The Greiner Curve

Fast-growing companies can often be chaotic places to work.

As workloads increase exponentially, approaches which have worked well in the past start failing. Teams and people get overwhelmed with work. Previously-effective managers start making mistakes as their span of control expands. And systems start to buckle under increased load.

While growth is fun when things are going well, when things go wrong, this chaos can be intensely stressful. More than this, these problems can be damaging (or even fatal) to the organization.

The "Greiner Curve" is a useful way of thinking about the crises that organizations experience as they grow.

In this article, we'll learn more about the Greiner Curve, and how you can use it to understand the root cause of the problems you're likely to experience in a fast-growing business, as well as how to prevent them.

What Is the Greiner Curve?

The Greiner Curve (shown in figure 1, below) describes the different phases that organizations go through as they grow. All kinds of organizations – from design shops to manufacturers, construction companies to professional service firms – experience these.

Each growth phase is made up of a period of relatively stable growth, followed by a "crisis" when major organizational change is needed if the company is to carry on growing.

Figure 1. The Greiner Growth Model

Reprinted by permission of Harvard Business Review. From "Evolution and Revolution as Organizations Grow" by Larry E. Greiner, May 1998. Copyright © 1998 by the Harvard Business School Publishing Corporation; all rights reserved.

Although the word "crisis" is often linked to a state of panic, it can also mean "turning point." While companies certainly have to change at each of these points, if they properly plan ahead, there is no need for panic, and so we will call them "transitions."

The Six Phases of Growth

Larry E. Greiner originally proposed the Greiner Curve (also known as the Greiner Growth Model) in 1972 with five phases of growth. In 1998, he added a sixth phase in an updated version of his original article. [1]

The six growth phases are described below:

Phase 1: Growth Through Creativity

Here, the entrepreneurs who founded the firm are busy creating products and opening up markets. There aren't many staff, so informal communication works fine, and rewards for long hours are probably through profit share or stock options.

However, as more staff join, production expands and capital is injected, there's a need for more formal communication   .

This phase ends with a Leadership Crisis, where professional management is needed. The founders may change their style and take on this role, but often someone new will be brought in.

Phase 2: Growth Through Direction

Growth continues in an environment of more formal communications, budgets and focus on separate activities like marketing and production. Incentive schemes replace stock as a financial reward.

However, there comes a point when the products and processes become so numerous that there are not enough hours in the day for one person to manage them all, and they can't possibly know as much about all these products or services as those lower down the hierarchy.

This phase ends with an Autonomy Crisis in which new structures based on delegation   are needed.

Phase 3: Growth Through Delegation

With mid-level managers freed up to react faster to opportunities for new products or new markets, the organization continues to grow. Meanwhile, top management focuses its efforts on monitoring and dealing with the big issues (perhaps starting to look at merger or acquisition opportunities).

Many businesses flounder at this stage because the manager whose directive approach solved the problems at the end of Phase 1 finds it hard to let go of the control they've assumed. This can mean that the mid-level managers begin to struggle with their roles.

This phase ends with a Control Crisis. A much more sophisticated organizational design   is required, so the separate parts of the business can work together more effectively.

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Phase 4: Growth Through Coordination and Monitoring

Growth continues with the previously isolated business units re-organized into product groups or service practices. Investment finance is allocated centrally and managed according to Return on Investment (ROI) and not just profits. Incentives are shared through company-wide profit share schemes aligned to corporate goals.

Eventually, though, work becomes submerged under increasing amounts of bureaucracy, and growth is stifled as a result.

This phase ends on a Red-Tape Crisis: a new culture and structure   must be introduced.

Phase 5: Growth Through Collaboration

The formal controls of Phases 2-4 are replaced by professional good sense, as staff group and re-group flexibly in teams to deliver projects in a matrix structure which is supported by sophisticated information systems and team-based financial rewards.

This phase ends with a crisis of Internal Growth: further growth can only come by developing partnerships   with external, complementary organizations.

Phase 6: Growth Through Extra-Organizational Solutions

Greiner's recently added sixth phase suggests that growth may continue through mergers, outsourcing, networks, and other solutions involving external companies.

Growth rates will vary between and even within phases. The duration of each phase depends almost totally on the rate of growth of the market in which the organization operates. The longer a phase lasts, though, the harder it will be to transition to the next phase of growth.

Applying the Greiner Curve

The Greiner Growth Model helps you to think about your own organization's growth trajectory, and plan ahead so you can overcome each growth crises that affects it.

To apply this model, use the following five steps:

1. Based on the descriptions above, think about where your organization is now.
2. Think about whether your organization is reaching the end of a stable period of growth, and nearing a 'crisis' or transition. Some of the signs that a "crisis" is occurring include:
   • People feel that managers and company procedures are getting in the way of them doing their jobs.
   • People feel that they are not fairly rewarded for the effort that they put in.
   • People seem unhappy, and there is a higher staff turnover than usual.
3. Ask yourself what the transition will mean for you and your team. Will you have to:
   • Delegate more?
   • Take on more responsibilities?
   • Specialize more in a specific product or market?
   • Change the way you communicate with others?
   • Incentivize and reward your team differently?
   By thinking this through, you can start to plan and prepare yourself for the inevitable changes, and perhaps help others to do the same.
4. Plan and take preparatory actions that will make the transition as smooth as possible for you and your team.
5. Revisit Greiner's model for growth again every 6-12 months, and think about how your organization's current stage of growth is affecting you and others around you.

Infographic

You can see our infographic on The Greiner Curve here: