Chapter 8: Organizational Life Cycle and Decline Flashcards
Pressures for Growth
- Compete on a global scale
- Control resources
- Invest in new technologies
- Control distribution channels
- Gain access to new markets
Ability to weather downturns
Large Size
- Economies of scale, resources, global reach
- Longevity, stability, security for employees
dilema of large
But they tend to become more standardized, mechanistic, hierarchical, complex, slow
Small
Flexible, responsive to changing needs, fast, flat, organic, niche-finding, entrepreneurial
Solving the Dilemma of Size – big company/ small company hybrid
- Cohesive vision, values, style
- Decentralization
- Systems to capture and disseminate innovation
- Cross-functional, cross-disciplinary (global) teams
Life cycle
a perspective on organizational growth and change that suggests that organizations are born, grow older, and eventually die
Stages of Life-Cycle Development:
- Entrepreneurial stage
- Collectivity stage
- Formalization stage
- Elaboration stage
Entrepreneurial Stage
- Organization is born and its emphasis is on creating a product/service and surviving in the marketplace
- Creativity
- Crisis: need for leadership
Collectivity Stage
- Organization has strong leadership and begins to develop clear goals and direction
- Provision of clear leadership
- Crisis: need for delegation with control
Formalization Stage
- The installation and use of rules, procedures, and control systems
- Addition of internal systems
- Crisis: need to deal with too much red tape - org is bureaucratized, middle management may resent the intrusion of staff
Elaboration Stage
- The red-tape crisis is resolved through the development of a new sense of teamwork and collaboration
- Development of teamwork
- Crisis: need for revitalization
Bureaucracy
an organizational framework marked by rules and procedures, specialization and division of labour, hierarchy of authority, technically qualified personnel, separation of position and person, and written communications and records
Size and Control
Organization size has been described as an important variable that influences structural design and methods of control
Formalization
the degree to which an organization has rules, procedures, and written documentation
Centralization
- the level of hierarchy with authority to make decisions
Personnel ratios
the proportions of administrative, clerical, and professional support staff
Incident command system
- developed to maintain the efficiency and control benefits of bureaucracy yet prevent the problems of slow response to crises
Organizational Control Strategies
- Bureaucracy
- market
- clan
Bureaucracy
- Rules, standards, hierarchy, legitimate authority
- Standardize behaviour and asses performance
Rational-legal Authority:
based on employees’ belief in the legality of rules and the right of those in authority to issue commands
Traditional Authority
based in the belief in traditions and the legitimacy of the status of people exercising authority through those traditions
Charismatic Authority:
based on devotion to the exemplary character or heroism of an individual and the order defined by them
Market
Prices, competition, exchange relationship
Clan
- Tradition, shared values and beliefs, and trust
- Self-control: a person’s values are brought into line with the organization’s values to control behaviour
Organizational Decline
a condition in which a substantial, absolute decrease in an organization’s resource base occurs over a period of time
Organizational Decline - causes
- Organizational Atrophy
- Vulnerability
- Environmental decline or competition:
Organizational Atrophy:
when organizations grow older and become inefficient and overly bureaucratized. The organization’s ability to adapt to its environment deteriorates, often followed by long periods of success
Vulnerability
reflects an organization’s strategic inability to prosper in its environment, vulnerable to shifts in consumer tastes or in the economic health of the larger community
Environmental decline or competition
environmental decline refers to reduced energy and resources available to support an organization. When the environment has less capability to support organizations, the org has to either scale down operations of shift to another domain
Model of Decline Stages
- Blinded stage
- Inaction stage
- Faculty Action stage
- Crisis stage
- Dissolution stage
Blinded Stage:
internal and external change that threatens long-term survival and may require the organization to tighten up, they may have access personnel, cumbersome procedures, or lack of harmony with customers
Blinded Stage - solution
develop effective scanning and control systems that indicate when something is wrong, can alert the executives and bring the organization back to top performance
Inaction Stage:
denial occurs despite signs of deteriorating performance, leaders persuade employees that all is well
Inaction Stage - solution
leaders to acknowledge the decline and take prompt action to realign the organization with the environment
Faulty Action Stage
facing serious problems, and indicators of poor performance cannot be ignored, failure to adjust to the declining spiral can lead to org failure
Faulty Action Stage - solution
retrenchment - downsizing personnel, leaders should reduce uncertainty by clarifying values and providing information
Crisis Stage:
organization experiences chaos, efforts to go back to basics, sharp changes, and anger
Crisis Stage: solution
major reorganization
Dissolution Stage
stage of decline is irreversible, organization is suffering a loss of markets and reputation, loss if its best personnel and capital depletion
Dissolution Stage - solution
close down the organization
Downsizing Implementation
- communicate more not less
- provide assitance to displaced workers
- help the survivors cope
Downsizing
intentionally reducing the size of a company’s workforce by laying off employees
Communicate more, not less
organizational managers should provide advance notice with as much information as possible
Provide assistance to displaced workers
help workers cope with the loss of their jobs and get re-established in the job market. Provide training, severance packages, extended benefits, and outplacement assistance
Help the survivors cope
feelings of anger, confusion, and sadness after the loss of their coworkers, survivors also may be concerned about their own jobs and have difficulty adapting to changes in job duties and responsibilities
