The organizational life cycle is the life cycle of an organization from its creation to its termination.It also refers to the expected sequence of advancements experienced by an organization, as opposed to a randomized occurrence of events. The relevance of a biological life cycle relating to the growth of an organization, was discovered by organizational researchers many years ago. This was apparent as organizations had a distinct conception, periods of expansion and eventually, termination.
An organization or organisation is an entity comprising multiple people, such as an institution or an association, that has a particular purpose.
The idea of similarity between organisations and living organisms originates from as early as in 1890,by famous economist Alfred Marshall, who had compared the firms with trees in the forest, using beautiful metaphor: “But here we may read a lesson from the young trees of the forest as they struggle upwards through the benumbing shade of their older rivals”. Sixty years later, Kenneth Boulding presented concrete idea that organisations pass through lifecycle as living organisms. In the later epoch, Mason Haire is also identified as one of the pioneers of this concept. He was amid the initial few, who suggested that organizations may adhere to a certain path of uniformity in their course of expansion.
Subsequently, research has been done on the organizational life cycle for more than 120 yearsand can be found in various literature on organizations. Examples include the various stages in an organization's life cycle, phases of growth experienced by an organization during expansion and implications for these phases of growth. Review of the main organizational life cycle theories, with stages, main idea and authors is given in the table below.
|Life cycle stages||Main idea||Reference|
|Growth, competition, top position, stagnation, decline and (eventually) death||Growing trees in the forest as the analogy for the firm.||(Marshall, 1890)|
|Birth, growth, decline, death||Organisations follow the same lifecycle as living organisms.||(Boulding, 1950)|
|Born stage, growth - establishing of legitimacy, rapid growth -innovation and expansion, aging phase formalisation and control||Describes the dynamics of bureaucratic organisations.||(Downs, 1967)|
|Birth, youth-developing, stability and reputation, and maturity.||Organisation goes through stages in the lifecycle, and thus the crises which occur in every organisation could be predicted according to the stage.||(Lippitt and Schmitdt, 1967)|
|Informal "one-man- show," formalized bureaucracy, and diversified conglomerate||Organisational lifecycle is based on strategy and structure.||(Scott, 1971)|
|Hight -growth phase and low – growth (mature) phase||Researched how dividends fit in the lifecycle followed by the empirical evidence on dividend policy as it relates to the lifecycle theory. Value-maximizing firm should maintain a zero pay-out ratio at the initial stages and increase thepay-outs to 100% upon reaching maturity.||(Mueller,1972)|
|Creativity, direction, delegation, coordination and collaboration stage||The speed at which an organisation experiences phases of evolution and revolution is closely related to the market environment of its industry. Each phase is both an effect of the previous phase and a cause for the next phase.||(Greiner, 1972)|
|First stage of new agency, second stage of new agency||Based on organisational functional problems and how they can be applied to the analysis of complex public organisations. Problems provide criteria for identifying the functional effects of the efforts of an organisation both internally and as they contribute to the goals of larger systems.||(Lyden, 1975)|
|Primitive system stage, stable organisation stage and elaborative supportive structure stage||Organisational structures develops over timeframe of organisational growth.||(Katz and Kahn, 1978)|
|Courtship, infancy, go-go, adolescence, prime, stability, aristocracy, recrimination (early bureaucracy), bureaucracy and death.||Comparison of lifecycle of a company to lifecycle of living organism, with the crucial exception -company does not have to die, it can be rejuvenated. Organisations go through the |
normal struggles and difficulties accompanying each stage.
