The productivity, profitability, and sustainability of an organization is dependent on various aspects and factors. One of the most significant aspects is the organizational life cycle, which focuses on the stage at which an organization is in based on the time that it has been operating. New and startup organizations, for instance, may report lowered profit margins than the established ones that have managed to create efficient business models. The organizational life cycle entails five distinct stages, which are the start-up, growth, maturity, decline, and death. An analysis of various organizations helps to shed light on the characteristics of each of the stages in the organizational life cycle.
Discussion of the Organizational Life Cycle
Organizations are dynamic as they move from one stage to another necessitating the need to change strategies and goals to deal with new sets of issues. The organizational life cycle is a hypothetical and conceptual business model that establishes that companies are born, grow, mature, decline, and die. The organizational stages are determined by both internal and external environmental circumstances, which determine whether they will rise or fall. The five developmental stages in organizational growth are sequentially occurring in irreversible hierarchical progression (Jirasek & Bilek, 2018). Moreover, organizational developmental stages involve a wide range of structures and activities that are dictated by the growth phase. The stages can be summarized into startup, growth, maturity, decline, and death or revival, which are cyclic and predictable.
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Analysis and Characteristics of the Five Stages of the Organizational Life Cycle
Startup Stage
This is the first stage where entrepreneurs form teams and write business plans in readiness to form organizations. The stage requires entrepreneurs to have workable business models in addition to developing the necessary mindset to enhance the chances of success. Moreover, entrepreneurs need to understand how the organization will generate revenues and cater for expenses. Entrepreneurs at this stage usually have an exciting and compelling purpose and vision something that motivates the teams responsible for the implementation of the ideas (Scott, 2020). Most of the decisions are spontaneous and reactive while most of the plans are not implemented. Additionally, recruitment is based on the individuals’ excitement since they only contribute when they feel that they are needed. The stage is marked by a lack of clear and distinctive business structures, which means that there is a greater likelihood of conflicts. However, the crises pave the way for the need for more planning and clear organizational structures to ensure that the business moves to the next stage. An example of a company in this stage is Unit21, an organization that helps businesses to detect and manage fraud, money laundering, and other sophisticated risks.
Growth Stage
Formalization of structure and the establishment of competencies to allow the company to grow mark this stage. An organization routinely formulates its goals in a bid to generate enough revenues to enable it to finance growth, generate enough revenue, and stay competitive. This stage provides companies with various alternatives since some can grow and prosper in readiness for stage three while others fail to generate enough revenue to survive (Tam & Gray, 2016). The focus on this stage is on strengthening internal systems to expand services and support growth. Leaders are concerned about managing change and generating new ideas in addition to coordinating activities to enhance efficiency and continuous improvement. Google is an example of a company in this stage as it continues to invest in innovative technologies and expanding its business.
Maturity
The maturity stage represents an organization where control through bureaucracy and formalization is the norm. The organizations in this stage are considered to have passed the survival test since they are more concerned with protecting what they have achieved as opposed to targeting new territories. The top management focuses on strategy, risk management, and planning while the middle managers are tasked with the responsibility of dealing with daily operations (Jirasek & Bilek, 2018). While these organizations appear to understand the business world well, bureaucracies derail operations. Getting anything accomplished requires going through a rigid organizational structure. Some of the organizations in this stage are keen on duplicating the business model elsewhere while others consider terminating organizations once the vision has been achieved. Coca-Cola is an example of a mature company considering that it can improve efficiencies and maintaining costs as one of the most recognized global brands.
Decline
This stage occurs when organizations when companies do not recognize adapt to, anticipate or neutralize external and internal pressures threatening their existence. A company that is in this stage is characterized by layoffs and cutbacks in a bid to remain sustainable and profitable (Scott, 2020). These actions are advised for decreasing profits and rising costs as well as diminishing market share as competition increases. Organizational members in this stage are more concerned with personal goals, paving the way for blame games something that jeopardizes the achievement of organizational goals. Only a handful of people join the decision-making process something that erodes organizational viability witnessed in the earlier stages. An example of a company in this stage is Anadarko Petroleum Corporation, which has been reporting revenue declines in the last few years
Renewal
An organization in this stage demonstrates a desire to return to profitability and sustainability by embracing teamwork, collaboration, creativity, and innovation. Such organizations adopt decentralized decision-making to enhance the achievement of goals. While these organizations are still bureaucratic, they encourage members to work within the existing business structures without adding to them (Tam & Gray, 2016). The stage marks a transitional period where the company places the needs of its clients above those of the employees to regain brand loyalty and in turn competitiveness. Kodak is an example of a company that is trying to renew its business and make a comeback following its decline in 2012.
References
Jirasek, M., & Bilek, J. (2018). The organizational life cycle: Review and future agenda. Quality Innovation Prosperity 22 (3):1-18. DOI: 10.12776/QIP.V22I3.1177
Scott, F. W. (2020). Assessment and evaluation of organizational life cycle theorizing. Organization Development Journal, 38 (1), 21-32.
Tam, S., & Gray, D. E. (2016). What can we learn from the organizational life cycle theory? A conceptualization for the practice of workplace learning. Journal of Management Research 8 (2), 18-30. DOI: 10.5296/jmr.v8i2.9093
