Inside an Organizational Life Cycle Benefit from the development of information technology, we have entered an informational age. In a general, according to Dr. Henryk Sterniczuk, in order to success in the new informational age, the key elements are speed, flexibility, integration, and innovation. As leaders or managers, an essential concept, organizational life cycle, should be known ahead. Just like an organism, an organization will experience born, growth, maturity, and death those four stages.
Therefore, the main task for leaders and managers of organizations is trying to maintain and extend the maturity stage and finding a better solution to make their organizations can continue develop. This paper will explore the Daft’s Organizational Life Cycle theory, Handy’s Sigmoid Curve Theory, and an case study about Motorola. Daft’s Organizational Life Cycle Theory Richard L. Daft cited the organization stages of development in his book Organization Theory and Design from Robert E. Quinn, Kim Cameron and Larry E. Greiner. This theory includes four stages of an organization.
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First is the “entrepreneurial stage”. During this stage, an organization first emerges to the market and tries to survive by providing its own products or services. Generally, the owners are the controllers of the enterprise. They focus on how to enhance the viability of their organizations. Hence, the work hours are long and they control their companies based on their personal supervision. As a result, informal and less bureaucratic are the characteristics of the organizations in entrepreneurial stage. The key point in this stage is whether the enterprise has a wise leadership.
As the enterprise grows, the amount of employment grows. The owners face to the challenge issue about a scientific management if they belong to the creative and technically oriented people. In another word, they may lack the experience to manage their enterprises. Thus, to deal with the first crisis, they can either change the structure of the enterprises or find a suitable person to take this responsibility (Daft, 2007). The second stage is the “collectivity stage”. After the crisis of the first stage, organization obtains strong leadership and it begins to develop clear goals and directions.
In addition, departments are established along with a hierarchy of authority, job assignments, and a beginning division of labor. During this stage, the founders of the organizations usually bring skilled managers to run their companies. Moreover, employees identify with the mission of the organization and spend long hours helping the organizations successful. Members feel part of a collective, and communication and control are mostly informal although a few formal systems begin to appear (Daft, 2007).
However, within this stage, a crisis called “need for delegation” will appear. During this stage, lower-level employees gradually find themselves restricted by the strong top-down leadership with the success of the new management. However, lower-level managers begin to acquire confidence in their own functional areas and they need more discretion. As a result, an autonomy crisis occurs because top managers, who were successful because of their strong leadership and vision, do not want to give up their responsibility.
Top managers want to pull all parts of the organization together and make them coordinated. However, lower-level managers and employees find that they do not have enough delegation to do things. Consequently, the organization needs to find mechanisms to control and coordinate departments without direct supervision from the top (Daft, 2007). The third stage is the “formalization stage”. This stage involves the installation and use of rules, procedures, and control systems. Within this stage, employees and managers communicate less frequently and more formally.
In addition, others employees such as engineers, human resource specialists may be added within this stage. Furthermore, top management becomes concerned with issues such as strategy and planning. They leave tend to leave the operations of the firm to middle management. Product and groups or other decentralized units may be formed to improve coordination. Within this stage, incentive systems which are based on profits need to be implemented to ensure that managers work toward what is best for the overall performance of the company.
When the new coordination and control systems are effective, the organizations will continue to grow through the linkage mechanisms between top management and field units (Daft, 2007). However, within this stage, a crisis called “too much red tape” will appear. During this stage, with the development of the organization, the proliferation of systems and programs may begin to strangle middle-level executives. The organization tends to be bureaucratized. Middle management may re-sent the intrusion of staff. As a result, innovation may be restricted. The organization seems too arge and complex to be managed through formal programs (Daft, 2007). The fourth stage is the “elaboration stage”. After solving the crisis of the red tape, the organization will form a new sense of collaboration and teamwork. During this stage, managers within the organization develop skills for confronting problems and working together. Within the organization, social control and self-discipline reduce the need for additional formal controls. At this time, bureaucracy may have reached its limit. Managers begin to learn to work within the bureaucracy without adding to it.
Managers simply and replace the formal systems with manager teams and task forces. During this stage, in order to achieve collaboration, teams are often formed across functions or divisions within the organization. Furthermore, the organization may also be split into multiple divisions to maintain a small-company philosophy (Daft, 2007). However, within this stage, a crisis called “need for revitalization” will appear. After the organization reaches maturity, it may enter periods of temporary decline. During this stage, a need for renewal may occur every ten to twenty years.