|Initiation, innovation and institutionalization.||Features of the organisation that led to its success as an innovation in the short run were incompatible with requirements for survival in the longer run. These findings underscore the advantages of a biographical approach to organisational analysis.||(Kimberly,1979)|
|Entrepreneurial stage, collectively, formalization and elaboration of structure stage.||Changes that occur in organisations follow a predictable pattern that can be characterized by developmental stages. The stages are sequential, and changes target:cognitive orientations of organisation members, organisational structures and environment relation.||(Quinn and Cameron 1983)|
|Existence, survival, success, take-off and resource maturity||Small business growth depends on success factors as: business size, diversity, complexity, owner’s management style and organisational goals.||(Lewis and Churchill 1983)|
|Birth, growth, maturity, revival and decline||Each stage would manifest integral complementariness among variables of environment, strategy, structure and decision making methods; Organisation growth and increasing environmental complexity would cause each stage to exhibit certain significant differences from all other stages along these four classes of variables||(Miller and Friesen 1984)|
|Inception, survival, growth, expansion and maturity.||Transition from one stage to the next requires change, it will be accompanied by some crisis or another. Proactivity of management can minimize those crisis.||(Scott and Bruce, 1986)|
|Growth, decline, death||Focus on causes and consequences of growth and decline processes in organisations has focused on the role of environmental, structure al, and individual factors.||(Whetten, 1987)|
|Entrepreneurial Stage, Collectivity Stage, Control Stage, Elaboration of Structure-Decline Stage||Focus is on two outcomes of formalization: administrative efficiency, and influence. Formalization (as efficiency) contribute to effectiveness early in an organisation's history. Later in the lifecycle, formalization (as influence) may contribute to organisational ineffectiveness and decline.||(Walsh and Dewar, 1987)|
|Conception, Investment, Incorporation,Investments, Incorporation, Experiments, Systematic production, Social network, Collaborative inquiry, Foundational community of inquiry, Liberating disciplines||Analogous to E. Erikson's (1959) theory of individual development. The main idea is to provide a new perspective on the problems of creating new organisations, changing bureaucratic organisations, and envisioning qualitatively different kinds of organising. Final phase enables rebirth by awareness of and skills for resolving gaps between mission, strategy and outcomes.||(Rooke&Torbert1998; Sherman &Torbert2000; Cacioppe and Edwards, 2005 )|
|Existence, survival, success, renewal, decline||Resembling general Miller and Friesen viewpoint and 5 stages model, and developed a scale to classify organisations, and examines relationships between organisational lifecycle, competitive strategy, and performance.||(Lester, Parnell and Carraher, 2003)|
|The absorptive capacities: ignorance, awareness, knowledge, implementation. The tipping points: Market entry, operational improvement, people management, obtaining finance, formal systems, strategy.||As analogy to lifecycle stages they chose 6 tipping points with two dimensions (absorptive capacity and tipping point solutions) provide a framework within which to examine the growth needs of ﬁrms. Their reconceptualization of ﬁrm growth contrasts with the linear model described by the organismic metaphor and proposes that, over time, ﬁrms encounter tipping points which are the consequence of growth or of environmental changes. To navigate beyond the tipping point, the ﬁrm must have the capability to identify, acquire and apply new and requisite knowledge to resolve the new challenges and succeed in a competitive environment.||(Phelps, Adams, and Bessant, 2007)|
|Start-up, growth, maturity, and decline||Follow the framework of the resource-based theory to explain relations between managers and firm’s resources. They use and explain synthesis of existing lifecycle research||(Sirmon, Hitt, Ireland&Gilbert, 2011)|
|Introduction, Growth, Maturity, Saturation, Recession||Synthesize earlier theoretical research in order to connect lifecycle with organisational structure management and transaction costs||(Gurianova, Gurianov and Mechtcheriakova, 2014)|
|Start-up phase, phases of expansion, maturity and subsequent diversiﬁcation(or decline)||Lifecycle is unique configuration of variables related to organisation context, strategy, and structure. The number and nature of the stages varies extensively.||(Hanks,|
|Inception, High growth, Maturity||Author synthesize work of previous author to suggest usable model generic to all organisations||(Tam and Gray, 2016)|
Generally, there are five stages to an organization's life cycle
Management is the administration of an organization, whether it is a business, a not-for-profit organization, or government body. Management includes the activities of setting the strategy of an organization and coordinating the efforts of its employees to accomplish its objectives through the application of available resources, such as financial, natural, technological, and human resources. The term "management" may also refer to those people who manage an organization.
A hierarchical organization is an organizational structure where every entity in the organization, except one, is subordinate to a single other entity. This arrangement is a form of a hierarchy. In an organization, the hierarchy usually consists of a singular/group of power at the top with subsequent levels of power beneath them. This is the dominant mode of organization among large organizations; most corporations, governments, and organized religions are hierarchical organizations with different levels of management, power or authority. For example, the broad, top-level overview of the general organization of the Catholic Church consists of the Pope, then the Cardinals, then the Archbishops, and so on.
Red tape is an idiom that refers to excessive regulation or rigid conformity to formal rules that is considered redundant or bureaucratic and hinders or prevents action or decision-making. It is usually applied to governments, corporations, and other large organizations. Things often described as "red tape" include filling out paperwork, obtaining licenses, having multiple people or committees approve a decision and various low-level rules that make conducting one's affairs slower, more difficult, or both.
According to Larry Greiner, there are 5 phases of growth in an organization, each indicated by an evolutionary and subsequently, a revolutionary phase.
An evolutionary phase, refers to an extended duration of expansion enjoyed by the organization with no significant disruptions. Similarly, a revolutionary phase refers to a period of considerable disturbance within an organization.
Creative expansion (evolutionary phase) leads to a leadership crisis (revolutionary phase). Initially, the organization enjoys expansion through the creativity and proactive nature of its founders.However, this leads to a crisis of leadership, as a more structured form of management is required. The founding members must either assume this role, or empower a competent manager to fulfill this if they are unable to.
