What do giants like McDonald's, Apple and Walmart have in common, besides having over 100,000 employees, is an interesting question. They all started small, with just a few people, and then grew. Can aspiring entrepreneurs imagine the journey that Walmart had to go from a modest Five and Dime store in Arkansas to a global empire with more than 11,000 stores worldwide and 2.3 million employees? The stages of organizational development apply to domestic companies as well. All major manufacturers face transition periods. Basically, without government support and large investments, everything starts with small businesses.
During this growth, firms had to change how they operate, and each stage brought new challenges. All companies go through the same development cycles, regardless of industry.
Stages of business life
IchakAdizes, one of the world's leading experts in the field of management, has developed a methodology that describes the stages of organizational development that every company goes through. He compares the growth of a firm to that of a human as it grows, ages, and eventually dies. There are 10 stages and each consists of a unique set of challenges.
Growth stage 1: the emergence of an idea
Basically everything starts with an idea. The stages of organizational development begin as a vision in the head. The future founder dreams of everything he can do and spends days and nights developing ambitious plans. Future entrepreneurs tell everyone about their idea, enthusiasm heats up, and everything is rosy, promising. But there is an aggravating concern: “What if it doesn’t work? What if I fail?”
This stage is called “Having an idea” because the founder is already thinking about how to start a business, but has not taken any concrete steps. To move on to the next stage, a businessman needs the courage to take risks and dedicate himself to the realization of his project.
This stage in the development of an organization ends the minute the founder decides to take responsibility and assumes risk (eg, renting space, purchasing equipment, or buying equipment). However, the business may not develop if the entrepreneur does not commit and abandon the idea.
Growth Stage 2: Birth
As soon as a founder takes a risk, "a business is born." This is expressed by the registration of the organization. The idea becomes reality and itshould start showing results. Every sale is a special event and everything is action oriented. The business does everything to sell.
There are no processes or systems, and no one pays any attention to paperwork. What was really emphasized was the registration of the organization and the proper paperwork. Further, bookkeeping can be done remotely.
The founders work 16 hours a day, seven days a week. They don't have time for their personal lives because a business that requires constant attention is like a child. Decisions are difficult to make. New challenges emerge every day, so rules and best practices are created along the way. Energy and enthusiasm begin to gradually decline. The business can be opened at the main address of the organization. However, this is not always the case.
To ensure a positive cash flow, long-term planning fades into the background. Everyone is busy trying to keep the business afloat. All this becomes a way of life. Each day brings unique situations that require creativity and the ability to make quick decisions. The main mistake of many start-up projects is related to the inconvenient address of the organization. If the company works directly with clients, it is necessary to choose a comfortable and accessible location.
Besides, it would be a mistake to introduce processes and strategies too early because things are changing too fast. What worked today won't necessarily work tomorrow. Founders are deeply involved in technical work and day-to-day operations and only delegate authority toif necessary. Many firms forget about the development of the logo. In fact, it is an important element in a company's marketing. Without it, recognition will be minimal.
Logo design can be ordered from professional designers. Clients meet a new business precisely by design. Therefore, you should create a presentable appearance.
Growth Stage 3: Beginning Development
Business is constantly earning and growing rapidly. This means the formation of the organization and its prosperity. The company is optimistic, confident, proud and takes on more than it can handle. As a result, even more intensive growth is required. The entrepreneur has a vision of where best to find a use for goods and services.
Forming an organization here will be a long process and not always convenient. The business tries to use every opportunity it has and finds it difficult to stay focused on a specific goal. People are scattered due to the numerous work. New employees appear, but there are not enough processes to coordinate everyone. Work becomes sloppy and quality suffers.
The main stages of the development of the organization must always be under control. If there are no managers who could mark all the transition periods, the firm will begin to have serious problems. When founders organize a company around people rather than features, they continue to interfere with day-to-day operations. This leads to the fact that directors try to run everything, taking on many unnecessary functions. To avoid the collapse of entrepreneursmust hire their first managers and offload control and decision making.
Growth Stage 4: Transition
As the founder lets go a bit and hires CEOs, the company needs a new structure. The main stages of managing an organization can be repeated here. The transition to a new stage is often difficult and filled with internal situations, as the founders experience difficulties with the transfer of management functions. This is because professional managers see work as a normal job, and founders see the company as their life. The main documents of the organization are put in order only at the moment when a competent manager comes. The founders, as practice shows, always treat papers carelessly.
During the transition period, the organization experiences a temporary loss of control due to conflicting views. Too many projects are running in the previous stage, but few are being implemented. Thus, the first task of the new management is to consolidate existing projects and reorganize them. They also need consistency and a way to measure progress. They end up introducing processes.
