Organizational Life Cycle

2

Institutional Theory Three processes lead organizations to become more similar

over time:

• Coercive isomorphism

•organizations adopt norms because of pressures

exerted by other organizations and by society in general

(affirmative action, environmental protection)

• Mimetic isomorphism

•organizations intentionally imitate and copy one another

to increase their legitimacy

(new medical practices, advertising approaches)

• Normative isomorphism

•organizations indirectly adopt the norms and values of

other organizations in the environment

(IT professionals carry practices from one organization to

another)

Negative Effects

• Bad practices spread

• Outdated practices may be institutionalized

• Innovation stifled in strongly isomorphic field

Positive Effects

• Leads to stability

• Provides legitimacy

Isomorphism: Pros and Cons

Industry Life Cycles

• Industry Evolution

– Entry strategies

• First movers

• Followers

• Survival strategies

• Specialist

• Generalist

Entry Strategies

• Entering the market early

– Pick of environmental resources

– Rapid growth

– Better chances of survival

Entry Strategies

• Entering the market later

– Reduces operational uncertainty

– Correct way to compete is apparent

– Lower R&D investment

– Survival as the more efficient producer

Survival Strategies

• Specialists

– Concentrate skills in a single niche

– Develop core competencies

– Can provide better customer service

– and superior products, but

– Trouble if the niche disappears or others enter.

• Generalists

– Spread skills across many niches

– Providing greater brand recognition

– Can succeed when environment is uncertain,

– If risk is spread across a number of niches

Organizational Life Cycle

• Stages of Life Cycle Development

– Pre-Birth Stage

• first idea

• commitment and early planning

• implementation

– Entrepreneurial Stage

– Collectivity Stage

– Formalization Stage

– Elaboration Stage

Organizational Characteristics

During the Life Cycle

• ENTREPRENEURIAL STAGE:

– Personal control systems

– Innovation by owner/manager

– Goal: Survival

– Management style: Entrepreneurial

– Crisis: Lack of/Need for leadership

Organizational Characteristics

During the Life Cycle

• COLLECTIVITY STAGE:

– Personal rewards aimed at individuals who contribute to

organizational success

– Innovation from employees and managers

– Goal: Growth

– Management style: Charismatic, directive

– Crisis: Lack of/need for delegation

Organization Growth:

Is Bigger Better?

• Pressures for Growth

– Organization goals

– Economies of scale

– Executive advancement

– Economic health

Size and Structural Characteristics

As Organizations get bigger:

• Complexity increases

• Centralization decreases

• Formalization increases

• Flexibility decreases

Large Vs. Small: How can you be

both?

• Structural reorganization (split up)

• Smaller headquarters staff (decentralize)

• Subsidiaries/spin-offs that can act small

• Skunkworks to develop new products

• Support intrapreneurship within the firm

Bigger may not be better!

• Growth is difficult to maintain.

– A $100K company has to generate $10K to grow by 10%.

– A $100B company has to generate $10B to grow by the same 10%

– In the 1990s, what percentage of publicly-traded firms increased their revenues and profit by an average of 10% a year?

• Growth can stretch a firm too thin.

– A 20% growth rate per year means a firm doubles in size in less than four years.

Bigger may not be better!

• What determines a firm’s size?

– Market Cap?

– Employees?

– Profits?

– Market share?

– Revenues?

• The wrong choice can lead to seriously negative consequences.

Organizational Characteristics

During the Life Cycle • FORMALIZATION STAGE:

– Impersonal rewards through formalized systems

– Innovation from separate innovative groups

– Goal: Internal stability/market expansion

– Management style: Delegation with control

– Crisis: Too much red tape

Organizational Characteristics

During the Life Cycle

• ELABORATION STAGE:

– Extensive rewards tailored to product and department success

– Innovation by institutionalized R & D

– Goal: Image/reputation-building

– Management style: Team approach

– Crisis: Lack of/need for revitalization

Organization Life Cycle

Small

Large

Siz

e

Entrepreneurial Collectivity Formalization Elaboration ?????????

