Stages of the Greiner Business Growth Model

The most commonly referred to small business growth model consists of five stages: existence, survival, success, take-off, and resource maturity. The Greiner Growth Model also has five stages, but it places a greater emphasis on the difficulties companies face as they grow. Greiner divides each phase into periods of ‘evolution’ and ‘revolution.’ Here’s how it works.

Phase 1: Creativity

This is the birth stage, when the company is small and young. Think about your typical startup. Communication is informal and people work long hours in the hopes of getting the company off the ground. But as the company grows and hires more employees, informal communication is less effective, and new hires are less dedicated to the product. Founders have to take on the role of managers, leading to a crisis of leadership.

Phase 2: Direction

Once a strong business manager is in place, he or she can implement effective policies to guide the company during the period of growth. A hierarchy develops; accounting systems, budgets, and work standards are adopted; and jobs become more specialized. Low-level supervisors have less autonomy than they did in the first stage. These supervisors become frustrated with the new layers of bureaucracy, and a crisis of autonomy emerges.

Phase 3: Delegation

This phase of growth occurs when the organizational structure becomes more decentralized. Lower-level managers are given the authority and responsibility to act somewhat independently, while top-level executives focus on the bigger picture. The empowered managers take greater pride in their work, and are newly motivated to improve the company. They take action without coordinating with the rest of the organization. This leads to a crisis of control between mid-level and top-level executives.

Phase 4: Coordination

To regain this control, formal systems are created and administered by the top-level executives. The formerly decentralized units are merged into appropriate groups, and their return on invested capital determines the allocation of funds in the future. Planning procedures are put into place, and there’s a greater focus on company-wide programs, including stock options and profit sharing. Managers are still able to make decisions, but they have to be able to justify their choices to headquarters. At this point, procedures may begin to overwhelm innovation, resulting in a red-tape crisis.

Phase 5: Collaboration

This phase involves a highly evolved, flexible approach to managers. People at all levels are trusted to do their best for the organization and to make wise choices, replacing systems of formal control. There is an interdisciplinary approach to problem solving and product or service development as key managers work together to solve major issues. This is the final observable phase in the evolution of a business. Although ‘revolutions’ may still occur from time to time, they are likely to be much less dramatic.

This business growth model is just one of many, but they all share a common theme: conflict. There’s a reason they’re called ‘growing pains,’ and you can’t avoid them if you want your small business to grow. Instead, smart business owners anticipate the issues and prepare to overcome them.

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Sources:
https://hbr.org/1983/05/the-five-stages-of-small-business-growth
https://hbr.org/1998/05/evolution-and-revolution-as-organizations-grow

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