Organizational Life Cycle Development

Article Review

Submitted by: Md Bilal Shakir (2016PGP033)

For the course: Organizational Development (CBS116301)

Title: An Empirical Investigation of the Organizational Life Cycle Model for Small Business Development and Survival

Author: H. Robert Dodge and John E. Robbins

Journal of Small Business Management; Jan 1992; 30, 1; ABI/INFORM Collection Pg. 27

Introduction 

Organizational Life Cycle Model has been presented in the study. Any life cycle model is based on two assumptions. First one is that regularities will be there in organizational development and they will be segmented into stages. Organizational activities and structures will be different in different stages. Second assumption is that problems may transition from one stage to another or be exclusive to a particular stage only.

An organization goes through 4 stages during its development:

1. Formation: In this stage, an idea is converted into a business. It involves building a team to cater to the demand, get the organization going, develop a strong financial system. Transition to the 2nd stage depends on how the consumers perceive the products, how capable the products are.
2. Early Growth: This stage sees the business establish itself experiencing strong growth. But, some uncertainty still exists and it is imperative for the company to monitor the environment and be flexible with the strategy. Manager exhibits the characteristics of focussing on short – term gains. Maintaining product reliability, matching demand and formalizing organizational structure are the major challenges in this stage.
3. Later Growth: As the company enters this stage, its growth slows down. It is because of the entry of formidable competitors and the lessening gap between the potential market and the active market. Major challenge in this stage is to decide if the firm should expand or keep going as it is. Both the options have their own pros and cons. In this stage, control in the organization is developed.
4. Stability: If a business has reached this stage, it has gained stability and is operating in good condition. Major challenge is to keep the momentum going. Complacency may creep in and it needs to be taken care of. In this stage, entire company’s efforts are needed for its success because by this time the manager is usually out of ideas.

Objective and Hypothesis 

The objective of the study is to identify the problems faced by small businesses in each life cycle stage. The study had a secondary objective too, which was to figure out the importance of each problem so that it can be identified which areas deserve priority attention by the management as the company moves through the life cycle.

Variables which have been considered in the study 

The variables considered in this study are the factors which may impact each stage of the organizational development life cycle. Each factor is a problem faced by the organization and will have different weightage in different stages. The problems considered here are Customer Contact, Market Assessment/Definition, Location, Market Planning, Pricing, Expansion, Competition, Inventory and Cost Controls, Business Planning, Organization Design and Personnel, Production and Facilities, Business Knowledge, Financial Planning, Accounting Systems, and Cash Flow.