To many, the life cycle of an organization can seem chaotic and unpredictable. But for those who understand the organizational life cycle, it can be easier to understand how an organization is growing and help prepare for the future.
But what are the stages of an organizational life cycle, and how can you optimize each stage to keep your organization thriving?
With this guide to the organizational life cycle, you’ll be able to better understand how the organization functions in every stage, which you can use to foster a successful, functioning organization.
What Is The Organizational Life Cycle?
An organizational life cycle describes the stages of development of an organization through its life, from early stages including inception to organizational maturity. The life cycle helps to conceptualize different phases of an organization and how it may grow, evolve, and adapt in response to different factors, both internal and external.
Leaders who have a comprehensive understanding of the organizational life cycle will be better equipped to lead the organization through the different stages of the life cycle, leading to sustained long-term success.
HR’s Role
No matter what stage of the life cycle an organization is in, HR has a critical role in managing workforce needs during each stage and adapting strategies and initiatives to adapt to changing life cycle stages.
Many functions of HR may be influenced by different stages and needs of the organizational life cycle, including recruitment, culture, talent management, and change management.
HR can give a comprehensive, holistic view of the organization and specific workforce needs, which can help enhance organizational efficiency and effectiveness. HR has a unique advantage in helping ensure employees are engaged and motivated to help an organization thrive, regardless of which stage of the life cycle an organization is in.
HR professionals who take a more strategic approach to the organization may take even more of a front-seat role in managing the organization through the life cycle stages. Depending on what stage of the life cycle an organization is in, HR can help align human capital strategy with organizational goals and help change the strategy and practices as the organization changes.
Organizational Vs. Employee Life Cycle
The organizational life cycle isn’t the only life cycle that exists within an organization; there is also the employee life cycle. It’s crucial to understand the difference between organizational life cycles and employee life cycles and how they interact with one another.
While an organizational life cycle describes the different stages of growth an organization goes through, the employee life cycle describes the stages an employee goes through within the organization, including recruitment, onboarding, development, retention, and separation.
The employee life cycle is only one part of an organization’s journey, and focuses on individual employees, while the organizational life cycle is the entire span of an organization’s existence and focuses on the growth, development, and goals of an organization through the different phases.
Learn more: Enhancing your Employee Life Cycle for HR Success
The Importance of Organizational Life Cycles
Understanding and managing the organizational life cycle is imperative to keeping an organization motivated and thriving through change.
If you can understand the organizational life cycle framework and what each step entails, you can be better positioned to handle the specific challenges and obstacles that can come with different parts of the life cycle.
A comprehensive understanding of the organizational life cycle can help an organization with:
Strategic Planning: Because each phase of the life cycle is different, they require different strategies, focuses, and priorities to stay efficient and effective.
Resource Allocation: Resource allocation and optimization is an incredibly crucial aspect to organizational success. Resources – both tangible and intangible – must be allocated properly at different points in an organization’s life cycle, so understanding current and upcoming phases of the organization can help allocate resources properly.
Risk Management: Understanding the risks associated with the organizational life cycle can help an organization prepare for – and hopefully mitigate – those risks.
Organizational Development: At each stage of the organizational life cycle, an organization must adapt and evolve to stay strategic and aligned with overall goals, which can help prioritize and improve organizational development.
Change Management: Change is a guaranteed aspect of any organization, and it’s the core of the organizational life cycle. Without an informed and strategic view of the life cycle, changes can seem overwhelming and unable to be controlled. On the other hand, an organization that understands and accepts the life cycle stages can help the organization better adapt to change with change management strategies.
4 Life Cycle Stages and Challenges
Different models of the organizational life cycle have different stages, challenges, and strategies, but there are a few essential steps that all life cycle frameworks have.
Here are the four stages of the organizational life cycle:
Startup Stage
The startup stage is the initial phase of the life cycle model. It occurs when an organization is founded or created, ideas are flowing, and the niche or operating market is being carved out.
In the startup stage, an organization will establish business ideas, narrow down the target market, and set up basic operations.
During this phase, the organization may run into some challenges, like:
Building a customer base
Setting up organizational processes and systems
Managing and allocating tangible and intangible resources
Growth Stage
As the name suggests, an organization really begins to grow and expand during the growth stage. Growth could include several things, such as headcount, revenue, or customer base.
During this time, an organization may scale services or production, invest in marketing efforts, and hire additional employees.
During the growth stage, an organization might run into challenges like:
Managing change and expansion
Maintaining quality as demand grows
Developing a competitive advantage to stand out from the competition
Maturity Stage
In the maturity stage, an organization may stabilize, and the expanded growth may slow to a more sustainable level, leaving room for an organization to optimize processes and operations.
