Greiner’s growth model describes how organizations grow and change over time. The model suggests that organizations go through several stages of growth, each with its own challenges and opportunities.
Most companies grow to increase their sales and market share. But other factors also play a role in why a business may want to grow. Some of the other advantages of growth are increased market viability or resilience, cost savings from economies of scale, increased market dominance, increased buying and negotiating power, capacity to reduce commercial risk through diversification, or other factors of a similar nature. Growth facilitates asset acquisition, talent recruitment, and investment funding. Profit and corporate performance are also fueled by it. To put it simply, a company’s long-term viability depends on its ability to grow.
The Different Types of Growth at a Company
There are many different types of growth that a company can experience. Some common types of growth include:
- Revenue growth: This refers to an increase in the amount of money a company makes from its products or services. Revenue growth can be measured by comparing the company’s revenue from one period to another. For example, if a company’s revenue increased from $1 million last year to $1.5 million this year, it has experienced 50% revenue growth.
- Market share growth: This refers to an increase in the percentage of a market that a company controls. For example, if a company’s products or services make up 10% of the total market and then the company increases its market share to 15%, it has experienced 50% market share growth.
- Customer growth: This refers to an increase in the number of customers a company has. For example, if a company had 100 customers last year and then adds 50 more customers this year, it has experienced 50% customer growth.
- Employee growth: This refers to an increase in the number of employees a company has. For example, if a company had 10 employees last year and then hires 5 more employees this year, it has experienced 50% employee growth.
The Milestones for the Growth of a Company
There are many other ways in which a company can grow, and the specific types of growth that a company focuses on may depend on its industry, business model, and goals. But the potential milestones that a company might aim to achieve as it grows are often similar and may include:
- Reaching a certain level of revenue or profitability
- Expanding into new markets or geographic regions
- Developing new products or services
- Hiring a certain number of employees
- Growing the customer base to a certain size
- Increasing market share or market presence
- Entering into strategic partnerships or collaborations
- Investing in new technologies or business models
Once again, while the specific milestones that a company focuses on may depend on its industry, business model, and goals, there are certain common characteristics that define the different phases of growth. Understanding the issues involved in each of these can often help to manage the growth of the company successfully.
Greiner’s Growth Model and Stages of Growth
Greiner’s growth model is a framework that explains how businesses develop and evolve over time. According to the model, which was put forth by economist Ludwig Greiner, businesses go through many stages of growth, each with its own set of opportunities and challenges. The model can be used to help organizations understand their current stage of growth and develop strategies for moving to the next stage.
The stages of growth in Greiner’s model are as follows:
- The “birth” stage, where the organization is first established and begins to develop its initial products or services. At this stage, the focus is on survival and building a customer base. This may involve developing and marketing the organization’s products or services, building relationships with customers, and establishing a strong brand.
- The “growth” stage, where the organization starts to expand and increase its revenue and profitability. At this stage, the focus is on building a strong organizational structure and developing effective management processes. This may involve hiring new employees, developing new products or services, and expanding into new markets.
- The “maturity” stage, where the organization has reached its peak performance and is facing increased competition. At this stage, the focus is on maintaining market share and improving efficiency. This may involve implementing cost-cutting measures, improving the organization’s operations, and innovating to stay ahead of competitors.
- The “decline” stage, where the organization is no longer able to compete effectively and begins to lose market share. At this stage, the focus is on restructuring and revitalizing the organization. This may involve closing underperforming operations, streamlining the organization’s structure, and investing in new technologies or business models.
As mentioned, each stage of growth presents its own challenges and opportunities, and organizations must adapt their strategies and approaches to effectively navigate these stages. By understanding their current stage of growth and developing strategies for moving to the next stage, organizations can continue to grow and thrive.
The Growth Phases in Greiner’s Growth Model
The Greiner Growth Model makes it simpler to comprehend why management techniques, organizational designs, and coordination mechanisms function well in some situations throughout an organization’s birth and growth stages and poorly in others. The Greiner Growth Model is oriented toward strategic policy as a result of the fact that each phase calls for distinct managerial competencies.
Accordingly, a young organization undergoes six phases, each ending with a characteristic crises, before it reaches maturity. These growth phases are:
- Growth through creativity ending in a leadership crises
- Growth through direction ending in an autonomy crises
- Growth through delegation ending in a control crises
- Growth through coordination and control ending in a crises of red tape
- Growth through cooperation ending in a growth crises
- Growth through alliances ending in an identity crises
The Growth Phases in Detail
The company is young and small as it enters the Greiner Development Model’s pioneering growth through creativity phase. The workforce is extremely devoted and the organization is casual. A flat organizational structure and an externally focused entrepreneur who invests in new customers characterize this situation. But a leadership crisis occurs as a result of the entrepreneur’s inability to assess the situation due to the organization’s rapid growth and increasing complexity. Internal control and coordination can no longer be handled by a single individual. An improved structure is required.
Functional managers are appointed during the Greiner Growth Model’s management phase, also known as growth through direction, as a result of which a middle management that oversees the main processes is established. There are structured and standardized rules, processes, and business. The entrepreneur still controls the central coordination. However, when the business grows, the coordination issues could become too much for the entrepreneur. Middle managers also require more freedom. The crisis of autonomy ensues.
In the growth through delegation phase, the entrepreneur assigns significant work to his middle management. The middle managers are in charge of achieving tactical and operational goals, and results are sought after. Management rarely intervenes and moves at a strategic level. The creation of distinct product groups and individual managers forms a division structure. However, as additional divisional managers are hired, it will be more challenging for the management board to coordinate all of the independent divisions. The possibility of a management crisis exists. There is a good probability that the divisional managers will set their own agendas too often, which could lead to the organization dissolving.
The coordination between the various components receives increased attention throughout the Greiner Growth Model’s standardization phase. The many staff departments occupy a significant position from the headquarters where the divisional managers are controlled in huge, diverse companies. However, a red tape problem develops when the staff departments have excessive power and when divisional managers have insufficient room to maneuver. The company is now overly rigid and inflexible as a result of the restrictions.
The Greiner Growth Model’s cooperation phase aims to foster cooperation between line and staff departments, which breaks up forms of hierarchical coordination like matrix structures or project organizations. Employees communicate often throughout this phase through various consultation groups. There isn’t much uniformity and formalization. However, the frequent consultations are a trap, which could lead to a consultation crisis. There is a good likelihood that control and oversight will drastically decrease. Unless they grow through external alliances, this could spell the end for organizations.
Strong external ties and alliances are needed by the company throughout the growth through endeavor phase. These can be found in alliances, mergers, and vast networks. However, there is a significant likelihood that an identity crisis will arise since the organization is more concerned with forging partnerships than it is with advancing its fundamental mission. The original predicament will fully vanish when other companies completely take over the organization.
Conclusion
Organizations face different challenges and crises at each phase of growth, and must adapt their strategies and approaches to effectively navigate these challenges and move to the stage of maturity. By understanding their current stage of growth and adapting their strategies and approaches to effectively navigate the challenges and opportunities of that stage, organizations can manage crises and continue to grow and succeed.
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