American economist Larry E. Greiner, who was Professor of Management and Organizations at University of Southern California, first identified this problem – and its solutions – in 1972.

He originated the “Greiner Curve,” outlining five phases (before adding a sixth in 1998) that organizations go through as they grow.

Each phase begins with relatively stable growth, followed by a "crisis" when major organizational change must happen if the company is to continue growing.

Six Organizational Steps to Stable, Sustainable Growth

Let’s take a spin through the six phases – the problems they lead to and their solutions.

Phase 1: Growth Through Creativity

Here, the entrepreneurial founders are busy creating products and developing markets. There aren't many staff, so informal communication works well.

But, as the payroll grows, production expands, and capital is injected, there's a need for more formal communication. This leads to a Leadership Crisis, where professional management is needed. The founders may take on this role, but often someone new comes in.

Phase 2: Growth Through Direction

Growth continues, built on a foundation of more formal communications, budget controls, and focus on separate activities like marketing and production.

However, there comes a point when the products and processes become so numerous they are beyond the capability of one person to manage.

This phase ends with an Autonomy Crisis, in which new structures based on delegation are needed.

Phase 3: Growth Through Delegation

With mid-level managers now freed up to react faster to opportunities for new products or new markets, the organization continues to grow. The leadership is focused on monitoring, developing the company vision, and the big issues.

Many businesses struggle at this point as the manager (whose direct approach solved the problems at the end of Phase 1) finds it hard to let go of the control they've assumed.

This phase ends with a Control Crisis. A more sophisticated organizational design is required, so the separate parts of the business can work cohesively.

Phase 4: Growth Through Coordination and Monitoring

Growth continues with the isolated business units reorganized into product groups or service practices. Investment finance is allocated centrally.

Eventually, though, work becomes submerged under increasing amounts of bureaucracy, and growth is stifled.

This phase ends with a Red-Tape Crisis: a new culture and structure must be introduced.

Phase 5: Growth Through Collaboration

The formal controls of Phases 2-4 are replaced by professional good sense, as staff regroup flexibly in teams to deliver projects in a matrix structure, supported by sophisticated information systems.

This phase ends with a crisis of Internal Growth: further growth can only happen by developing partnerships with external organizations.

Phase 6: Growth Through Extra-Organizational Solutions

Greiner's sixth phase suggests that growth may continue through mergers, outsourcing, networks, and other solutions involving external companies.

The duration of each phase depends almost totally on the rate of growth of the market in which the organization operates. The longer a phase lasts, though, the harder it will be to transition to the next phase of growth.

Getting Help Before You Need It

To showcase how Greiner’s approach can work in practice, Business Review took the case of low-cost airline startup EasyJet.

The British firm revolutionized the airline industry by offering low-cost flights and a more limited service, changing customer expectations of air travel. As a startup, it fought off challenges from the long-established players.

How? Well, as EasyJet grew and went through the different crises of growth, it met them by adhering to Greiner's advice.

For example, during the “leadership crisis,” EasyJet brought in established, experienced airline industry players. As a “red tape crisis” loomed, the company moved workers to a centralized headquarters, changed its appraisal system, and endeavored to keep operations as simple as possible for staff. And as a fully established player entering the sixth phase, it began to acquire other airlines.

By meeting these challenges head on, EasyJet was able to minimize the disruption of the crises of growth.

In more modern times, companies will likely need to hire experts to help them manage the shift toward remote and hybrid working – or to meet the challenges or opportunities that AI is bringing.

What's Next?

Success brings its own problems, as we’ve discovered above. For further insight into how to cope with crises of company growth, see our article and video, The Greiner Curve, which includes a diagram of the Greiner Curve model.

And for a wider view of structuring organizations to meet the challenges they face, see our article, What Is Organization Development?

Tip of the Week

Leave the Competition Behind With "Blue Ocean Leadership"

By Matthew Hughes, Mind Tools Senior Editor

Success is a good problem to have. But what if you’re struggling to get off the ground in the first place? What if your competition is chipping away at your revenue and customers are slipping away?

“Blue Ocean Strategy” is a way for organizations to get ahead by removing competition from the equation. Its theorists ask you to picture a “red ocean,” where densely packed rivals compete for scraps. Now imagine a “blue ocean” which is open and empty. Here, customers are yours for the taking.

Think of Netflix coming along and changing the video rental industry, or Apple’s iPod reinventing how we listen to music.

To enter a blue ocean, analyze your industry: what does everyone do the same? What don’t they do? Then, talk to your customers about their experiences; blue ocean companies identify what customers don’t even know they desire. Identifying your blue ocean is the hard part. Once you have, work on your strategy and how you’ll overcome any potential problems.

If you find a blue ocean, you can offer services at high value with low cost, because your competitors aren’t operating in the space – for now. Then you can worry about the Greiner Curve as your business booms.

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News Roundup

This Week's Global Workplace Insights

Disconnecting on the East Coast

Following the likes of Canada, France, and Portugal, the State of California could soon make it illegal to contact employees outside of work hours.

The new bill has been proposed by Democrat Assemblyman Matt Haney, and, if passed, would go into effect from January, making California the first U.S. state to pass a "right to disconnect" law – New York having flirted with the idea in 2018 before abandoning it.

If a company breaks the rule three times, they would be liable to pay a $100 fine. While some may welcome the move, critics have called it a "step backward for workplace flexibility."

Resenteeism: The New Quiet Quitting

A new workplace buzzword is gaining traction. "Resenteeism" refers to people who resent their job but stay anyway, either due to financial reasons or because they can’t find a job elsewhere.

Unlike "quiet quitting," which refers to people doing the bare minimum, resenteeism can lead to highly reduced productivity, with employees actively resenting their job, boss and company.

What’s caused the rise of this resentment? Insperity district manager Jennifer Libby blames "lack of advancement opportunities, a toxic corporate culture, an excessive workload and feelings of burnout."

Likewise, a recent survey from Owl Labs revealed the significant disconnect between employees and leadership, especially with an increasingly dispersed workforce. This lack of connection is another factor in the growing resent of employees.

Read our new articles How to Build a Strong Culture in a Distributed Team and Connecting Remote and Hybrid Workers to Organizational Mission for ways to fight back against resenteeism in your organization.

See you next week for more member-exclusive content and insight from the Mind Tools team!