Life Cycle

Life Cycle Stages

Founding, also called birth or the entrepreneurial or formation stage, is the creation of the organization. There are many ways an organization can be formed, including entrepreneurial start-ups (e.g., an Internet start-up), legislative actions (e.g., a new government department), breakaways (e.g., an airline CEO leaves, takes key personnel along, and starts a new company), and spin-offs (e.g., a conglomerate sells off various divisions that become new organizations). Common to all of these examples is an environmental need for a new organization. That is, the environment in which the organization exists has available resources, demands that are not being met, and a supportive setting (government, regulatory, competitive, etc.) that sets the stage for a new organization to emerge and fill that need. The prime concern of the organization and its leadership during this stage is to acquire the resources it needs to ensure its survival.

Growth is the next stage, also called collectivity and direction. It is the stage when the organization begins to establish rules and procedures to manage its growth while trying to continue to operate in a start-up, resource acquisition mode. In this stage, the organization is beginning to transform itself into a mature, established organization. The challenge during growth is to create rules and procedures that continue the organization's success and expansion now that survival is no longer the main concern.

Maturity, sometimes called formalization, bureaucratization, or transformation, is when the organization has established itself and has formal rules and procedures in place guiding its actions. In this stage, the earlier successes have been institutionalized, but the organization may also begin to be constrained by those same rules and procedures. Often, the organization has reached a certain size such that it can no longer be run in a strict, hierarchical manner. Here, organizations and their leaders face the challenge of remaining flexible enough to respond to inevitable environmental change but formal enough to allow for the governance of a large and complex organization.

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