Organizational%20Life%20Cycles,%20Size,%20and%20Decline

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Organizational Life Cycles, Size, and Decline

• BA 152

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Industry Life Cycles

• Industry Evolution
• Entry strategies
• First movers
• Followers
• Survival strategies
• Specialist
• Generalist

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Entry Strategies

• Entering the market early
• Pick of environmental resources
• Rapid growth
• Better chances of survival

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Entry Strategies

• Entering the market later
• Reduces operational uncertainty
• Correct way to compete is apparent
• Lower RD investment
• Survival as the more efficient producer

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Survival Strategies

• Specialists
• Concentrate skills in a single niche
• Develop core competencies
• Can provide better customer service
• and superior products, but
• Trouble if the niche disappears or others enter.
• Generalists
• Spread skills across many niches
• Providing greater brand recognition
• Can succeed when environment is uncertain,
• If risk is spread across a number of niches

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Organizational Life Cycle

• Stages of Life Cycle Development
• Pre-Birth Stage
• first idea
• commitment and early planning
• implementation
• Entrepreneurial Stage
• Collectivity Stage
• Formalization Stage
• Elaboration Stage

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Organizational Characteristics During the Life
Cycle

• ENTREPRENEURIAL STAGE
• Personal control systems
• Innovation by owner/manager
• Goal Survival
• Management style Entrepreneurial
• Crisis Lack of/Need for leadership

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Organizational Characteristics During the Life
Cycle

• COLLECTIVITY STAGE
• Personal rewards aimed at individuals who
  contribute to organizational success
• Innovation from employees and managers
• Goal Growth
• Management style Charismatic, directive
• Crisis Lack of/need for delegation

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Organization Growth Is Bigger Better?

• Pressures for Growth
• Organization goals
• Economies of scale
• Executive advancement
• Economic health

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Size and Structural Characteristics

• As Organizations get bigger
• Complexity increases
• Centralization decreases
• Formalization increases
• Flexibility decreases

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Large Vs. Small How can you be both?

• Structural reorganization (split up)
• Smaller headquarters staff (decentralize)
• Subsidiaries/spin-offs that can act small
• Skunkworks to develop new products
• Support intrapreneurship within the firm

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Bigger may not be better!

• Growth is difficult to maintain.
• A 100K company has to generate 10K to grow by
  10.
• A 100B company has to generate 10B to grow by
  the same 10
• In the 1990s, what percentage of publicly-traded
  firms increased their revenues and profit by an
  average of 10 a year?
• Growth can stretch a firm too thin.
• A 20 growth rate per year means a firm doubles
  in size in less than four years.

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Bigger may not be better!

• What determines a firms size?
• Market Cap?
• Employees?
• Profits?
• Market share?
• Revenues?
• The wrong choice can lead to seriously negative
  consequences.

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Organizational Characteristics During the Life
Cycle

• FORMALIZATION STAGE
• Impersonal rewards through formalized systems
• Innovation from separate innovative groups
• Goal Internal stability/market expansion
• Management style Delegation with control
• Crisis Too much red tape

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Organizational Characteristics During the Life
Cycle

• ELABORATION STAGE
• Extensive rewards tailored to product and
  department success
• Innovation by institutionalized R D
• Goal Image/reputation-building
• Management style Team approach
• Crisis Lack of/need for revitalization

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Organization Life Cycle
Large
Streamlining Continued maturity Decline
Development of Teamwork
Addition of Internal Systems
Size
Provision of Clear Direction
Crisis Too much red tape
Creativity
Crisis Need for revitalization
Crisis Need for delegation with control
Crisis Need for Leadership
Small
Entrepreneurial Collectivity Formalization
Elaboration ?????????
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Organizational Decline and Downsizing The Causes

• Organizational Atrophy
• Loss of ability to respond to changing
  environment
• Inefficient, bureaucratic, fat, and happy
• Organizational Vulnerability
• Loss of resources
• Loss of market share
• Loss of legitimacy
• Environmental decline
• Stagnating economy
• Flat/shrinking market
• Increased competition

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Stages of Decline
Good Information
Acknowledge Decline
Major Changes
Reorganization
No choices
Blinded Inaction Faulty
Action Crisis Dissolution
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Managing the Downsizing

• Implementation approaches must be a function of
  the severity and speed of decline.
• Implementation issues to consider
• Consider voluntary programs with incentives (but
  be careful - who might leave?)
• Over communicate - The best surprise is no
  surprise.
• Allow employees to leave with dignity
• Assist those leaving
• Use ceremonies to reduce anger/confusion
• Remember those who stay!

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Next Time

• Sunflower, Inc.