Organizational Life Cycle Lecture

Introduction

• Comparison between human life cycle and organizational life cycle
• Life stages: infant, toddler, child, teenager, adult, midlife crisis, old age, death
• Organizations: born, maturing, dying

Organizational Life Cycle

• Organizations follow predictable stages
• Similar structures and features at each stage
• Firms face similar problems at each stage
• Necessity to overcome crises for growth
• Understanding stages helps in anticipating and responding to challenges

Common Organizational Life Cycle Model

• Four stages: entrepreneurial, collectivity, formalization, elaboration

Stage 1: Entrepreneurial Stage

• One-person show with an idea/product/technology
• Example: Apple, Steve Jobs and Steve Wozniak in garage
• Crisis: Need for leadership and vision
• Leaders necessary for company growth; founders may or may not be good leaders

Stage 2: Collectivity Stage

• More than just the founder and big idea
• Clear vision and leadership
• Emergence of structure: work divided into specialties
• Formation of organizational culture and informal structures
• Crisis: Need for delegation
• Lower level autonomy needed; responsibilities delegate through the organization

Stage 3: Formalization Stage

• Need for more formal control
• Institutions of rules, procedures, and bureaucratic control
• Formal reward systems
• Expansion into new product lines or services
• Crisis: Too much red tape
• Over-bureaucratization stifles innovation and complicates coordination

Stage 4: Elaboration Stage

• Focus on collaboration and teamwork within bureaucratic systems
• Splitting into smaller units for responsiveness
• Emphasis on integration and coordination
• Crisis: Need for revitalization
• Adaptation to changing external environment
• Example: Apple's reinvention, shift to iPhone sales
• Failure to adapt leads to decline or death

Different Structures Throughout Life Cycle

• Early stages: Organic structures for flexibility
  • Small, nimble startups
  • Little specialization
• Later stages: More mechanistic structures
  • Need for control and order
  • Over-structuring can hinder flexibility
• Continual balance between structure and flexibility
• Managerial challenge: Stability and efficiency vs. innovation and adaptability

Conclusion

• The constant management challenge throughout the life cycle is maintaining the balance of stability and flexibility