What challenges arise as you move through the phases of growth in your business and how can you address them?
One of the key things I have learned and applied to work as a consultant and mentor is to recognise the stage of growth of a business to determine how best to support them. My favourite model which I use to catalyse these discussions and activities is The Greiner Growth Model. This was first published by Larry E Greiner in 1972 in Harvard Business Review and later republished in 1998.
Greiner talks about 5 phases of growth in business and the associated crisis potentially experienced at each phase. My particular interest in this and what I really like to debate is how, with this insight, you have the option to avoid some of the potential crisis, bring in some of the features of each growth phase earlier and therefore accelerate business growth.
To discuss this more fully, let’s walk through the model.
(1) Growth through creativity
Business often kicks off around an idea, a solution is created to respond to a particular need or problem. The solution will have been developed through creativity and therefore the business grows initially via this creativity. This is the phase of bootstrapping, pulling in favours and also, therefore, getting creative in the business works together as a newly formed team.
I have worked with many businesses at this stage and I have often needed to get my sleeves rolled up, spare resources are scarce and moving to the next stage of development has to be a creative process too. Founders are required to work on business models that allow some early-stage sustainability to enable the business to survive and meet longer-term objectives. One of the greatest crisis or challenge at this phase of growth is leadership, the founders are not necessarily natural leaders as a business grows. This presents the business with options, a need to upskill its founders or bringing in external expertise. Some businesses leverage the required skills through advisory boards and non-executive director board members or similar.
(2) Growth through direction
This is the time for shortfalls in management to start to be addressed. Strong leadership is required and growth will come from the reshaping of the business. Day to day activity is streamlined and operationalised, the company vision and direction is scoped. The new leadership team, even if an existing founder, requires support and understanding that leadership and management are distinct.
This phase can be uncomfortable when structures are put in place and to the founding team members it can feels like autonomy has been removed and replaced with control. That sense of freedom which was evident in the pure creativity phase temporarily disappears and tensions can arise. I often refer to this as a phase of frustration and friction, as control is tightened across the organisation in order for growth to occur.
(3) Growth through delegation
This is a significant shift from the phase before and the company is beginning to loosen the reigns. With infrastructure and reporting lines in place, accountability and responsibilities can be distributed at a departmental level. This is usually a period of renewed enthusiasm and energy as managers feel empowered to take decisions and lead locally. Growth can flourish quickly.
As with any situation of delegation, it can be messy and requires a bedding-in period. Manager will often regret delegating in this phase but this needs to be worked through. Many people have a wobble when learning to delegate and it is necessary to push through the “it’s quicker/ better/less risky to do it myself” stage of delegation. It is important to persuade leadership teams that this is a vital next step. Even following large mergers I have seen this executed really badly and phase 2 of command and control continues. Teams become demotivated and poor performance becomes a self-fulfilling prophecy. I have also seen businesses stuck between the transition of phase 2 and 3 literally for years. Phase 2 becomes ‘business as usual’ and it stifles growth.
(4) Growth through coordination
I am most familiar with this phase when I have been establishing structures to drive innovation forward within an organisation. In this phase, teams operate in a different way as new functions are established to pool expertise into semi-autonomous departments acting on behalf of the organisation. In large multi-site organisations, for example, senior teams based on different physical sites have some degree of autonomy for growth, adapting to a local geographical need etc. However, the challenge is maintaining the necessary centralised approach to support growth and therefore there is a need for standardisation through development and adoption of new policies and procedures.
(5) Growth through collaboration
The final phase is described by Greiner as being “a final loosing of control” as a company reduces its structures of silo and control. Networking increases, the cross-boundary way of running teams changes and the company starts to work across previously disparate functions. Personally, I see this phase of growth also involving collaboration beyond the organisational boundaries. This phase is everything I evangelise about, creating win-wins, exploiting the talent and expertise of all parties, underpinned by shared values, trust, joint outcomes and accountability through having an authority to act on behalf of the business.
What else can this model show us?
I have observed that his model has a useful application in better understanding of how growth can sometimes stagnate following a business merger or acquisition. Many of us will have observed how a thriving business on an impressive trajectory of growth can suddenly stall. I have worked with companies through these scenarios. It is very common for a company to merge with another when they are in phase 3 of the growth cycle. That is, they have started to settle into an accelerated pace of growth through delegation and they become attractive to investment and/or merger/acquisition. The leadership team then often changes, new boards are established and whether intentional or not, the management style adopted is often the same as we see in phase 2 of the growth cycle, a scenario where direction rather than delegation occurs. Therefore, this creates a mismatch between the growth that was thriving through delegation and a more directive approach that is often introduced as a new Board and leadership team find their feet, take control and become established. This can be particularly uncomfortable and disempowering for the existing management structures who have led the organisation to growth through delegation. They feel the business has taken a step backwards as the new board and/or investors tighten the reigns again. When autonomy is removed, managers are often left with two choices, leave the organisation through frustration or stick it out until the new board realises that they are capable of delivering impact through growth across the business via delegation, coordination and then collaboration.
What I love about this model is that it provides leaders with insight. It is possible to not only map your own business onto one of the phases of growth, but to also consider what needs to be put in place to move to the next phase. I have seen how it is possible to move relatively quickly through to phase 5 – growth through collaboration, much sooner than we have historically seen when the collaboration was less widespread and encouraged. This insight can prevent so many businesses getting stuck in the transitions between phases 2 and 3, then phases 3 and 4. Action can be taken to put the necessary infrastructure, policies and similar in place to accelerate movement from growth through creativity, to growth through collaboration.
Understanding models like these help to reduce frustration and get unstuck when you have either stagnated in a single phase or you can experiencing a change in one of them. Consider what phase of growth your business is encountering and what you can do to reduce friction through the next phase, accelerating growth as you go.