Growing your company is exciting, stressful, at times tiring, but always fun! During the growth you’ll encounter numerous crises that will jeopardise the success. As with most of life’s business problems, there’s a framework to explain or help map out this scenario…
So, let’s take a look at Greiner's Growth Model.
What is Greiner's Growth Model?
Greiner's Growth Model is a framework that shows the different phases a company goes through to achieve growth and the different types of crisis that may occur during those milestones.
The graph shows time on the X axis and size of the business on the Y axis, with both increasing as the company goes through the different phases.
The model is helpful in showing companies the different approaches to growth, as well as highlighting the different challenges. It is commonly used by businesses to self-identify obstacles they are facing that will hamper their efforts to achieve their full potential.
What are the phases of growth in the Greiner's Growth Model?
Let’s firstly look at the different phases a company goes through based on this model.
Growth Through Creativity
All businesses start from a spark of an idea, one that is fostered and developed over time. It’s a truly creative stage of a company's life as they attempt to develop a new product or service, pull together a team, a route to customers, and get that sometimes elusive 'product-market fit'.
There are some common traits of companies at this stage:
- They are small, responsive and agile
- They are creative and working to find their product-market fit
- They’re informally structured with strong communication between teams
Growth Through Direction
At this point in a company's life the owner/founders begin to hire managers, releasing some of the control of the resources and direction of the business. This is normally a 'growing up' period of a company's life, when processes become slightly more formal, departments may be developed, and a culture is set within the business. That’s not to say the founders/owners aren’t still actively involved, they are indeed ultimately running the company, but it’s a collaboration of managers that drive the direction.
A company can be considered in the Growth Through Direction phase if:
- They have recently hired managers as the team grows
- Decisions are no longer solely made by the founder/owners
- Processes have started to be created within the company (e.g. HR, operations)
- A culture is embedded within the company
- Things are getting bigger and more complicated!
Growth Through Delegation
The Delegation phase of growth occurs when key staff members are given accountability and responsibility to deliver in areas where they are better equipped to than the manager. At this point in a company life there will be specialist employees, focused on specific roles.
Delegating jobs to more specialist, skilled employees means you’ll get a better result, with the added benefit that the executive team have time to focus on the market data, their strategic decisions, and business planning.
A company may be in this phase if:
- Specialist skilled employees are increasingly being hired
- Accountability for key tasks is shared down the company
- Leadership teams spend less time doing jobs they aren’t good at or don’t like
Growth Through Coordination
This is now a mature stage of growth, one that focuses on the company core competencies and all departments working in line with each other to output a product or service. Growth comes from the whole business being greater than the sum of its parts.
A company may be in this phase if:
- They are mature in a marketplace
- Teams work with each other internally for the best outcome
- There are set processes and functions within the business
- Workflows and communication tools are present within the business
- Roles and responsibilities are clearly defined
Growth Through Collaboration
The final stage of growth in this model is deemed to be Collaboration. This is an evolution of Coordination, one where all parts of the company work together in a trusted, effective manner. Systems are simplified for efficiency, learning and development is prominent, and all aspects of the business contribute towards ways to continue success.
A company may be in this phase if:
- They are a mature company
- There is a positive culture around problem solving
- There’s little 'red tape'
- Reward is shared on the basis of team performance
- Processes are simple and teamwork is good
- Employees feel they can contribute ideas for growth
- Everyone knows how they impact the company with the work they do
Growth Through Alliances
The final stage of growth is a new one introduced more recently to the curve, and it focuses on strategic alliances. The idea being that companies may merge, acquire, partner or work with other companies in order to grow themselves.
Are the phases of growth linear in the Greiner's Growth Model?
The model suggests that is the case, but in real life it is not necessarily always linear. For example, a start-up company focused on Direction may also embark on Strategic Alliances. It’s important to note the real importance and value of this model lies in the crises that may impact a company at the different stages… so let’s take a look at those.
What are the crises in the Greiner's Growth Model?
Each phase in the Growth Model has an associated potential crisis that may disrupt the trajectory of growth.
Crisis of Leadership occurring during Creativity
This is a common issue for start-ups and young companies that find themselves growing via creativity and innovation. Initially with a small and informal team it’s possible for founders to manage the business in a relaxed manner, but over time this becomes a challenge.
Growth will lead to increasing difficultly around coordinating processes, communicating and motivating the team, or driving the company forward. This can be fatal for a business as it can result in key people departing (remember, people leave managers as much as they leave jobs) and founders becoming increasingly frustrated.
At this point a more defined management style is required in the company to take it to the next level.
Crisis of Autonomy occurring during Direction
This is a really interesting crisis. As a company develops in direction then managers may become more interested in their own unit than the business as a whole. This can result in conflict between management where a decision may be good for one department or area but bad for another.
The balance to strike is giving managers and employees autonomy but ensuring everyone is on the same page around decision that are best for the business as a whole. Ensuring everyone is on the same page around their strategy is key in that balance.
Crisis of Control occurring during Delegation
The crisis around the Delegation phase can be summed up with two factors:
- Founders and managers can find it difficult to let go and give others full control over certain aspects of the business.
- Communication may be difficult. At this point in a company’s life there can be problems between management or employees about what is trying to be achieved in each job and how to get the best result.
The latter can sometimes be a reason to reinforce the behaviour of the former, with founders citing concerns that if they do not do something it won’t be done well. It ultimately will result in a sub-par outcome though, with founders struggling to ‘do everything’ and teams feeling unmotivated.
Crisis of Red Tape occurring during Coordination
Another very relatable crisis within the life of a company is that of 'Red Tape' or bureaucracy. The addition of extra reports, processes, functions, all of which contribute to additional work for employees and can risk the wider culture of the business.
This can slow down decision making, resulting in a less agile company that cannot respond to market changes while also suffering a wider loss of efficiency/reduced margins.
Of course, this is a risk at all points in a company life, but it has more chance of arising when coordination is required and thus processes are needed within a company.
Crisis of Growth occurring during Collaboration or Alliances
The final crisis is one of how to grow. In the framework we’ve moved through each phase, so the company is now successful and mature. The question becomes how does it continue to grow, given the success?
If you’re in Collaboration, then perhaps Alliances are your way forward. If you are already developing partnerships then perhaps diversification is the route to growth? There are lots of potential options here, it’s a good point to evaluate your industry and develop a new strategy.
What are the advantages of Greiner's Growth Model?
There are lots of advantages to this model including:
- It provides a number of identifiable challenges companies may face
- It’s simple to understand and shows a way forward for growth
- Different phases for a company to identify their current position are highlighted
- It provides a good discussion piece for management teams
- It reinforces change is needed for growth
What are the disadvantages of Greiner's Growth Model?
The few limitations of this model include:
- It’s simple and in real life the lines blur between phases
- Not all companies follow the curve in a linear way
- The crises may not always occur in each phase
What frameworks go well with Greiner's Growth Model?
As a company using Greiner’s Growth Model you may also want to use a SWOT Analysis, which should include strengths & weaknesses from this model.
Who invented Greiner's Growth Model?
The Greiner's Growth Model was invented by Larry E. Greiner in 1972 with the five phases of growth. In 1998 he updated the model to add the sixth phase around Alliances.