Stages Of Organisational Growth

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Introduction

An organisation is a group of people who work together with coordinated efforts to achieve certain objectives or goals (Lewis, 2007). Organisations are established by individuals or groups of individuals. During their formation, there is usually very little to talk about by the owner(s) and too much for them to do. Just like human beings, organisations need to grow so as to enable the owner or owners realize their objectives.

If the aspect of growth is removed, then it becomes almost impossible for an organisation to exist beyond its formation stage (Alstete,^, 2007). The signs of growth are expansion and increase in financial base.

It also includes increase in the number of employees and diversification of a business as well as the separation of the owner from the business. Organisations also grow through mergers and acquisitions, all in the spirit of attaining their mission and vision (Changing minds organisation, 2013).

Business management commentators have described various models of organisational growth. All of them vary in terms of how they conceptualize growth but they have one thing in common, that is, they all focus on the importance of creativity, resilience and innovativeness in the business (Dodge, Fullerton & Robbins, 1994).

Examples of growth models include the five stages of small business growth model by Neil Churchill and Virginia Lewis, the stages of growth model by Richard Nolan and the Scarf model by David Rock.

The five stages of small business growth model

This model was developed by Neil Churchill and Virginia Lewis in 1993. The model indentifies five stages of growth namely existence, survival, success, take off and resource maturity. The existence stage entails the establishment of the business and is majorly characterized by domination by the owner.

The major worry at this stage is whether to move to stage two or quit the business. In the survival stage, the business has survived the threats associated with establishment of new business ventures. The owner appoints a foreman to act as a supervisor of the few employees (Churchill & Lewis, 1993).

During this stage, the business has acquired for itself some customers and a position in the market. If the owner is able to be innovative enough and be ready to do some sacrifices, then the business moves to stage three of success which is sub divided into success-disagreement and success- growth.

Success disagreement majorly involves a disagreement between the owner and the managers as to whether the business has reached a ceiling or whether it has the potential to grow further (Greinier, 1982).

If the disagreements persist, the business does not grow any further and it may stagnate. If the owner does not disagree with the managers, he or she collaborates with them to develop a strategic plan for the organisation outlining where it has come from, where it is and where it wants to go and after how long. This is the sub stage of success – growth. When this happens, the business moves to the take off stage.

At this stage, a business has grown significantly and acquired a position in the national and global market. It has also diversified following the implementation of the strategic plan developed in sub stage three of succes- growth. At this stage, the owner is almost separte from the organisation.

The organisation is fully decentralized in terms of planning and management. Many corporations are at this stage. The owner can decide to sale the organisation to a willing buyer if he or she feels like doing something different (The Center for Organisational Design, 2012).

Stage five of resource maturity is a stage which describes an organisation as ‘having arrived’. As the name suggests, the organisation has actually matured. It is staffed by experts in various fields. It is also fully decentralized and in most cases listed in a stock exchange market.

The organisation also consolidates its resource base to open other avenues for further growth. Ideas and innovations form the criteria for the sustainability of the achieved growth (The family business blog, 2013).

The Stages of growth model

This is a five stage model developed by Richard Nolan in 1970. It is based on the application of Information Technology (IT) in business as a change agent. In the first stage of initiation, emphasis is given to cost reduction achieved through functional applications. It is also characterized by creation of awareness about a business (Accel Team 2013).

The contagion stage comes in second, characterized by intensified use of IT. Various IT applications emerge and come with increased probability of problems, which leads to stage three known as control. Data is managed so as to avoid losing possible gains made in the previous stages.

It is done using a centralized system. Stage four is intergration of the various technologies availble and in use by an organisation. At this stage, there is no further expenditure on IT infrastructure.

Stage five is the maturity stage, which entails the use of all the technologies developed by the organisation to exercise a high degree of control on various processes of the organisation and the process of production in general.

The scarf model

This is one of the most recent business growth models developed by David Rock and published in the neuroleadership journal in 2008. Scarf is initials for Status, Certainty, Autonomy, Relatedness and Fairness. The model is basically based on collaboration and influencing other people in order to bring change or growth to an organisation.

The focus of the model is intergration of rewards and prevention of threats to a business in the growth strategy, growth majorly seen from the perspective of collaboration of an organisation with its stakeholders and infleuncing employees through motivation. Organisations, just like human beings have the need of feeling important to others. They need to be important stakeholders in a certain area (Rock, 2008).

According to the model, organisations grow through collaboration with others. Through such collaborations, they get to know their status and work to improve it if it is poor and maintain it if it is good. High status motivates organisations to scale up their growth efforts.

