often used to refer to changes in age, size, complexity and the rate of growth. Each element of changes has slightly different effects on the life of an organization.

Organizational life cycle change pressures are clearest at the beginning. Small, new organizations usually begin by serving a small market with a limited product/service line.

The structure and policy of the organization are usually simple and quite informal. As the organization experiences is rapid growth period, it tends to become more highly structured and to develop more comprehensive policies and procedures. Structure often becomes more differentiated as the organization attempts to cope with growth.

The maturity phase places great emphasis on marketing and sales skills as efforts are made to expand markets in order to continue the growth of the previous period. Structure tends to become more firmly set, and policy may not be as flexible as before as the tenure and age of mangers with the organizations increase. The deterioration stage finds the organization losing sales, profits, markets, and employees at a gradual rate.

Efforts are made to change structure and policy to better meet the changing needs of the environment. If the organization be unable to reverse itself, it dies. Death may also come through a merger or consolidation, which, while not ending the organization, significantly changes its image, identity, and perhaps even legal status. These lifecycle changes are major changes all organizations face.

One oftencited model posits five typical evolutionary phases as organizations develop from entrepreneurial startups to mature organizations, each terminated by a "revolution," a crisis involving leadership and control (Greiner, 1972). Phase one is called creativity; the organization is small, informal, and entrepreneurial. In phase two, direction, supervisors appear. Delegation, phase three, establishes indirect control through management layers, rules, and procedures, Phase four, coordination, involves a formal balance between centralized and decentralized activities. Finally, collaboration is based on teams and informal structures with sophisticated and interpersonally skilful members in a highly supportive context.

The way in which lifecycle changes affect a particular organization, however, is unique to the organization because are so many different alternative strategies that can be adopted to deal with each of these major changes.