The growth phases model of Larry E. Greiner suggests that organizations go through 5 (6) stages of growth and need appropriate strategies and structures to cope. It is a descriptive framework that can be used to understand why certain management styles, organizational structures and coordination mechanisms work, and why some don’t work at certain phases in the development of an organization. The 1972 Growth Phases model of Greiner describes five phases of organizational development and growth:
1. Growth through creativity. Start-up company, entrepreneurial, informal communication, hard work and low earnings. Ending by a leadership crisis.
2. Growth through direction. Sustained growth, functional organization structure, accounting, capital management, incentives, budgets, standardized processes. Ending by an autonomy crisis.
3. Growth through delegation. Decentralized organizational structure, operational and market level responsibility, profit centers, financial incentives, decision making is based on periodic reviews, top management acts by exception, formal communication. Ending by a control crisis.
4. Growth through coordination and monitoring. Formation of product groups, thorough review of formal planning, centralization of support functions, corporate staff oversees coordination, corporate capital expenditures, accountability for ROI at product group level, motivation through lower-level profit sharing. Ending by a red tape crisis.
5. Growth through collaboration. New evolutionary path, team action for problem solving, cross-functional task teams, decentralized support staff, matrix organization, simplified control mechanisms, team behavior education programs, advanced information systems, team incentives. Ending by an internal growth crisis.
More recently Greiner added a sixth phase to his Growth Phases model:
6. Growth through extra-organizational solutions (mergers, holdings, networks of organizations)
Book: Larry E. Greiner – Power and Organization Development