Directional expansion (evolutionary phase) leads to a crisis of autonomy (revolutionary phase). As the organization experiences expansion through directive leadership, a more structured and functional management system is adopted.However, this leads to a crisis of autonomy. Greater delegation of authority to managers of lower levels is required, although at the reluctance of top tier managers who do not wish to have their authority diluted.
Expansion through delegation (evolutionary phase) leads to a crisis of control (revolutionary phase). As the organization expands from delegating more responsibilities to lower level managers, top tier directors start to lessen their involvement in the routine operations, reducing the communication between both levels.This eventually leads to a crisis of control, as lower level managers become accustomed to working without the intrusion of top-level directors. This leads to a conflict of interest with the directors, who feel that they are losing control of the expanded organization.
Expansion through coordination (evolutionary phase) leads to a crisis of red tape (revolutionary phase). As an organization expands from improving its coordination, such as through product group formation and authorized planning systems, a bureaucratic system develops.This eventually leads to a crisis of red tape, where many administrative obstacles reduce efficiency and innovation.
At this stage, the organization seeks to overcome the barrier of red tape through adopting a more flexible and versatile matrix structure (matrix management). Educational courses are arranged for managers, to equip them with the skills of solving team disputes and to foster greater teamwork. Complex and formal systems are also made simpler, and there is an increased emphasis on the communication between managers, to solve crucial problems. Although Greiner identified expansion through collaboration as the evolutionary phase, he did not specifically identify the succeeding crisis (revolutionary phase), as there was little evidence due to most of the organizations still being in the collaboration phase. However, Greiner predicted that the crisis might involve the exhaustion of members in an organization, due to a strong requirement for innovation and teamwork.
While Greiner's model is conceptually attractive, the central problem is that it is not possible to operationalize or apply it to specific organizations in practical situations. This is because the five phases are conceptual and can not be measured. An alternative model has been proposed by Flamholtz <See Flamholtz and Randle, 2016>.This models identifies seven different stages of organizational growth and uses corporate revenues as the way to define when each stage occurs (begins and ends).
The Seven stages of growth of a company’s life cycle can be identified: I. New venture 0 to $1 million revenues (USD) II. Expansion 1 million to $10 million revenues III. Professionalization 10 million to $100 million IV. Consolidation 100 to $500 millions V. Diversification 500 million to $1 billion VI. Integration over $1 billion VII. Decline and revitalization Varies
The revenues are shown in US $. These ranges are based upon manufacturing firms. An adjustment is made for the revenues of service and distribution firms. Revenue's of service firms are multiplied by a factor of 3 to be the equivalent of manufacturing firms, and Revenue's of distribution firms are multiplied by a factor of 2 to be the equivalent of manufacturing firms. These adjustments are made to account for the difference in cost of good sold of manufacturing firms vis a vis service and distribution firms. A further explanation can be found in Flamholtz and Randle(2016). </ref>
There are certain implications for managers in organizations with regards to the phases of growth:
Top tier managers should be aware of their organization's current stage, to be able to execute relevant solutions to the type of crisis faced.Managers should also not be tempted to surpass their current phase due to eagerness. This is because there may be vital experiences from each phase to be learned, that will be required to tackle future phases.
It becomes clear in each phase of revolution that there are only a specific number of solutions that can be applied.Managers should avoid repeating solutions, as this will prevent the evolution of a new phase of growth. It is also important to note that evolution is not a mechanical event, and organizations must actively seek out new solutions to the current crisis that are also suitable for the next stage of growth.
Managers should realize that past actions are factors of future consequences. This would help managers in formulating solutions to cope with the crisis that develops in the future.
The business cycle, also known as the economic cycle or trade cycle, is the downward and upward movement of gross domestic product (GDP) around its long-term growth trend. The length of a business cycle is the period of time containing a single boom and contraction in sequence. These fluctuations typically involve shifts over time between periods of relatively rapid economic growth and periods of relative stagnation or decline.
Organizational culture encompasses values and behaviors that contribute to the unique social and psychological environment of a business. The organizational culture influences the way people interact, the context within which knowledge is created, the resistance they will have towards certain changes, and ultimately the way they share knowledge. Organizational culture represents the collective values, beliefs and principles of organizational members and is a product of factors such as history, product, market, technology, strategy, type of employees, management style, and national culture; culture includes the organization's vision, values, norms, systems, symbols, language, assumptions, environment, location, beliefs and habits.
Product management is an organisational lifecycle function within a company dealing with the planning, forecasting, and production, or marketing of a product or products at all stages of the product lifecycle. Similarly, product lifecycle management (PLM) integrates people, data, processes and business systems. It provides product information for companies and their extended supply chain enterprise.
