Knowing when to redesign: Size, History, and Life-Cycle

Why do organizations grow?

What are the consequences of size?

How do organizations and industries evolve?

What are design consequences of organizational life-cycle?

Causes and Consequences of Organizational Growth

Why do Organizations grow?• Business Expectations ( Organizational Goals )• Executive Advancement• Economic well-being and Survival

What happens when organizations get larger?• Formalization: Rules, procedures, manuals• Decentralization: Decision making authority• Complexity: Expansion of departments and

positions

Relative Distribution of Personnel in Large Vs. Small Organizations

0.00%

25.00%

50.00%

75.00%

100.00%%

of Tot

al E

mplo

yees

Line EmployeesTop Management

Professional Staff

Clerical

Small Large

Large Size and Bureaucracy: Good and Bad

TYPES OF FORMALIZATION

DEGREE OF FORMALIZATION

Enabling Coercive

Low

High

Organic

EnablingBureaucracy

Autocratic

CoerciveBureaucracy

Evolutionary Processes in Organizations

Two Alternative Perspectives

Analysis of the industry as a whole

Analysis of individual organizations

Dynamics of Organizational Ecology

Effects of Legitimacy & Competition Liability of Newness

Carrying Capacity of the Environment

PopulationDensity

Time

1

Age

Like

lihood o

f Fa

ilure

Organizational Life Cycle

The Internal dynamics of growth

• 1. Entrepreneurial Stage: Growth through creativity crisis: Need for leadership

• 2. Collectivity Stage: provision of clear direction crisis: Need for delegation and control

• 3. Formalization Stage: Addition of internal systems crisis: Need to deal with red tape

• 4. Elaboration Stage: Development of teamwork crisis: Need for Revitalization

Greiner’s Model of Organizational Growth

Org

aniz

ati

onal Siz

e

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

Age of the organization

LeadershipCrisis

AutonomyCrisis

ControlCrisis

Red tapeCrisis

Creativity Direction DelegationCoordinationCollaboration

Horizontal coordination mechanisms

Information carrying capacity

Costs

low

high

low high

Paperwork

Direct contact

Liaison roles

Task force

Full time integrator

Permanent teams

Vertical coordination mechanisms

Information carrying capacity

Costs

low

high

low high

Hierarchical referrals

Rules, plans, SOPs

New positions in hierarchy

Vertical information systems

OrganizationalCharacteristics

New Organizational Realities

Managing theOrganization

Managing theEnvironment

•NETWORKED

•FLAT

•FLEXIBLE

•DIVERSE

•GLOBAL

•Team structure

•Incentives/careers•Workforcemanagement•Conflictresolution•Cross-borderintegration

•Alliances

•Boundaries

•Learning

•Stakeholders

•Localresponsiveness