All organizations mature and change over time. If you we look at a startup and then a large enterprise, we can see just how drastic the changes are–and they are across all facets of organizational practices. This includes management focus, management style, organizational structure, strategy development, etc.
However, from a week-to-week, month-to-month, oftentimes even year-to-year basis, it is difficult to notice these changes. More importantly, it can be difficult to determine when we should be making these evolutionary and transformational business changes–e.g. when do we need a change in leadership?
This is where Maturity Models come into play. Maturity Models are powerful framework to gauge the maturity of an organization in a number of disciplines or functions. They help pinpoint the specific areas of improvement in order to reach the next level of maturity. Most Maturity Models qualitatively assess people/culture, processes/structures, and objects/technology.
In capturing the maturity of an organization, there are 5 dimensions to analyze.
- Age of the Organization
- Size of the Organization
- Stages of “Evolution”
- Stages of “Revolution”
- Growth Rate of the Industry
The concept of these dimensions is captured in the framework known as Greiner’s Growth Model. Let’s dig into each of these dimensions.
1. Age of the Organization
The most obvious and essential dimension for any maturity model is the age of an organization (represented on the graph as the horizontal axis).
Management problems and principles are rooted in specific time periods of the organization. This is illustrated by how the same organizational practices are not maintained throughout a long life span. The passage of time also contributes to the institutionalization of managerial attitudes. As these attitudes become rigid and eventually outdated, the behavior of employees becomes more predictable and more difficult to change.
2. Size of the Organization
The second most obvious dimension is the size of the organization (represented by the vertical axis of the chart).
Organizational problems and solutions tend to change significantly as the number of its employees and its sales volume increase. Problems of coordination and communication exacerbate, new functions emerge, levels in the management hierarchy multiply, and jobs become more interrelated.
3. Stages of “Evolution”
Evolution is a prolonged period of growth where no major upheaval occurs in organization practices. Each evolutionary period is characterized by the dominant management style used to achieve growth.
Most growing organizations do not expand for two years and then contract for one. Instead, those that survive a crisis usually enjoy four to eight years of continuous growth without a major economic setback or severe internal disruption.
As a company progresses through its stages of growth, each evolutionary period creates its own “revolution.”
4. Stages of “Revolution”
Revolution is a period of substantial turmoil in the organization’s life. Each revolutionary period is characterized by the dominant management problem that must be solved before growth can continue.
Traditional management practices that were appropriate for a smaller size and earlier time no longer work and are brought under scrutiny by top-level management and by lower-level managers. During periods of crisis, those organizations unable to abandon past practices and effect major organizational changes are likely either to fold or to level off in their growth rates.
5. Growth Rate of the Industry
The speed at which an organization experiences phases of evolution and revolution is closely related to the market environment of its industry. For example, a company in a rapidly expanding market will have to add employees quickly.
Evolutionary periods tend to be relatively short in fast-growing industries, while longer evolutionary periods occur in mature or slow-growing industries.
Also, evolution can be prolonged and revolutions delayed when profits come easily. For example, companies that make serious errors in a prosperous industry can still look good on their financials. As a result, they can buy time before a crisis forces changes in management practices.
If you are interested in learning more about how organizations mature as they grow, take a look at our framework presentation on the Greiner Growth Model.
The Greiner Growth Model is part of the Strategy Development Stream at Flevy.