Product life-cycle management (PLM) is the succession of strategies by business management as a product goes through its life-cycle. The conditions in which a product is sold changes over time and must be managed as it moves through its succession of stages.
Management consulting is the practice of helping organizations to improve their performance. Organizations may draw upon the services of management consultants for a number of reasons, including gaining external advice and access to the consultants' specialized expertise.
Marketing strategy is a long-term, forward-looking approach to planning with the fundamental goal of achieving a sustainable competitive advantage. Strategic planning involves an analysis of the company's strategic initial situation prior to the formulation, evaluation and selection of market-oriented competitive position that contributes to the company's goals and marketing objectives.
Corporate social responsibility is a type of international private business self-regulation. While once it was possible to describe CSR as an internal organisational policy or a corporate ethic strategy, that time has passed as various international laws have been developed and various organisations have used their authority to push it beyond individual or even industry-wide initiatives. While it has been considered a form of corporate self-regulation for some time, over the last decade or so it has moved considerably from voluntary decisions at the level of individual organisations, to mandatory schemes at regional, national and even transnational levels.
The systems development life cycle (SDLC), also referred to as the application development life-cycle, is a term used in systems engineering, information systems and software engineering to describe a process for planning, creating, testing, and deploying an information system. The systems development lifecycle concept applies to a range of hardware and software configurations, as a system can be composed of hardware only, software only, or a combination of both. There are usually six stages in this cycle: analysis, design, development and testing, implementation, documentation, and evaluation.
Software product management is the discipline of building, implementing and managing software or digital products, taking into account life-cycle considerations and an audience. It is the discipline and business process which governs a product from its inception to the market or customer delivery and service in order to maximize revenue. This is in contrast to software that is delivered in an ad hoc manner, typically to a limited clientele, e.g. service.
Business development entails tasks and processes to develop and implement growth opportunities within and between organizations. It is a subset of the fields of business, commerce and organizational theory. Business development is the creation of long-term value for an organization from customers, markets, and relationships. Business development can be taken to mean any activity by either a small or large organization, non-profit or for-profit enterprise which serves the purpose of ‘developing’ the business in some way. In addition, business development activities can be done internally or externally by a business development consultant. External business development can be facilitated through Planning Systems, which are put in place by governments to help small businesses. In addition, reputation building has also proven to help facilitate business development.
Application lifecycle management (ALM) is the product lifecycle management of computer programs. It encompasses requirements management, software architecture, computer programming, software testing, software maintenance, change management, continuous integration, project management, and release management.
The following outline is provided as an overview of and topical guide to marketing:
In organizational theory, dynamic capability is the capability of an organization to purposefully adapt an organization's resource base. The concept was defined by David Teece, Gary Pisano and Amy Shuen, in their 1997 paper Dynamic Capabilities and Strategic Management, as "the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments".
The technology life-cycle (TLC) describes the commercial gain of a product through the expense of research and development phase, and the financial return during its "vital life". Some technologies, such as steel, paper or cement manufacturing, have a long lifespan while in other cases, such as electronic or pharmaceutical products, the lifespan may be quite short.
Innovation management is a combination of the management of innovation processes, and change management. It refers to product, business process, and organizational innovation. Innovation management is the subject of ISO 50500 series standards developed by ISO TC 279.
The web content lifecycle is the multi-disciplinary and often complex process that web content undergoes as it is managed through various publishing stages.
Corporate DNA is business jargon for organizational culture. It is a metaphor based on the biological term DNA, the molecule that encodes the genetic instructions in living organisms.
Performance management work (PMW) describes all activities that are necessary to ensure that performance requirements of application systems (AS) can be met. Therefore, PMW integrates software performance engineering (SPE) and application performance management (APM) activities. SPE and APM are part of different lifecycle phases of an AS, namely systems development and IT operations. PMW supports a comprehensive coordination of all SPE and APM activities, which is inevitable due to an increased complexity of AS architectures.
Top-line growth is the increase in revenue or gross sales by a company over a defined period and is used to indicate the financial strength of a business and its potential for growth in the future. It is usually measured over periods of one-half or full years and is often reported as a percentage growth compared to the previous year or period. Top-line growth does not accrue across periods, instead it is recalculated based on the performance of the business in a specified reporting period. It is a gross figure that represents economic inflows to the company, prior to the deduction of expenses or changes in equity contributed by the business owners or the investors. Top-line growth is often used as a metric for business growth potential and overall operating performance. In most businesses, it forms an integral part of their strategic planning and a means of assessments for such strategies.
Ichak Adizes is a Macedonian born management researcher. He is the founder of the Adizes Institute and a former professor, and author of books including The Ideal Executive.