During the maturity stage, organizations may struggle with:
Market saturation
Sustaining innovation
Cost structures
Decline or Renewal Stage
The final stage is the decline or renewal stage, where organizations may see a decline in profitability or disruptions in the market.
In the decline stage, organizations may face decreasing sales and profit margins. In the renewal stage, organizations may pivot and make strategic changes, like adapting operations, innovating on existing products, or improving culture.
During this stage, organizations may face challenges like:
Employee resistance to change
Finding the root cause of slowing growth
Identifying new opportunities for growth
It’s important to note that although these are the basic phases of an organizational life cycle, they will likely vary based on several factors, especially industry and market environment and workforce needs and demographics.
3 Life Cycle Models
The concept and framework of the organizational life cycle has a few essential steps, but it’s not one-size-fits-all. There are various models of the organizational life cycle that have different phases and different implications on organizations.
No matter what model makes the most sense for your organizational needs and industry specifics, the model should enhance your understanding of the life cycle as a whole as well as the different needs and challenges of different phases. Then, leaders can use this to inform decision-making and overall strategy.
Here are a few different models that organizations may use to understand the organizational life cycle.
Greiner Growth Model
Larry E. Greiner developed the Greiner Growth Model, which emphasizes the idea that organizations change practices and priorities over time. Each phase of Greiner’s model has a period of growth that causes a change in the organization that acts as a catalyst for the next phase.
The stages of Greiner’s growth model are:
Creativity: This stage emphasizes entrepreneurship and innovation. A lack of management and structure creates a crisis that necessitates the next change.
Direction: In this stage, leaders begin to build an organizational structure and implement organizational design. However, employees do not feel like they have autonomy and do not have a say in the decision-making process, spurring the next stage.
Delegation: This stage emphasizes the continuous building of structure to help delegate tasks and decisions. This can create silos within the organization, which can create the next stage.
Coordination: In this stage, the organization begins to coordinate resources and emphasize planning. This can help the organization grow even more, which can damage organizational culture and make the structure too rigid and hierarchal, spurring the final phase.
Collaboration: The organization emphasizes teamwork, and harmonious, cross-functional collaboration among departments to break down silos and help align the organization with broader goals.
Adizes Organizational Lifecycle
This model, developed by Ichak Adizes, lists four activities that can spur changes in the organizational life cycle, including producing results, creating formal procedures and processes, integrating individuals within the organization, and acting like an entrepreneur.
The Adizes model emphasizes the importance of evolving management practices to keep the organization thriving during change.
Adizes model has ten distinct stages of growth: courtship, infancy, go-go, adolescent, prime, fall, aristocratic, recrimination, bureaucracy, and death.
During these stages, if not nurtured, the organization may face specific challenges, such as the founder/family trap.
Lifecycle Framework by Miller and Friesen
Miller and Friesen’s model asserts that life cycle phases are based on changes in the larger competitive market and environmental changes.
There are four stages in this organizational life cycle model:
Birth: Includes the organization’s founding and initial growth, usually by the founder or owner.
Growth: Also called youth, the organization now has profitable sales, policies, and organizational structure.
Maturity: Here, growth stabilizes and slows.
Revival: Growth may begin to climb again, and the organization is “revived” by diversified offerings and a thriving organizational design.
Decline: Innovation may stop, growth may slow again, and profitability may decline.
Optimizing Life Cycle Stages
Throughout every step of the life cycle process, some things can help optimize the organization and enhance efficiency and effectiveness.
Here are some best practices.
During the startup stage:
Develop a strategic business plan with long-term goals, milestones, and timelines.
Make operations basic with the minimal amount of resources possible, but ensure that they will be scalable in the future.
Secure funding through avenues such as loans, grants, or investors.
During the growth stage:
Invest in technology to manage organizational growth.
Adapt systems and processes to support scaled operations.
Build organizational resiliency to prepare for upcoming phases.
During the maturity stage:
Diversity offerings to stay competitive.
Encourage innovation throughout the organization.
Build and maintain strong relationships with customers or clients.
During the decline or renewal stage:
Find the root cause of stagnation before beginning to address it.
Assess where the future of the organization is going, and cut unnecessary resources based on those goals.
Find ways to refresh and refine organizational culture to reignite engagement and motivation.
Final Thoughts
When the cycle is over, that doesn’t necessarily mean the very end of the organization. Instead, an organization may cycle through these phases again, or go through one phase multiple times, especially in fast-paced industries that are being shaken up by technology like AI.
All in all, the organizational life cycle is incredibly important to maintain a successful, thriving organization now and far into the future. HR can implement these tips by identifying the life cycle stage their organization is in, and develop a plan to maintain adaptability and flexibility in future phases.
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