Chapter Nine
Organization Size,
Life Cycle, and Decline
Thomson Learning
© 2004
9-1
Differences Between Large and Small
Organizations
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LARGE
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Economies of
scale
Global reach
Vertical hierarchy
Mechanistic
Complex
Stable market
Career longevity and
stability
Source: Based on John A. Byrne,
“Is Your Company Too Big?”
Business Week, 27 March 1989, 84-94.
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Thomson Learning
© 2004
SMALL
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Responsive
Flexible
Regional reach
Flat structure
Organic
Simple
Niche finding
Entrepreneurs
9-2
Organizational
Life Cycle
Large
Development of teamwork
Addition of internal systems
S
I
Z
E
Crisis:
Need for
revitalization
Provision of clear direction
Creativity
Crisis:
Need for
leadership
1.
Small Entrepreneurial
Stage
2.
Collectivity
Stage
Crisis:
Need for
delegation
with control
Streamlining,
small-company
thinking
Continued
maturity
Decline
Crisis:
Need to deal
with too much
red tape
3.
Formalization
Stage
4.
Elaboration
Stage
ORGANIZATION STAGES OF DEVELOPMENT
Sources: Adapted from Robert E. Quinn and Kim Cameron, “Organizational
Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary
Evidence,” Management Science 29 (1983): 33-51; and Larry E. Greiner,
“Evolution and Revolution as Organizations Grow,” Harvard Business
Review 50 (July-August 1972): 37-46.
Thomson Learning
© 2004
9-3
Organization Characteristics During Four
Stages of Life Cycle
Characteristic
1.
Entrepreneurial
2.
Collectivity
3.
Formalization
4.
Elaboration
Nonbureaucratic
Prebureaucratic
Bureaucratic
Very Bureaucratic
Informal, one-person
show
Mostly informal, some
procedures
Formal procedures,
division of labor,
specialties added
Teamwork within
bureaucracy, smallcompany thinking
Products or
services
Single product or service
Major product or service
with variations
Line of products or
services
Multiple product or services
lines
Reward and
control systems
Personal, paternalistic
Personal, contribution to
success
Impersonal, formalized
systems
Extensive, tailored to
product and department
By owner-manager
By employees and
managers
By separate innovation
group
By institutionalized
R&D
Survival
Growth
Internal stability, market
expansion
Reputation, complete
organization
Individualistic,
entrepreneurial
Charismatic, directiongiving
Delegation with control
Team approach, attack
bureaucracy
Structure
Innovation
Goal
Top
Management
Style
Sources: Adapted from Larry E. Greiner, “Evolution and Revolution as Organizations Grow,”
Harvard Business Review 50 (July-August 1972): 37-46; G. L. Lippitt and W. H. Schmidt,
“Crises in a Developing Organization,” Harvard Business Review 45 (November-December 1967):
102-12; B. R. Scott, “The Industrial State: Old Myths and New Realities,” Harvard Business
Review 51 (March-April 1973): 133-48; Robert E. Quinn and Kim Cameron; “Organizational
Life Cycles and Shifting Criteria of Effectiveness,” Management Science 29 (1983): 33-51.
Thomson Learning
© 2004
9-4
Weber’s Dimensions of Bureaucracy and
Bases of Organizational Authority

BUREAUCRACY
1.
2.
3.
4.
5.
6.

Rules and procedures
Specialization and
division of labor
Hierarchy of authority
Technically qualified
personnel
Separate position and
incumbent
Written communications
and records
Thomson Learning
© 2004
LEGITIMATE BASES
OF AUTHORITY
1.
Rational-legal
2.
Traditional
3.
Charismatic
9-5
Percentage of Personnel Allocated to
Administrative and Support Activities
Line employees
75
Percentage
of
Employees
50
Top administrators
Professional staff
25
Clerical
0
Large
Small
Organization Size
Thomson Learning
© 2004
9-6
Three Organizational Control
Strategies
TYPE
REQUIREMENTS
Bureaucratic
Rules, standards, hierarchy,
legitimate authority
Market
Prices, competition, exchange
relationship
Clan
Tradition, shared values and
beliefs, trust
Source: Based upon William G. Ouchi, “A Conceptual Framework
for the Design of Organizational Control Mechanisms,” Management
Science 25 (1979): 833-48.
Thomson Learning
© 2004
9-7
Market Control
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Basis of control:
Price competition
Req:
1) tangible outputs
2) competition
3) any size unit OK
Good ex: divisions
Bad ex: HR, IT
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9-8
Bureaucratic Control
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Basis of control:
use of rules,
hierarchy
Req:
1) accept authority
2) extensive policies
3) best for large
units
Good ex: HR, IT
Bad ex: R&D Thomson Learning
© 2004
9-9
Clan / Professional Control
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Basis of control:
use of values, culture
Req:
1) shared emp values
2) high level of trust
3) orient / socialize
4) best for small units
Good ex: SME, R&D
Bad ex: large unit/org
Thomson Learning
© 2004
9-10
Workbook
Activity
Your job
responsibilities
Evaluation of Control
On the Job
How your
boss controls
Positives of
this control
Negatives of
this control
How you would
improve control
1.
2.
3.
4.
Thomson Learning
© 2004
9-11
Workbook
Activity
Item
Evaluation of Control
At the University
How Prof. A
(small class)
controls
How Prof. B
(large class)
controls
How these
controls
influence you
What you think
is a better
control
1.
2.
3.
4.
Thomson Learning
© 2004
9-12