Streamlining

Continued maturity

Decline

Creativity

Provision of

Clear Direction

Addition of

Internal Systems

Development of Teamwork

Crisis: Need for Leadership

Crisis: Need for

delegation

with control

Crisis: Too

much

red tape

Crisis: Need for

revitalization

Organizational Decline and Death

Occurs when an organization fails to anticipate, recognize, avoid, neutralize, or adapt to external or internal pressures that threaten its long-term survival

Organizational Decline and

Downsizing: The Causes • Organizational Atrophy

– Loss of ability to respond to changing environment

– Inefficient, bureaucratic, fat, and happy

• Organizational Vulnerability – Loss of resources

– Loss of market share

– Loss of legitimacy

• Environmental decline – Stagnating economy

– Flat/shrinking market

– Increased competition

Stages of Decline

Blinded Inaction Faulty Action Crisis Dissolution

Good

Information

Successful Organizational Performance

No choices

Acknowledge

Decline Major

Changes Reorganization

Weitzel and Jonsson’s Model of Decline

Managing the Downsizing

• Implementation approaches must be a function of the severity and speed of decline.

• Implementation issues to consider

– Consider voluntary programs with incentives (but be careful - who might leave?)

– Over communicate - “The best surprise is no surprise.”

– Allow employees to leave with dignity

– Assist those leaving

– Use ceremonies to reduce anger/confusion

– Remember those who stay!

Leadership Role

Clawson’s Diamond Model of Leadership

Leader

Others Task

Organization

Organizational Design

(North-South line)

(Shared Vision

East-West line)

Influence Strategic Thinking

Managing Change Employee

Bonding

Key Elements of Leadership

• In the Diamond General Model of Leadership, four interconnected elements constitute leadership:

– Leader. Each leader has unique skills and attributes.

– Task. The set of tasks facing the organization, as perceived by Leader and Others. Strategic Thinking.

– Others. The followers, with skills and attributes of their own.

– Organization.

– Organizational structure and systems and culture, etc., which can help or hinder the accomplishment of tasks.

A Diamond In The Rough

Two larger concerns can be added to the Diamond model:

– Environment: The Context. Market realities, political forces, and so on have their effect on leadership.

– Results: Outcomes of Leadership. These include effectiveness, efficiency, growth, learning, and morale.

Relationships Are The Key

• Relationships between the four elements of the Diamond model are the key to successful leadership. – Leader and Task: determines, describes or represents the leader’s

vision.

– Leader and Others: determines degree of influence leader has over followers.

– Others and Organization: determines depth of employees’ attachment and commitment to the organization.

– Organization and Task: determines whether organization is well-suited to meet its challenges.

– Others and Task: determines followers’ view of what must be done.

– Leader and Organization: determines whether the leader’s style and skills make a good match with the organization.

Leadership Potentialities

– Each leadership situation encompasses numerous “potentialities,” or possible analytical perspectives.

– The leader’s vision, and skill in communicating it to followers, will determine which potentiality members of the organization see.

– This, in turn, will determine organizational action and outcome.

The Diamond Model and What CEOs Do

One study of 160 CEOs arrived at five basic leadership foci which equate strongly with the relationships in the diamond model. – Strategy (emphasis on setting strategic direction): analogous to Leader and Task.

– Box (emphasis on organizational control systems): analogous to Others and Organization.

– Human resources (emphasis on human relationships throughout the organization): analogous to Leader and Others.

– Change (emphasis on managing change): analogous to Organization and Task.

– Expertise (emphasis on creating a competitive advantage through particular expertise): analogous to Leader and Organization.

What Do We Want to Become?

• A vision statement should answer the basic question,

“What do we want to become?”

• The vision statement should be short, preferably one

sentence, and as many managers as possible should

have input into developing the statement.

Vision Statement Examples

What Is Our Business?

• Mission statement

– a declaration of an organization’s “reason for being.”

– answers the pivotal question “What is our business?”

