Chapter # 7

Organization Size, Life

Cycle, and Decline

Reference Books:
 Organization Theory and Design (Richard L. Daft)

Resource person: Furqan-ul-haq Siddiqui

 Aquihiring- buy out (a company) primarily for the
skills and expertise of its staff, rather than for its
products or services.
 Acqui-hiring has become increasingly common in startup companies,
especially within the competitive technology sector; as of March
2013, Facebook was the largest performer of talent acquisitions, with
12 over the last five fiscal quarters. Twitter, Yahoo!, and Google rank
alongside Facebook as similarly major users of talent acquisitions.
 Organization Size: Is Bigger Better?
Large
 Every entrepreneur dreams to have his or her
company grow fast and grow large, maybe even to
eventually make the Fortune 500 list.
 Industry consolidation, global expansion, and
diversification have made firms grow
 Size enables companies to take risks
 R&D
 Growing organizations are vibrant, exciting places to
work, which attract and keep quality employees.
 “to stop growing is to stagnate and die”.
Dilemmas of Large Size
 Organizations feel compelled to grow, but how
much and how large? What size organization is
better poised to compete in a fast-changing global
environment?
 Large organizations can get back to business more
quickly following a disaster
 Large companies are standardized, mechanistic, and
complex
 Large organizations give employees a sense of security
and belonging during an uncertain time.
 Small Organizations
 Small scale can provide significant advantages in terms of quick
reaction to changing customer needs or shifting environmental
and market conditions
 Small organizations often enjoy greater employee commitment.
 Employees typically work on a variety of tasks rather than
narrow, specialized jobs.
 Many large companies have grown even larger through merger
or acquisition in recent years, yet research indicates that few of
these mergers live up to their expected performance levels.
 By default, Small organizations are more innovative.
 By some estimates, 90 percent of mergers never live up to
expectations.
 The paradox is that the advantages of small
companies sometimes enable them to succeed and,
hence, grow large.
 Small companies can become victims of their own
success as they grow, shifting to a mechanistic
structure emphasizing vertical hierarchy and
spawning “organization men” rather than
entrepreneurs. Giant companies are “built for
optimization, not innovation.”

Small or big?????????????????
 Big-Company/Small-Company Hybrid
 The solution is what Jack Welch, retired chairman
and CEO of General Electric, called the “big-
company/small-company hybrid” that combines a
large corporation’s resources and reach with a small
company’s simplicity and flexibility.
Divisional Structure (SBUs)
 Johnson & Johnson is actually a group of 250
separate companies operating in fifty-seven
countries.
 Stages of Life Cycle Development
 A useful way to think about organizational growth
and change is the concept of an organizational life
cycle.
 Entrepreneurial Stage- When an organization is
born, the organization is informal and non-
bureaucratic. The hours of work are long. Control is
based on the owners’ personal supervision. Growth is
from a creative new product or service.
Crisis: need for leadership
 When Apple began a period of rapid growth, A. C. Markkula was
brought in as a leader because neither Jobs nor Wozniak was qualified or
cared to manage the expanding company.
 Collectivity Stage- If the leadership crisis is
resolved, strong leadership is obtained and the
organization begins to develop clear goals and
direction. Departments are established along with a
hierarchy of authority, job assignments, and a
beginning division of labor. In the collectivity stage,
employees identify with the mission of the
organization and spend long hours helping the
organization succeed. Members feel part of a
collective. Communication and control are mostly
informal although a few formal systems begin to
appear.
 Crisis: need for delegation
 Top managers want to make sure that all parts of the
organization are coordinated and pulling together.
The organization needs to find mechanisms to
control and coordinate departments without direct
supervision from the top.
 c e b o o k m o v e d
n g c o m p a n y F a
 Socia l n e t w o r k i t h e c o l le c ti v i ty
t re p r e n e u r i a l t o
f r o m t h e e n r k
quickly y e a r- o l d f o u n d e r M a
. T w e n t y -t h r e e “ g r o w u p a t
stage i s c o m p a n y h a s t o
k n o w s h
Zuckerberg e r e c r u i te d a t o p G o o g le
e t s p e e d , ” s o h c h ie f
In t e rn r g , to se r v e a s
S h e ry l S a n d b e sk i l l ed
exe c u ti v e , s o h i r e d o t h e r
r. F a c eb o o k a l
o ff i c e h a s
operating e v a ri o u s f u n c t i o n s s u c
ti v e s t o m a n a g u b li c
exec u n i c a t i o n s a n d p
, l e g a l , c o m m u
ma r k e t i n g
, a n d fi n a n c e .
relations
 Formalization Stage- The formalization stage
involves the installation and use of rules,
procedures, and control systems. Communication is
less frequent and more formal. Engineers, human
resource specialists, and other staff may be added.
Top management becomes concerned with issues
such as strategy and planning and leaves the
operations of the firm to middle management.
Product groups or other decentralized units may be
formed to improve coordination.
collaboration/teamwork
Crisis: Too much red tapes
 Elaboration Stage- The solution to the red tape
crisis is a new sense of collaboration and teamwork.
Social control and self-discipline reduce the need
for additional formal controls. Managers learn to
work within the bureaucracy without adding to it.
Formal systems may be simplified and replaced by
manager teams and task forces. To achieve
collaboration, teams are often formed across
functions or divisions of the company. The
organization may also be split into multiple
divisions to maintain a small-company philosophy
Crisis: Need for revitalization
 Organizational inertia
is the tendency of a
mature organization
to continue on its
current trajectory.
This inertia can be
described as being
made up of two
elements -- resource
rigidity and routine
rigidity.
 After the organization reaches maturity, it may enter
periods of temporary decline. A need for renewal may
occur every ten to twenty years. The organization shifts
out of alignment with the environment or perhaps
becomes slow moving and over bureaucratized and
must go through a stage of streamlining and innovation.
Top managers are often replaced during this period.
 At Apple, the top spot changed hands a number of times
as the company struggled to revitalize. Steve Jobs
returned in mid-1997 to run the company he had
founded nearly twenty-five years earlier. Jobs quickly
reorganized the company, weeded out inefficiencies,
and refocused Apple on innovative products for the
consumer market.
Organizational Life Cycle