For example, the organization may shift out of alignment with the environment or perhaps becomes slow moving and overbureaucratized and must go through a stage of streamlining and innovation. Within this stage, top managers are often replaced during this period (Daft, 2007). Charles Handy’s Sigmoid Curve Theory Charles Handy who is an Irish philosopher in organization behavior is considered as one of the top “Thinker 50” in the world. In his book The Age of Paradox Charles Handy points to the sigmoid growth curve as the ubiquitous s-shaped curve which can be used to describe the life-cycle of products, organizations, and even relationships.
Similar as the theory as Daft mentioned above and is illustrated in the figure 1, the sigmoid growth curve pass four stages which are inception stage, growth stage, maturity stage and decline stage. The S-shape curve in the theory starts in the inception stage. As the time go by, it goes down at the early era of inception stage and then goes up and passes the growth stage, maturity stage and eventually reach the peak in the decline stage then begin goes down. The path of the curve forms the S-shape.
During the Inception stage of a new growth curve, an organization may experience a dip, an apparent setback. This is a temporary phenomenon due to reasons like the lack of experience of management or does not properly use of resource. Thus, as organizations face changes or embark on new initiatives, they need to recognize that when they are in the inception stage of a growth curve they may experience a temporary and natural dip and believe that they can do well.
When organizations grow up to the era between maturity stage and decline stage, Handy encourage organizations to consider the second generation strategy, which aims to create a new upward curve, to maintain organizations’ competitive and gain an energy to continue develop their business. The process is illustrated in figure 2. Point A and Point B are in the same level beside the peak. Handy believes that, before organizations eventually reach the peak, it is the good time for organizations consider to change to the second generation strategy at the A point instead of the preparation of change when organization decline to the B point.
The reason of that is because it can ensure that organizations can have enough time, resource and energy to bridge to the new curve through its initial faltering uncertainty before the cold cure has turned the corner and begun its inevitable slide to its end. If organizations realize that they should change to the new generation strategy after they decline to the B point, organizations generally do not have enough resources, either market or human resources, to attain enough energy to implement the plan (Handy, 1995). The shade area which illustrated in the figure 2 is described as the “time of confusion”.
During this period, organizations are more likely to enjoy their glories they earned than consider the crisis (Handy, 1995). The doubt to the necessary of change from the inside of organization might arise because they think they are presenting so well and the future of the organization is clear and bright. The new generation strategy might be regarded as a wrong direction to them. Case study: Motorola Motorola provides a cautionary lesson in how an organization reaches the peak of its industry and becomes blinded by its own success.
Roger O. Crocket, the Chicago deputy bureau manager of the BusinessWeek, and Peter Elstrom, the news director of BusinessWeek had ever posted an in-depth report in 1998 about how Motorola lost its advantage. Take a look of the performance of Motorola since 1993 to 1998 first. In this report, they cited the data of Herschel Shosteck Associates that Motorola clamed sixty percent of U. S. market in wireless phones in 1994. During the time of 1993, 1994, and 1995, Motorola grew its revenue under an average growth rate of 27% to 1. billion. Especially in 1995, the revenues were up 31% and profits were up 53%, to $1. 6 billion. During the time in 1994 to 1995, Motorola achieved an admired success, Compare to the 60% of market share of the wireless phone, Nokia and Ericsson just earned a tiny of cake. However, since 1996 to 1998, the annual revenue growth rate of Motorola begun slowed to 5%. Meanwhile, the profits had declined 33% since 1995 to $1. 2 billion in 1997. The market share of wireless phones in U. S, had drop to thirty-four percent in 1998.
The reason for this dramatic change of Motorola in that period is due to the delay to enter the digital technology era. In 1995, the digital technology began woke up the U. S. wireless carriers. Compare to the previous analog technology, the new digital technology offers times of capacity of analog systems (depends on the digital standards, like CDMA is six times, GSM is two to three times, and TDMA is three times—Sources: Wikipeadia) and new services such as Caller I. D, short messaging and paging to customers. The new business at that time hooked the carriers.
AT, Bell Atlantic, and other carriers showed their desires to attain relevant digital cell phone products from Motorola in a telling meeting in February, 1995 in New Orleans. However, Motorola ignored this important message. Weisshappel, who was a famous former main cell phone designer in Motorola, insisted to continue develop analog phone. He believed that compared digital one with a big and bulky appearance (at that time) customers would prefer a better and smaller analog phone. The amount of analog phone users, which was counted as forty-three million, firmed his mind.
