Organizational Life Cycle

Presented by Group E

What is an organization?

Organization in its simplest form is a

person or group of people intentionally organized to accomplish an overall, common goal or set of goals.

What is organizational life cycle?

Content

1. Organization Birth2. Population Ecology Model of

Organizational Birth3. Institutional theory of organizational

growth4. Greiner’s model of organizational growth5. Organizational Decline6. Weitzel and Jonson’s model of decline7. Managerial implications

Organizational Birth

▫Entrepreneurs▫Opportunities▫Utilize resources▫Create value

Risks involved

•Liability of newness•Inability to predict•Mistake in judgment•Lack of formal structure•Conditions of Environment

Examples

•Sinful something•Something Fishy•Sandy’s chocolate Factory•Maya

•Action Plan•Road Map•Sales tools•Example : Google

Purpose of a Business Plan

SWOT Analysis

Population Ecology Theory

•A theory that seeks to explain the factors that affect the rate at which new organizations are born(and die) in a population of existing organizations.

•The availability of resources determines the number of organizations in a population.

Population Ecology Theory

•

Factors Accounting for rapid birthrate• Increase in knowledge and skills

available to generate similar new organizations.

• When an organization becomes successful, it acts as a roll model.

Factors Accounting for birthrate tapering off• Availability of resources for late

entrants diminishes.• Difficulty of competing with existing

organizations for resources.

Time

Nu

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of

Org

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Birthrate is rapidly increasing

Birthrate tapers off

Survival Strategies

Set of Strategies that organization follows to survive are:

•r-Strategy vs K-Strategy

•Specialist Strategy vs Generalist Strategy

r-Strategy vs K-Strategy

• r-Strategy: A strategy of entering a new environment. Major advantage that r-strategy obtain is first mover advantage.

Example: Apple entered the market with i-pad and i-pods

• K-Strategy: A strategy of entering an environment late, after other organizations have tasted the water.

Example: Samsung and Sony erricsson entered after Nokia and Motorola have proved their global success.

Specialist Strategy vs. Generalist Strategy

• Specialist Strategy: Organizations that concentrates their skills to pursue a narrow range of resources in a single niche for e.g Smart phones. By concentrating on one niche they tend to outperform Generalist in that niche. For e.g. Nvidia, leader in Graphics chip but could not compete with Intel or AMD for microprocessors or memory chips

• Generalist Strategy: Organizations that spread their skills thinly to compete for a broad range of resources in many niches. They outperform Specialist when environment is uncertain as they have better spread across many niches.

Example: Inexpensive cell phones

Organizational Growth

•Develop skills & competences.•Control over scarce resources & reduce

uncertainty•Division of labor & specialization• Institutional theory of organization

growth▫Legitimacy▫Stake holders

• Isomorphism

Greiner’s Model Of Organizational Growth

Stages

1. Growth Through Creativity▫Crisis of Leadership

2. Growth Through Direction▫Crisis of Autonomy

Growth through Delegation1. Solve crisis of Autonomy2. Reduce costs and improve products3. Explosive growth leads to crisis of Control

Growth through Coordination•Stage 4: Growth through

coordination▫To resolve crisis of control, managers

must find right balance of centralized and decentralized control.

▫Crisis of red tape

Growth through Collaboration

•Greater spontaneity in management action through teams and skillful confrontation of interpersonal differences.

•More organic by making adjustment and less use of standardization.

Decline and Death

“ When an organization fails to anticipate, recognize, avoid, neutralize or adapt to external or internal pressures that threaten its long term survival…. ”

The Liability of Newness

The risk of dying is highest at the point of founding of an organization and decreases with growing age of the organization

▫ The learning of the new roles takes time and leads to economic inefficiencies

▫ Trust among the organizational members has yet to be developed

▫ New organizations have not yet built stable portfolios of clients

▫ Subject to stronger selection pressures

Organizational Inertia

• Internal forces that resist change

•Organizations usually do not have the ability to easily change their strategy or structure

•Power and Conflict, Mechanistic Structure, Risk aversion, Desire to maximize rewards, Overly bureaucratic culture

Changes in the environment

•Structure and strategy have to be adapted quickly

•Constant pressure to match competitors

•Organizations sometimes grow too fast or too much

•The greater the uncertainty in the environment, more likely it is that some organizations will fail

Weitzel and Jonson’s model of decline

Decline occurs by degrees and at each stage managers prompt action can reverse the decline.

▫ Stage 1: Blinded – organizations are unable to recognize the internal or external problems that threaten their long-term survival

▫ Stage 2: Inaction – despite clear signs of declining performance such as decreased sales or profits, top management takes little actions to correct problems

Weitzel and Jonson’s model of decline

▫ Stage 3: Faulty action – managers may have made the wrong decisions because of conflict in the top-management team, or they may have changed too little too late

▫ Stage 4: Crisis – by the time this stage has arrived, only radical changes in strategy and structure can stop decline

▫ Stage 5: Dissolution – decline is irreversible and the organization cannot recover

Weitzel and Jonsson’s Model

Managerial Implications

•Continuous Analysis of organization structure, environment and the niches that the organization occupies.

•Consult external consultants to analyze organization decline

•Utmost priority to the stakeholders.

References:• Organizational Legitimacy and the Liability of Newness -

Jitendra V. Singh, David J. Tucker and Robert J. House, Administrative Science Quarterly Vol. 31, No. 2 (Jun., 1986), pp. 171-193

• Stinchcombe, A.L. (1965): Social Structure and Organizations. In: March, J.G. (ed.), Handbook of Organizations. Chicago: Rand McNally & Company, 142-193.

• Organizational Theory, Design And Change - Gareth R. Jones, Mary Mathew

The E Group, T.A Pai Management Institute (TAPMI), Manipal, India•Arun Pathrose•Sunandha K•Rahul Babu•Namrata Mahapatra•Chandni Kumar•Santhosh Annam•Krishnamohan•Dwivesh Chander•Nitin Jindal•Tushar Nanda

Thank You