The organizational form after such measures is in constant conflict and confusion. The leaders cannot agree on the direction and what risks to take. But once they resolve their conflicts, the company reaches its peak.
If management cannot resolve their conflicts, one of two things happens:
- Professional managers leave the company and it stops growing, unable to reach its full potential.
- Premature aging. The founders decide to retire or sell the business. Admin-oriented managers take charge and cut costs, which increases profits in the short term. But then they run out of ideas. Without the creative energy and vision of the founders, the company stops growing and stagnates.
Growth Stage 5: Blossoming
When leadership and founders have a clear vision, "magic" happens. The company reaches its peak and everything comes together. Actions become disciplined and innovations are introduced. The company becomes flexible and delivers results consistently through strong management decisions. This main stage in the development of the organization provides an opportunity to make good profits.
The firm begins to have the same energy and aggressiveness as in the "Beginning of Development" stage, but now there are more accurate calculations and forecasts. With more people, an organization can achieve more, do better, and increase efficiency through continuous process improvement.
Management has a strategy to improve services, products and employee satisfaction. Companies in their prime have trouble finding talent because their standards are high and they need a lot of talent. At this point, they begin to develop their own talent rather than relying on recruiting. The biggest danger for companies in their heydaystrength is self-satisfaction and satisfaction with success.
Growth Stage 6: Establishing Stability
The transition from heyday to stability happens so smoothly and takes so long that no one even notices it. But this is the deepest transition, as it marks the beginning of the end. The company is currently an industry leader, but it doesn't have the same drive as before. The organization welcomes new ideas, but with less enthusiasm. Financially motivated people run the company and, in order to please shareholders, they focus on short-term results, rather than investing in research and development, which is necessary for future growth. However, the stabilization phase of the organization may not last long.
Top management feels comfortable and doesn't want to change their status. They have a formula for success and they don't want to change it. Company policy also becomes a problem. People are more focused on how something is made and processed than on the overall goal. At this point, the firm is so large that it is very slow to respond to change. The only way out of this stage is destruction.
Ageing stage 1: recognition of oneself as a leader
Destruction begins gradually. An organization in liquidation begins to show the first signs from the moment it reaches long-term stability. Next, the company begins to abandon innovation. Leaders rely on the past to move the organization forward, but this is not possible. Companies die if they don't grow and change.Obstacles to innovation and improvement always lead only to failure. Thus, the structure itself begins to degenerate.
Management begins to lose touch with the market and external conditions. The company is making more money than ever before, but it has no new initiatives to invest in. Management at this stage often rewards themselves with huge bonuses and high salaries.
The company stops investing in its new initiatives, but spends some money, mostly on acquisitions of young technology startups. Thus, she tries to restore vitality to the organization, but the acquired ideas are not implemented due to the old administration and bureaucracy in the views. Intensive development growth is no longer possible due to the heavy burden of administrative barriers and principles created.
People at the company place more value on dress code, decor and titles than on actual work. Now the office and the general work of managers and management is becoming more like an exclusive country club. Bad work is tolerated while new ideas are discarded because they threaten an already established brand credibility.
The company begins to lose touch with the market and gradually loses customers. Nobody wants to take bad news to the top until it's too late to do something about it, which sets the stage for the next phase.
Ageing Stage 2: Cross Battles
When management can no longer hide that profits are falling, they start a witch hunt. Owners spend all theirenergy to find someone else to blame, instead of channeling that energy into solving the problem. Leaders argue among themselves and try to keep their position. This is where the crisis in the organization comes in. Conflicts arise because of separate views.
Managers, usually the most productive, either leave or are expelled. The purges and infighting continue as clients are treated as inconvenient guests that distract from the "real problem" of identifying the culprits. However, once the culprit is found and removed, the problems remain, because the difficulty is not in individuals, but in the system. In order to recoup its profits, the company is focusing on cutting costs, which only harms the business.
Aging stage 3: bureaucracy
Witch Hunt drives away all remaining talent and hope of salvation. A new CEO is coming to fix the chaos and turbulence. But the new leader appreciates stability, processes, and repeatability of performance, which triggers a creative system of destruction. Creative people are starting to leave, and the very culture of the company is completely changing. All that remains are procedures, policies and documents that stifle innovation. The company relies on small technical requirements to work because it is trying to avoid the chaos of the previous stage. Even the organization's advertising is beginning to change. It usually speaks of stability and adherence to tradition, and this is especially destructive in technological industries.
At this moment, the company is onlife support, and it can no longer be profitable because almost all of the customers have left due to neglect. The only reason the firm is still alive is because some external subsidy is keeping it afloat (e.g., it is in a regulated environment and politically significant, of national interest, so the government takes partial ownership). But as soon as the subsidy is canceled, there is a complete collapse.
