Back in 1972, Larry Greiner observed that most companies grow through 5 fundamental phases. Each of them begins with a crisis point leading to a revolution, which itself marks the beginning of the following phase, with another set of problems to solve. 🔁
It’s amazing to see Greiner’s theory stand the test of time—and how it perfectly applies to both growing startups and established companies.
Phase 1: Creativity
The beginning of a journey: a few friends are creating what they believe is innovation. The team is focused on shipping the MVP. Their communication is frequent but informal. The founders are in charge. The work is rewarded with modest salaries and the promise of ownership. The first customers start showing the interest.
In general, it’s the fun phase—there isn’t much to loose at that point. Suddenly, the product has its market fit. The startup takes a very serious course and faces the crisis of leadership soon.
The startup is in need of someone taking the leadership and managing people. The solution is to identify or find a strong business manager, a CEO to pull the business together and direct the people.
Phase 2: Direction
Thanks to strong management, the company has established its basic structures. Serious budgeting and accounting kick in. The communication starts to feel a little formal. Everybody follows newly introduced processes bringing KPIs, OKRs, LTV into the equation.
The company is led by vision and that’s when the autonomy crisis takes its toll. There’s too much control in hands of one person—all decision-making is centralized. Employees need at least some freedom controlling things to make it work. Some of them leave the company.
This is the moment for the CEO to let go and start delegating tasks.
Phase 3: Delegation
Thanks to delegation, different employees are responsible for and focused on their specific areas. Lower-level managers get to act more independently making the company seem decentralized. Employee benefits are introduced.
The conflict between management parties makes an appearance causing the crisis of control within the company.
The CEO is close to losing control over the lower management. To avoid the past stage problems from reappearing, the executive must coordinate rather than control.
Phase 4: Coordination
Top-level executives now coordinate the organization through formal systems. There is a necessity for bureaucracy.
Middle managers report to higher-level managers. New and existing procedures are very often reviewed. Local units are merged into product or service line groups. Procedures take over problem-solving, falling the innovation apart. People don’t feel like they cooperate with one another. They need more flexibility.
That’s the red tape crisis. Divisions which are supposed to collaborate work for their own profit. Division managers’ salary is tied to the results of the respective teams.
The logical solution is to turn personal success into the achievements of an entire team.
Phase 5: Collaboration
A company that gets to this phase is usually a huge organization that can’t be managed through strict systems and needs to pursue flexible ways of management.
This stage is about the focus on spontaneity in management action through teams. Social control and self-discipline are replacing formal control. Problems are solved quickly with team action. Teams get merged and reorganized to handle particular tasks instead of areas. There is a lot of education to achieve better teamwork and maintain a conflict-free environment.
At this stage, the only way for such a company to grow is to collaborate with another successful organization. This indistinct growth crisis is solved through alliances.
Phase 6: Alliances
This last phase was actually introduced by Greiner in 1998 to emphasize the changes to companies’ unique characteristics.
At this stage, organizations face the crisis of identity as they get merged or acquired—loosing their identity in effect.
Which phase is your company on? Tweet the answer to me! ✌️