Business Strategies

Facing the Strategic Challenges of Growth - The Greiner's Growth Model

Written by Samuel Muriithi for Gaebler Ventures

The Greiner's growth model illustrates the well defined periods of crisis that small firms encounter as they progress from one phase of growth to the next.

According to this model there are five stages of growth i.e. creativity, direction, delegation, coordination and collaboration, and after each of these is attained there follows a period of crisis.

Crisis of leadership

The first strategic challenge of growth that the firm faces is the crisis of leadership which happens after growth is achieved at the first stage thanks to entrepreneurial creativity. The crisis is such that for the firm to grow to the next level there is a need for increased knowledge and strategic leadership which are both required to successfully manage the increased workforce and production capacity. Here the firm needs to secure additional capital so as to sustain more growth and with this is the need for better financial controls. The hiring of management personnel and organizational restructuring may be required.

Crisis of autonomy

This is the second strategic challenge of growth and it represents the difficulties faced by the firm as its physical size becomes larger. The initiatives implemented to curtail the previous crisis become ineffective and the result is that line employees and managers will suffer the effects of bureaucracy visited upon them by the centralized management structure. It is also the case that the line staff will become more knowledgeable about the machinery and markets, more than their executives, and will have a hard time deciding between taking initiatives and following protocol and procedure. To solve this situation the firm will have to adopt a system of delegation when it comes to decision making.

Crisis of control

As a result of the increasing discretion that the lower levels of management will have attained starting from the previous strategic challenge of growth, top level managers will start perceiving a loss of control. This crisis is illustrated by a minimal level of coordination between divisions, functions and/or plants. The top management will seek to quell the situation by implementing various coordination techniques.

Crisis of red tape

This crisis is defined by a marked decline in the entrepreneurial drive of the organization. The strategic challenge of growth here is defined by the fact that operations are conducted according to set procedures under the watchful eye of the top management. These procedures further increase the level of bureaucracy and red tape, and this makes for unhealthy relations between line and top-level managers. The former object to the excessive direction by the latter, and the latter start viewing the former as being uncooperative. The crisis of red tape shows that a firm's growth has become too complex for management through elaborate structures of formal procedure.

Crisis of ???

During the fifth stage of growth attempts will be made to surmount the challenges presented by excessive red tape. This will lead to the next strategic challenge of growth whose nature cannot be defined by any consistent empirical evidence; the Greiner's growth model posits that the employees will face a 'psychological saturation' courtesy of the information age.

Samuel Muriithi is a business owner in Nairobi, Kenya. He has extensive international business experience in the United States and India.

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