Innovation

Greiner’s growth model

Start-up firms often go through painful transitions as they grow

As a business grows, it is common for it to go through painful transformations. These transitions cause anxiety and uncertainty among employees, and they can even lead to the firm's failure. Greiner's growth model lays out the normal stages of a startup's growth, as well as the transition points between them. This analysis aids a growing company in anticipating and managing transitions more successfully.

When to use it

● To assist you in managing growth as a start-up or developing business.
● To identify and plan for potential growth challenges.
● To have a better understanding of the problems that small and emerging businesses encounter while doing business with them.

Origins

Larry Greiner published the growth model in 1972. While there may have been earlier studies on this topic, it has all been forgotten since then. Greiner's methodology was based on his personal knowledge and experience with business success rather than thorough academic research. His findings were quickly popular, prompting a slew of follow-up research on the various stages of growth and transitions that small and expanding businesses go through. Greiner wrote a follow-up paper in 1998, validating most of his previous concepts but also adding some new ones, such as the idea of rising through alliances.

What it is

A company's growth is divided into five stages. Each phase begins with an evolutionary era and concludes with a revolutionary moment of tumult and transformation. The resolution of the revolutionary period determines whether a company will go to the next phase of evolutionary growth, or whether it will face serious financial troubles and be sold or shut down. The following is a summary of the five phases:

● Growth through creativity – resulting in a leadership crisis.
● Growth through direction – resulting in an autonomy crisis.
● Growth through delegation – resulting in a control crisis.
● Growth through coordination – resulting in a red-tape crisis.
● Growth through collaboration.

How to use it

The Greiner growth model is a helpful diagnostic tool, and the first step is to figure out which phase your company is in right now. The descriptions below provide additional information to assist you in determining where you sit:

● Growth through innovation: At this stage, the founders are focused on developing new goods and expanding their market. Because there are usually only a few people, communication is informal, and people are willing to work long hours. As the company grows, more employees join, and the founders find themselves spending more time managing their employees and less time operating the company. Founders are frequently technical folks who struggle with the human side of things.

This phase culminates in a "leadership crisis" and the requirement for professional management. Occasionally, the founders can pivot and become professional managers, but most of the time, external leaders are brought in at this point.
● Growth through direction: Growth is maintained by imposing more formal systems and procedures, such as budgets and the separation of functional activities like marketing and production. However, the top-down approach that was necessary to organize the company begins to become a burden, and front-line employees begin to resent the'micro-management' from above. This phase finishes with a 'autonomy crisis,' which is frequently represented in conflicts across levels of management and substantial staff turnover. Typically, the remedy is some type of delegation of duty closer to the action.
● Growth through delegation: The firm continues to grow as lower-level managers are freed up to respond quickly to new opportunities while top managers deal with the larger strategic challenges. Top executives become accustomed to the fact that they cannot do everything. However, because delegation assumes that those on the front lines have the skills and competencies to take responsibility, this new system has its own set of issues. This isn't always the case, with many people elevated to managerial roles without the necessary training. The outcome is frequently a "control crisis," in which mistakes are made and upper management feels compelled to intervene.
● Growth through coordination: Growth continues when formerly independent company divisions become more coordinated — for example, through the formation of product groups or service practices. There are frequently accompanying adjustments, such as more centrally allocated money or incentives based on firm-wide success. However, when levels of coordination increase, complexity increases, and progress may be hampered once more by what Greiner refers to as a "red-tape problem."
● Size of organisation

greiner growth model

After determining where your company falls on the growth curve, you can devise a strategy. The first important thing to consider is if you are in or approaching a transition. The following are common indicators that you are at a crossroads:

● there are numerous arguments concerning the company's direction and management.

● people abandoning the company because they believe it is heading in the wrong path

● senior executives spend the majority of their time dealing with problems or correcting mistakes. If you are one of those senior people, a big part of this study is figuring out your own role - are you overly controlling of the people below you, or have you delegated too much power to them before they are ready?

Obviously, the particular modifications you make will be unique to your scenario, but the Greiner model gives a helpful starting point for determining which path you should take.

Top practical tip

Greiner's problems all come because various people in the company have different ideas about how things should be done. To get the most of this paradigm, you should seek out multiple perspectives before acting. For example, if those at the top believe they have delegated too much and are experiencing a control crisis, while those on the front lines believe they are experiencing a red-tape crisis, you have a very difficult problem on your hands. The most difficult task in this case is simply to reach agreement on where the company stands on the curve. This can be accomplished by large-scale surveys and interviews, followed by a meeting in which the various points of view are discussed and reconciled.

Top pitfall

The most important thing to understand about the growth curve is that not every company passes through each stage in the same order. Some businesses become stuck at a certain stage of development, while others resolve one crisis before reverting to an earlier set of issues. You can also find enormous companies that are still dealing with early-stage issues. Even though Rupert Murdoch is in his nineties, he still has a firm grip on News Corporation. His company has arguably never progressed beyond the second level of Greiner's plan.

As a result, avoid using the growth curve in a deterministic manner. Instead, utilize it to structure a conversation on the causes of a company's organizational challenges, as well as the customary solutions to those problems.