Certainty is about predicting the future. It is about looking at where an organisation has come from, where it is and where it wants to go. It is done through analysing the business environment to understand the major weaknesses and threats to a business, then developing a strategy of trasforming the threats and weaknesses into strengths and opportunities.

Prediction also has to do with allocating resources in risk management so as to cushion the organisation from any risks and developing a strategy to position the organisation in a strategic position for the future.

Autonomy is the ability of an organisation to control events surrounding it. In other words, management of an organisation must take charge of events, both in the internal and external environment with a view of guiding the events in the direction which inspires growth. Events to be controlled include things like economic recession, security threats, growth spurts, employee turnover, change management and employee motivation.

Relatedness has to with developing a good relationship with others, a relationship based on friendship rather than on enemity occasioned by business rivalry. Organisations focus on creating an environment in which they are loved by all stakeholders, including their competitors.

This has the advantage of organisations helping each other to grow through learning together, which avoids duplication of business ideas. Lack of duplication enables organisations to place themselves in competitive positions in the market thus stimulating growth.

Fairness has to do with being fair to business stakeholders. Organisations need to stick to business ethics and engage themselves in fair practice. Fairness also has to do with engaging in corporate social responsibility activities such as care of the environment and engaging in charity work to help the marginalized in the society.

Profiling of three organisations using the five stages of small business grwoth model

Wal-Mart is a Multinational Corporation based in the United States of America. It deals with general merchandise of a wide variety of goods largely in retail. Wal-Mart’s history can be traced back to May 1950, when Sam Walton established a business in Bentonville.

The business grew and expanded and by 1962, Walton opened the first store under the name Wal-Mart in Rogers. The Corporation is a leading employer in the world with an overall number of employees amounting to over two (2) million. It operates in other parts of the world but under different names (Dyck & Neubert, 2010).

In terms of the five stages of small business growth model, the organisation is in the fifth stage of resource maturity since it is fully decentralized. It also has in place very competent managers and employees. It also has very good employee remuneration programs (Management systems, 2012).

Infosys is a software company based in India and started in 1981. The company was established on the philosophy of professionalism in the company’s operations and service delivery as well as motivating employees through proper remunerations. The organisation is in the third stage of success-disagreement of the five stage model of small business growth, following its near collapse and re-emergence from stage two of survival.

The founders of the organisation are not involved in direct management of it’s affairs but managers do. The organisation is not decentralized in terms of decision making and the owners largely control its strategic direction. It does not have other branches in other countries (Scott & Bruce, 1987).

Tesco Company is found in Cheshunt, United Kingdom. It’s a multinational organisation dealing with grocery and general retail merchandise. In terms of revenue, it is ranked as the third largest retail merchandise in the world after Wal-Mart and Carrefour. In terms of profits, it ranks second after Wal-Mart stores. Its main market is in the United Kingdom but it has grocery stores in more than 13 countries in various parts of the world.

The organisation is in the fifth stage of resource maturity, especially due to its huge resource base just like Wal-Mart. It is also fully decentralized in terms of management and decision making. The owner is not involved in any operational activities of the organisation. It relies heavily on competent pool of employees as well as on technology to retain its position and status and possibly do better (Recklies, 2001).

Reference List

Accel Team 2013, Organisational Growth Cycles. Web.

Alstete, J. W. 2007, An assessment of knowledge growth stages in organisations, Knowledge Management Research & Practice, 5, 54–63.

Changing minds organisation 2013, Phases of Organisational Growth and Crisis. Web.

Churchill, N. C. & Lewis, V. L 1993, The five stages of small business growth, harvard business review.

Dodge, H. R., Fullerton, S., & Robbins, J. E. 1994, The stage of the organisational life cycle and competition as mediators of problem perception for small businesses. Strategic Management Journal, 15, 2, 121-134.

Dyck, B. & Neubert, M. J. 2010, Management: current practices and new directions, Houghton Mifflin, Boston, MA.

Greinier, L. E. 1982, Evolution and revolution as organisations grow, Harvard Business Review.

Lewis, P. S. 2007, Management: challenges for tomorrow’s leaders, Thomson/South-Western, Mason, OH.

Management systems 2012, Stages of Organisational Growth. Web.

Recklies, O. 2001, Managing Growth – 5 Phases of Growth. Web.

Rock, D. 2008, SCARF: a brain-based model for collaborating with and influencing others. Web.

Scott, M. & Bruce, R. 1987, Five stages of growth in small business. Long Range Planning, 20, 3- 45.

The Center for Organisational Design 2012, The 3 Stages of Organisational Development. Web.

The family business blog 2013, Understanding Where You Are in Your Organisation’s Growth Stage. Web.

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