– essential for effectively establishing objectives and

formulating strategies

– reveals what an organization wants to be and whom it

wants to serve

– Also called a creed statement, a statement of

purpose, a statement of philosophy, a statement of

beliefs, and a statement of business principles

Mission

• A Mission Statement defines the organization's

purpose and primary objectives. Its prime

function is to define the key measure or

measures of the organization’s success.

Mission Statement Creation

1) First, identify your organization’s “winning idea”- what

makes your organization stand out from its competitors

& is the reason that customers will choose your

organization over others.

2) Second, identify the key measures of your success.

(What is it that your organization has that others don’t?).

3) Create a measurable goal by combining steps 1 & 2.

REMEMBER:

– A Mission Statement should be concise and precise

which expresses your ideas, measures and desired

result.

Benefits of Having a Clear Mission and

Vision

A Comprehensive Strategic-Management

Model

2-36

Four Types Of Decisions

• Decisions that are made for the leader

• Decisions that the leader makes independently of others (autocratic)

• Decisions that leaders make after consultation with others (participatory)

• Decisions that leaders allow others to make (empowering)

Leadership And Decision Making

1. Leader makes decision and announces it

2. Leader “sells” the decision

3. Leader shares an idea and invites input

4. Leader presents a problem, gets input and makes the decision

5. Leader allows subordinates to use a prescribed process to make a decision

Directive

Leadership

Empowering

Leadership

Phase 1: Clarifying

• Clarifying Phase – Clearly identify the decision to be made: why does this decision need to be made?

– Gather information: • Clarify who will be impacted by the decision (both in the short-term and long-term)

• Clearly identify who will make the decision and why. • Identify what is known (data). What information is available to assist in making the decision

• Determine what additional information and/or expertise is needed to make the decision

– By what date does the decision need to be made? Can portions of the decision be made now and rolled out in phases

– With all stakeholders that will be impacted by the decision, share who is making the decision and why they are making the decision

Phase 2: Processing

Processing Phase – Determine how the decision will be made. Will it be made through consensus, voting or some other means?

– Collect multiple forms of data that will assist in making the decision. Be sure to make use of both qualitative and quantitative data.

– Identify the intended outcomes as well as evidence to demonstrate the outcomes were achieved.

– Determine who will implement the decision. Making the decision and implementing it are two different things.

– Decide the best course of action, and identify potential barriers based on the decision.

– Identify the group or individual who will announce the decision. – Determine if the decision will be communicated verbally, in writing or both.

Phase 3: Delivery Phase

• Delivery Phase

– Communicate the decision to all impacted stakeholders (how will it be communicated, by whom, and at what venue?)

– Explain how the decision was made (the process)

– Explain why the decision was made (the intended outcome)

Phase 4: Action

• Action Phase

– Implement the decision

• Process for implementation; who will be responsible for implementation

– Determine the timeline for implementation and reporting based on identified benchmarks

Phase 5: Assessing/Reflecting

• Assessing/Reflecting Phase

– Assess the outcome of the decision based on benchmark (data) information

– Based on the decision making framework, reflect on what worked, where there were challenges, and what could be modified to improve the process in the future

Assignment – 30 marks You will identify, select, and review articles from scholarly sources, on any model/theme (from the

course outline) relevant to global leadership and its application to your current work scenario. No. of words – 6000 (approx 20pgs), Arial 11, 1.5 -spacing, and Justified. Apart from the Title pg. the format is as follows;

• Abstract

• Contents (with pg. nos.)

• Introduction of the model/theme & Identification of the fundamental concepts of the articles

• Discussion of how these concepts relate to your current work scenario. Identify connections and make linkages

• to concepts and theory, and your experiences

• Conclusion & Recommendations- how you will specifically use the learning from this review to make yourself and your organisation a better global leader

• References / Bibliography /Citations

The asignment will be evaluated using the following criteria:

Quality of article – identification of model/theme, material reviewed (quality & quantity), analysis and discussion, relevance of recommendations 20

Report writing style, formatting, references and proper citations 10