Therefore, Weisshappel and his team spent two years and millions of dollars to develop a new and as small as a cigarette pack analog product, the StarTAC. According to Wikipedia, Motorola StarTAC is noted for being the first cell phone with the clamshell style and is listed as the top ten of The 50 Greatest Gadgets of the Past 50 years by PC World in 2005 (Wikipedia, 2007). Although the product brings honors to Motorola, StarTAC did not help Motorola achieve its goal. According to Crocket and Elstrom, Weisshappel and his top executives introduced the “Signature program” to U. S. wireless carriers in the summer of 1996.
The “Signature program” requires the wireless carriers who want to obtain the StarTAC have to ensure their inventories of cell phones must maintain a high percentage of Motorola’s. However, this ambition seemed too aggressive to wireless carriers. Many wireless carriers included Bell Atlantic, GTE Corp. and BellSouth Corp. refused to take part in the program. As a result, the sales dropped. On the other side, according to Crocket and Elstrom, Motorola terminated the purchase of the semiconductors, which are used to manufacture digital cell phones, from Qualcomm, its competitor, in 1995.
Instead, Motorola devoted millions of dollars and cost two years to turn it out. This two major reasons caused Motorola delayed its digital cell phones. Benefit from the absence of Motorola, who was regarded as industry-leader at that time, in the digital cell phone market, Ericsson and Nokia achieved an admired growth. According to Silberg Lurie, a reporter of HFN, Ericsson occupied 56 percent market share in 1996 from 24 percent in 1995 and Nokia occupied 33 percent market share in 1996 from 29 percent in 1995 (Lurie, 1997). Motorola could be revered today if only it had embraced digital,” Crocket and Elstrom cited the words from a former Motorola executive who was in Japan at the time (Crocket and Elstrom, 1997). Analysis Use Handy’s sigmoid growth curve to exam the case of Motorola, it will be found that Motorola in that period just follow the exact track of the S-curve. Motorola became an industry-leader in the early of 1990s due to its advanced analog technology. The technology helped Motorola passed the growth and maturity stage. When Motorola reached the A Point, just as the same time the digital cell phone entered to market as new arrival.
To change to the digital side or to insist the analog camp, Motorola step into the time of confusion. The previous effort, the huge amount of analog cell phone users blinded Motorola. Motorola believed that its new product, the StarTAC, would bring the company into a higher level and ignored the future of new technology. However, when Motorola realized the importance of the development of digital cell phone and started to manufacture relevant products, the company had actually declined to the B point. Motorola therefore missed the precious time and suffered a lost at the beginning. Conclusion
According Handy, the challenges for organizations, who consider change to the new generation strategy, include three dimensions. First is the need of leadership which can manage the chaos, confusion, denial and inevitable tension. When a new generation strategy arises, it may be doubted and objected by some members (Handy, 1995). Weisshappel is the example in case of Motorola. Second, organizations should have an open mind to adapt the change of external environment and enhance the ability of questioning and learning (Handy, 1995). Furthermore, organizations should form an atmosphere for group learning.
Group learning, according to the definition of Peter Senge who is the founder of the Center for Organizational Learning at MIT’s Sloan School of Management, is a process for group members develop the skill of integration and the ability to achieve the same goal. Senge regards that in order to forming an efficient group learning environment within an organization, the organization should consider three aspects. Firstly, the group must try to abstract the group intelligence from individual intelligence when the group faces a complex issue or topic. Secondary, the group requires its members behave in an innovative and integrative way.
Thirdly, the group must value its members’ individual role and effort (Senge, 1994). By this way, organizations can therefore establish a positive and efficient learning environment for their members. Third, the top management of organizations should have the confidence and discipline to pull resources from the old curve and apply to the new unproven one. Meanwhile the new resources should totally support the new growth curve (Handy, 1995). As a conclusion, modern organizations should clearly know about what stage they are in the organizational life cycle and therefore they can have a correct vision to develop their strategy in the future.
References Crockett, R. O. , & Elstrom, P. (1997) How Motorola lost its way. Retrieved from Business Week: http://courses. missouristate. edu/ philrothschild/Syllabi/mgt487/motorolaarticle. htm Daft, R. L. (2007). Organization Thory and Design (9th, ed. ). Mason,OH: Thomson Donlon, J. P. (1995). The paradox paradigm – interview with author-philosopher Charles Handy – includes related article – Interview. Retrieved 24 Dec, 2007, from http://findarticles. com/p/articles/mi_m4070/is_n100/ai_ 16636992/pg_2 Handy, C. (1995). The age of paradox. Watertown, MA:Harvard Business School Press. Lurie, S. (1997).
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