Aging stage 4: death
The death of a company is a slow and protracted process that can take several years. Once a firm cannot generate the cash it needs to cover its own expenses, it begins to shrink in size and sell its assets.
The company is a sinking ship, but no one feels responsible for its destruction. People simply leave or quit until no one is left and the office lease expires.
How to improve the internal workings of the organization?
By understanding the simple model of the three stages of organizational growth, companies can design themselves to move from chaos to high performance.
Most businesses experience chaos. In fact, the complete absence of problems would mean that they could not respond to changing requirements, and this already suggests that there is nothing to fix. However, chaos that immobilizes an organization and results in its inability to respond effectively to environmental demands is unproductive and should beminimized if the firm is to succeed.
The impact of development on the company
There are three more stages that make it possible to "resurrect" the business and direct it in the right direction. It does not require a radical change in direction or infusion of large amounts of funds. The main theses will be presented below, by which it is possible to determine at which stage the company is in the reorganization.
Stage 1 - Chaos:
- Crisis or short-term focus.
- Lack of clear direction and goals.
- Change priorities.
- Unclear policies and procedures.
- Discord in the team.
- Guilt of leadership and lack of involvement.
- Mass layoffs of employees.
Stage 2 - moving to the basics of stability:
- Clearness of goals and directions.
- Consistency in priorities.
- Clearly defined policies and procedures (technical and personnel).
- Agreement on roles and responsibilities.
- Basic management processes implemented.
Stage 3 – Achieving high performance:
- A clear mission statement that creates a sense of esprit de corps.
- Clearly defined values that lead to a distinct culture.
- Respect for people who are a deeply rooted part of the culture.
- Good communication systems and information sharing.
- High engagement and empowerment of people.
- Design (workflow, structure, systems) that supportsmission and values.
Next, each of the stages will be described in detail for a clearer understanding of the cause, problem and how to solve it.
A chaotic organization is on the verge of spiraling out of control. This is problem oriented. People react and manage by monitoring the situation. Expectations, policies, standards are unclear, not agreed or poorly enforced. Good ideas and intentions abound, but unity, commitment, or execution is not enough to bring them to fruition.
Work is unpleasant for most people. Employees act in self-defense by blaming and criticizing others and therefore create an atmosphere that increases fear, suspicion, hostility and frustration. The problems of a chaotic organization are the lack of stability, the lack of clarity, and therefore the worry about what to expect from moment to moment. More formalized structures, procedures, accountability and clarification of policies, expectations and roles in the overall structure are needed.
A stable organization is characterized by predictability and control. Structure, cycles, policies, were created to eliminate uncertainty in the system. The goals are clear and people understand who is responsible for what. The main task of the organization is to ensure effective daily work. Employees in this climate tend to be obedient and expect fairness from management. Order is the keyword and people are rewarded for their work, not for risk and innovation.
The purpose of the firm depends on its efficiency.The limitation of the organization, which cannot go beyond stability, is that efficiency is more important than innovation and development. Doing as instructed and following procedures becomes more important than the goal and the mission itself. Such companies end up being left behind as customers find more responsive competitors. A long-term vision is needed, an emphasis on growth, development and a culture in which people show more autonomy in making decisions and solving problems.
High efficiency stage
The essence of high performance is shared ownership. Employees are partners in business and are responsible for its success. These organizations actively participate and cooperate. Their members have broad decision-making responsibilities. The line of the site and other information sources is dedicated to customer service, not a formal organizational structure. The mission, not rules and policies, guides daily decision making.
Such an organization is based on a unique and strong culture built on a clear set of values expressed and reinforced by its leaders. These values allow you to focus on what matters, while at the same time enabling flexibility and innovation. The processes, systems, and structure of an organization are designed to match or harmonize with the values within the enterprise. High performance regulation takes a long-term perspective. The development of people is seen as the main task of management. Trust and cooperation exist between all members of the structure. People don'tblame and do not attack others because it is not in their own interest.
An important lesson learned from this model is that an organization cannot achieve high performance without a foundation of stability. Ironically, high performance requires not only participation, flexibility, and innovation, but also order, predictability, and control. The leaders of many organizations have tried to grow from chaos to high performance without a fundamental foundation of stability and have therefore failed or been frustrated in their efforts. Managers who want to build high performance work systems need to make sure they implement processes that also provide stability.
There is no magic in going beyond chaos. There are no simple formulas. Real organizational development requires commitment and hard work. However, for those who want to eliminate waste, improve quality, and provide better customer service, there are powerful initiatives that can lead to a foundation of organizational stability and, ultimately, high performance. Such system models can be applied at any stage, since the adoption of such decisions has a good effect on the development of the company.