Organizational Life Cycles 'LINK'

The organizational life cycle is the life cycle of an organization from its creation to its termination.[1] It also refers to the expected sequence of advancements experienced by an organization, as opposed to a randomized occurrence of events.[2] The relevance of a biological life cycle relating to the growth of an organization, was discovered by organizational researchers many years ago.[3] This was apparent as organizations had a distinct conception, periods of expansion[4] and eventually, termination.[5]

Organizational Life Cycles

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Comparisons between organisations and living organisms originated as early as 1890[6] by the economist Alfred Marshall who compared firms with trees in the forest, using the metaphor: "But here we may read a lesson from the young trees of the forest as they struggle upwards through the benumbing shade of their older rivals".[7] Sixty years later, Kenneth Boulding presented the idea that organisations pass through a lifecycle similar to that of living organisms.[8] Shortly after, Mason Haire was among the initial researchers[9] who suggested that organisations may adhere to a certain path of uniformity in their course of expansion.[10]

Subsequently, research has been done on the organizational life cycle for more than 120 years[6] and can be found in various literature on organizations.[11] Examples include the various stages in an organization's life cycle, phases of growth experienced by an organization during expansion and implications for these phases of growth.[12] Review of the main organizational life cycle theories, with stages, main idea and authors is given in the table below.

While Greiner's model is conceptually attractive, the central problem is that it is not possible to operationalise or apply it to specific organizations in practical situations. This is because the five phases are conceptual and can not be measured. An alternative model has been proposed by Flamholtz.[46] This models identifies seven different stages of organizational growth and uses corporate revenues as the way to define when each stage occurs (begins and ends).

According to the organizational life cycle models, growth in size leads to business issues that firms can solve by adopting only one possible organizational configuration, following a deterministic organizational approach. Recently, scholars challenged this view and propose conceiving of organizational life cycle as an evolutionary process, which calls for a variety of equifinal organizational solutions.[47]

This website provides information about points of intersection between organizations and the IRS. The content includes explanatory information, and links to forms that an organization may need to file with the IRS. The materials cover five stages in an organization's life cycle:

The length of time for each phase may vary according to several factors, such as resource constraints or external forces that inhibit movement between stages. For example, the organizational decline can be hastened when there is insufficient cash flow to fund projects or an increase in taxation rates will reduce profit margins while demand for products decreases due to downturns reducing sales revenue, etc.

The Organizational Life Cycle model is very effective for strategic planning, especially in the organizational growth and maturity phases, when managers are more able to look at long-term development issues.

Definition: Organizational life cycle, as the name suggests, is the life cycle of an organization from the point of its creation or onset to the point it is terminated. It has five distinct stages which are conception, expansion, stability, growth, and termination.

The organizational life cycle is referred to as a model that has linked business organizations with living organisms and proposed that it passes through predictable sequences of various development and growth stages.

It is believed that like human beings, organizations also are born, they grow and mature with time and there comes a stage when they start declining and like any other human being die. Some of the organizations have a long shelf life, whereas others are unable to cope with the demands and have a short life. Still, it is a fact that every life follows a pattern, and this seems predictable for every organization.

It is up to the management to realise and understand all the phases of the organizational life cycle so that they can understand the priorities of that stage and make decisions accordingly that will work best for that period.

The organizational life cycle is described as social systems where a group of people are organised around a common goal or purpose. They indulge in numerous activities like business planning, strategic planning, marketing, product development and financial management. All the activities have both formal and informal goals and include taking steps to achieve these goals by making adjustments along the way if necessary.

For the first time organizations were compared to living organisms by the economist Alfred Marshall in the 1890s and sixty years later it was proved by Kenneth Boulding that the organizations do pass through a life cycle that is very similar to that of living organisms.

Mason Haire was the researcher who came up with the idea that all the organizations adhere to a straight path in the course of their life cycle that can be explained by making similarities with those of living organisms.

More than one hundred and thirty years have passed since the first research was published and the concept of the organizational life cycle has gained prominence over time because of its usefulness in making changes that helps it to cope with the difficulties of every stage.

It has become essential to understand the organizational life cycle so that the owner, along with his management, can do whatever to stay and thrive in the business. The leaders who have gained experience recognize the symptoms that link life cycle theories to their organization.

With viable comparisons, it becomes easier to understand the phase their organization is going through and the types of problem they are facing and can face in that particular stage of the life cycle. It is this understanding that will provide them with the information to know about the various problems and issues that an organization can face during each cycle. The newly-gained perspective will help the management in making provisions for handling issues and responding to decisions in the workplace.

The understanding that the management gains after studying the theories of the organizational life cycle help them to prioritise the issues and sort them out. It also helps the systems to evolve and reach the next stage gracefully.

Organizations are typically changing into different phases, and it is up to an organization to understand the stage or the life cycle which their company is going through. All the organizational life cycle stages present challenges and priorities that should be met head-on to thrive in this world. The various stages of the organizational life cycle are as follows-

The second stage of the organizational life cycle is the growth stage that is also referred to as the survival stage. It is aptly named because at this point; the companies are looking to solidify their roots, establish a framework, pursue growth and develop their capabilities. The onus is on setting targets and generating revenues for expansion and growth plans. There are two possible scenarios in the growth stage; first, some companies enjoy success and growth and can enter the next step with aplomb whereas some organizations are unable to achieve the desired success and subsequently fail to survive.

The next stage in the organizational life cycle is the maturity stage where the company enters a hierarchal structure of management. In this phase, the companies pay fewer onuses on expansion and more on safeguarding their interests and maintaining the existing growth and development strategies and plans. It is the middle and top levels management that take up the mantle of specialising in tasks like routine work, planning, strategising etc.

The next stage in the organizational life cycle is known as the renewal stage. This is because, at this point, the companies will experience a renewal in their management structure that shifts from a hierarchical organizational structure to a matrix style of organizational structure. This change facilitates flexibility and creativity in the organization.

The renewal stage is also referred to as the revival stage because of its functions. It is an optional stage, and several organizations do not put the onus on it whereas other takes care of it diligently. The revival stage generally occurs between maturity and a decline stage of the organizational life cycle. This happens because an organization recognises the need for drastic changes and initiates plans to implement the set strategies that can alter their current path.

The firm forms project teams and task forces to analyse issues and find solution alternatives systematically. Information processing is expanded and becomes diverse because the requirement changes from performance reporting and financial controls to information about customer and market opportunities. This is for identifying the new trends and opportunities to revive the organizational structure.

The last stage of the organizational life cycle is the decline stage that signifies the death of an organization. This can be identified by minimizing sales figures and profitability in the organization. This happens because of market stagnation, reluctance for risk-taking, external challenges, and lack of innovation.

In this stage of the organizational life cycle, organizations start putting the onus on conserving resources. Their sales figures go plummeting downhill because of unappealing product lines and lack of new technologies in the products. The communication between departments and the levels is weak and well-developed mechanism is absent for information processing.