1. Organizational Life Cycles, Size, and Decline
BA 152

2. Industry Life Cycles Industry Evolution Entry strategies
First movers
Followers
Survival strategies
Specialist
Generalist

3. Entry Strategies Entering the market early
Pick of environmental resources
Rapid growth
Better chances of survival

4. Entry Strategies Entering the market later
Reduces operational uncertainty
Correct way to compete is apparent
Lower R&D investment
Survival as the more efficient producer

5. Survival Strategies Specialists Generalists
Concentrate skills in a single niche
Develop core competencies
Can provide better customer service
and superior products, but
Trouble if the niche disappears or others enter.
Generalists
Spread skills across many niches
Providing greater brand recognition
Can succeed when environment is uncertain,
If risk is spread across a number of niches

6. Organizational Life Cycle
Stages of Life Cycle Development
Pre-Birth Stage
first idea
commitment and early planning
implementation
Entrepreneurial Stage
Collectivity Stage
Formalization Stage
Elaboration Stage

7. Organizational Characteristics During the Life Cycle
ENTREPRENEURIAL STAGE:
Personal control systems
Innovation by owner/manager
Goal: Survival
Management style: Entrepreneurial
Crisis: Lack of/Need for leadership

8. Organizational Characteristics During the Life Cycle
COLLECTIVITY STAGE:
Personal rewards aimed at individuals who contribute to organizational success
Innovation from employees and managers
Goal: Growth
Management style: Charismatic, directive
Crisis: Lack of/need for delegation

9. Organization Growth: Is Bigger Better?
Pressures for Growth
Organization goals
Economies of scale
Executive advancement
Economic health

10. Size and Structural Characteristics
As Organizations get bigger:
Complexity increases
Centralization decreases
Formalization increases
Flexibility decreases

11. Large Vs. Small: How can you be both?
Structural reorganization (split up)
Smaller headquarters staff (decentralize)
Subsidiaries/spin-offs that can act small
Skunkworks to develop new products
Support intrapreneurship within the firm

12. Bigger may not be better!
Growth is difficult to maintain.
A $100K company has to generate $10K to grow by 10%.
A $100B company has to generate $10B to grow by the same 10%
In the 1990s, what percentage of publicly-traded firms increased their revenues and profit by an average of 10% a year?
Growth can stretch a firm too thin.
A 20% growth rate per year means a firm doubles in size in less than four years.

13. Bigger may not be better!
What determines a firm’s size?
Market Cap?
Employees?
Profits?
Market share?
Revenues?
The wrong choice can lead to seriously negative consequences.

14. Organizational Characteristics During the Life Cycle
FORMALIZATION STAGE:
Impersonal rewards through formalized systems
Innovation from separate innovative groups
Goal: Internal stability/market expansion
Management style: Delegation with control
Crisis: Too much red tape

15. Organizational Characteristics During the Life Cycle
ELABORATION STAGE:
Extensive rewards tailored to product and department success
Innovation by institutionalized R & D
Goal: Image/reputation-building
Management style: Team approach
Crisis: Lack of/need for revitalization

16. Organization Life Cycle
Large
Streamlining
Continued maturity
Decline
Development of Teamwork
Addition of
Internal Systems
Size
Provision of
Clear Direction
Crisis: Too
much
red tape
Creativity
Crisis: Need for
revitalization
Crisis: Need for
delegation
with control
Crisis: Need for Leadership
Small
Entrepreneurial Collectivity Formalization Elaboration ?????????

17. Organizational Decline and Downsizing: The Causes
Organizational Atrophy
Loss of ability to respond to changing environment
Inefficient, bureaucratic, fat, and happy
Organizational Vulnerability
Loss of resources
Loss of market share
Loss of legitimacy
Environmental decline
Stagnating economy
Flat/shrinking market
Increased competition

18. Stages of Decline Blinded Inaction Faulty Action Crisis Dissolution
Successful Organizational Performance
Reorganization
Effective
Prompt
Action
Corrective
Action
Effective
Changes
Declining Organizational Performance
Good
Information
Acknowledge
Decline
Major
Changes
Reorganization
No choices
Blinded Inaction Faulty Action Crisis Dissolution

19. Managing the Downsizing
Implementation approaches must be a function of the severity and speed of decline.
Implementation issues to consider
Consider voluntary programs with incentives (but be careful - who might leave?)
Over communicate - “The best surprise is no surprise.”
Allow employees to leave with dignity
Assist those leaving
Use ceremonies to reduce anger/confusion
Remember those who stay!

20. Next Time
Sunflower, Inc.