Come the Revolution…

In 1972, Larry Greiner (Professor Emeritus of Management and Organization at USC) wrote a seminal article which was published in the HBR and entitled “Evolution and Revolution as Organizations Grow”. In it he posited a model (now called the Greiner Growth Model, or the Greiner Curve) describing how organizations grow and prosper (or fail) over time through a cycle of evolution and revolution (or crisis).

In essence, Greiner stated that the idea that any organization could, after being founded, continue to grow and be managed in some stable, essentially linear fashion was deluded; and that, while the precise order, length and nature of each phase might vary depending upon the nature of the business and how prescient and adaptable its management was, each organization would go through periods of “crisis”.

One only has to observe the effects of the passage of time across multiple industries to recognize that the underlying premise is valid. Business model, structure and management style either proactively adapt, or changes are enforced by multiple factors. Trying to “stay the same” leads to ossification, irrelevance and potentially extinction.

In his model, Greiner suggested that there are up to 6 stages or phases in the process, with an attendant “crisis”, or catalyst for change between each:

Phase 1: Creative growth from founding, leading to a crisis of leadership as the business scales and becomes more complex structurally

Phase 2: Growth based upon an adapted leadership style (perhaps with new leadership) emphasizing more formal processes and direction, leading a crisis of autonomy as employees chafe against what is seen as over-centralization

Phase 3: Growth under a delegated structure, in which the autonomy of employees and teams is recognized, and they have broader decision-making authority. This leads to a crisis of control, as senior management and directors begin to sense that they are losing control of the business

Phase 4: Growth continues via greater use of co-ordination in which the business puts in place structures through which senior managers take more direct responsibility for business units, while creating a “staff structure” to maintain consistency across the entire organization. Eventually, this can lead to friction between “line” and “staff” functions, in the guise of a “red tape” crisis

Phase 5: To counteract “red tape”, senior management emphasizes a more collaborative approach, in which problem-solving through team action or through collaboration across teams is used to manage what by now is likely to be a large and complex business. The potential major issue becomes one of growth itself, as employees become overwhelmed because of the demands made on their time, and the pressure to grow

Phase 6 : In this phase, concerns about the ability to continue to grow, lead to an attempt to create broader alliances, M&A, networks, or the use of outsourcing.

Whether and how quickly each stage or phase occurs depends upon a combination of industry dynamics, growth rate and management quality. Viewing the model as deterministic is, in our opinion, misguided. However, it does provide a useful framework for thinking about how to manage organizational structures as a business grows, and to ensure awareness that over time these have to adapt to stand any chance of surviving long term. Of course, not all businesses make it through the phases described above, victims of “creative destruction” or an inability to adapt. If one looks at the (re)insurance industry, one can see that it contains members which exhibit the characteristics of the various phases, from start-ups to global businesses, as well as those which have somehow become “stuck”, which brings into question whether the might succumb to the next “revolution”.

At Awbury, we have deliberately grown carefully and incrementally since being established some 7 ½ years ago, while adapting our business model to changes in markets and opportunities; and we are very well aware that we will have to continue to adapt and evolve over time to meet the challenges and disruptions that face all businesses in a complex industry such a (re) insurance. We have no intention of being overrun by any revolution!

The Awbury Team

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