In the second part of these posts about Greiner’s growth model I am going to cover the signs that show you in each of the six phases of growth that your business is getting to the end of that phase and the crises are developing. I will share with you Greiner’s suggested solutions to each of these crisis moments and will add my own thoughts where I think they are relevant.
Please do read the first post in this series before reading this one. It will introduce you to the phases and allow you to identify where your own business is in its growth path. This part comes with a warning, you may end up doing a lot of self-examination after reading it. I will say though, this is a general business model, not all businesses will go through each phase, some will skip a phase, but the issues detailed here most businesses do go through. Misery does love company after all!
Phase1 ‘Creativity’
As you start up and grow the organisation becomes more complex and as a founder you start to struggle with the need to manage the company rather than what you have been doing so far, running it. Typically, more arguments take place amongst the founders over, customers, products, and markets. Because of this you find yourself in a leadership crisis and sometimes the people you have employed are having to wait around for decisions to be made because you have not relinquished decisions making authority and the founders feel that they must continue to control the business. Most businesses resolve this phase with some of the founders leaving the business and an external CEO being brought in to lead and build the organisation. This allows the remaining founders to revert to adding real value to the business by doing what they do best.
Phase2 ‘ Direction’
Businesses that move to this phase have typically installed a CEO and have developed an executive team to lead it. The management style employed is typically directive, with strategy and activities being passed down the chain. As the business grows even more complex the executive team is no longer able to oversee the operations effectively and staff once again feel restricted by the management style even though they have greater knowledge of the markets they operate in and the product. Organisations going through this crisis typically move towards more delegation with authority to act being passed down the management chain.
Phase3 ‘Delegation’
At this point the business is operating a far more decentralised organisational structure which has resulted from moving through the last phase of growth. The organisation tends to grow profitably but the executive team is struggling due to a feeling of lack of control and often shareholders and the original founders are expressing dissatisfaction that their more detailed questions cannot be answered rapidly by the executive team. Managers, now often operating remotely, act more independently than at any time in the businesses history and begin to run their own “fiefdoms”, operating parochially without considering the wider business implications of their local decisions. This period is known as a ‘crisis of control’. Senior managers attempt to reintroduce control usually drowns in the large scope of operations and markets. The solution to be adopted is to move to the next phase of growth introducing a co-ordinated style of management rather than attempting to regain a control led organisation. Many organisations seek to establish work groups of a transient nature at this point for the first time, this often fails because control is once again sought from above.
Phase4 ‘Co-ordination’
If a business survives the ‘control crisis’ it experiences at the end of the last phase of growth. It enters a period of increased co-ordination where information exchange across and between business units and product groups happen. Limited resources are used more effectively, and local management starts to operate in the interests of the whole business. Sadly, over time the willingness to co-ordinate fades and middle and lower management starts to suffer due to the imposition of rules and goals which rather than being a means to collaborate and co-ordinate efforts become goals that must be achieved. The business starts to struggle with the red tape it has created to facilitate co-ordinated efforts and gate keeper roles come to assume more power. Once again growth starts to falter. The only way to address this crisis is to drive greater market agility and give people more flexibility allowing and trusting them to operate in the best interests of the business.
Phase5 ‘Collaboration’
In this phase growth comes from a mature business model. All the things the best businesses of today encompass are to the fore, with matrix management, cross functional teams, simplification of processes and procedures and authority to act in the best interests of the business are engrained. Managers become leaders. This phase tends to end with an internal growth crisis where existing markets are fully served and the only way to grow is by collaborating with complementary organisations.
Phase6 ‘Alliances’
Greiner’s use of the word ‘Alliances’ was coined in the 90’s when he added it to his original paper. His real meaning as we would understand it now is the need to look outside of the business for growth. Mergers and acquisitions typically happening at this point, although they could already have happened to some degree during any of the previous phases. I believe what he meant by alliances in this phase are the bigger steps of significant acquisitions of competitors and complementary businesses that would allow cross selling and up selling opportunities. It is not the use of alliances to provide additional routes to market or remove things like professional services from the core business of a software business. These are revenue and growth ‘plays’ that can happen during any phase of growth.
In summary. The Greiner growth model is not a panacea. Different businesses will perhaps not even go through all these phases, they may experience them in a different order. What an understanding of the model does do for a management team is help them identify the crises they are going through or recognise they will be heading into. In this way they can prepare for the event and have some solutions tailor made for addressing them when they arrive. Those of you who are more astute will have seen a common theme throughout many of the crisis points. The need for control and information. Good information systems and leadership training will always help avert some of these issues. Setting a clear strategy and adopting clear and frequent reviews of it will also help a business manage its way through its growth phases.