The Evolution of species (of organizations)

Phase 1: Creativity.

EVOLUTION 1. After the birth of an organization, the emphasis has been on creating products and marketing. The founders usually show a technical orientation and with a certain disdain towards management. Communication between employees is frequent and informal, and long working hours are rewarded with modest wages and the promise of coming benefits.

REVOLUTION 1. But as the company grows, those activities become the problem. Increasing production requires insight into manufacturing efficiencies. An increased number of employees cannot be managed solely through informal communication. New accounting procedures are needed… founders are often overwhelmed by unwanted responsibilities. They yearn for the ‘good old days’ and try to act as they did in the past. Conflicts between leaders emerge and become more intense.

At this point there is a crisis of management, which is the beginning of the first revolution: who will get the company out of the mess and confusion and sort out the management problems it faces?

Obviously, a strong manager is needed, who has the necessary knowledge and skills to introduce new business techniques. But finding it is easier said than done. Founders are often reluctant to step aside, and this is the critical first option: locate and allocate a strong manager who is acceptable to the founders and who can bring the organization together.

Phase 2: Direction.

EVOLUTION 2. Those who survive the first phase generally embark on a period of sustained growth under capable managerial leadership. The evolution is characterized by having a functional structure to separate manufacturing activities from marketing activities, and work assignments become more specialized. Incentives, budgets, and standard operating procedures are adopted. Communication becomes more formal and impersonal as the hierarchy of titles and positions grows.

The new manager and his supervisors take accountability for ‘instituting’ the lost management; lower-level supervisors are treated more like functional specialists than autonomous decision makers.

REVOLUTION 2. Over time, unit directors become inappropriate to control a more diverse and complex organization. Employees are constrained by a cumbersome, centralized hierarchy. They gather more direct knowledge and feel torn between following procedures or taking the initiative on their own.

Thus, a crisis of autonomy arises. The adopted solution is usually to move towards greater delegation. However, it is difficult for high-level managers to hand over responsibility to lower-level managers.

As a result, many companies fail as they adhere to centralized methods, while lower-level employees become disillusioned and leave the organization.

Phase 3: Delegation.

EVOLUTION 3. This phase begins with the successful implementation of a decentralized organizational structure, in which greater responsibility is given to managers of plants and market territories. Bonuses are used to motivate employees, and top management focuses on acquiring companies that can be aligned with other decentralized units. Communication from above is uncommon and usually occurs by mail, phone, or short visits.

This phase allows companies to expand through the increased motivation of lower-level managers, who have greater authority and incentives, and can penetrate larger markets, respond faster to customers, and develop new products.

REVOLUTION 3. However, a serious problem arises when senior executives feel they are losing control over a highly diversified operational field.

Autonomous field managers prefer to take their own actions without coordinating plans, budget, technology, or personnel with the rest of the organization. Freedom breeds a narrow-minded and backward attitude.

It soon evolves into a crisis of control as top management seeks to regain control of the company.

Those companies that move along this phase find a new solution in the use of special coordination techniques.

Phase 4: Coordination.

EVOLUTION 4. This period is characterized by the use of formal systems or protocols to achieve greater coordination and by high-level executives who assume the implementation of these new systems.

Some examples are changes from operational business units to product business units, formal planning procedures that are heavily reviewed, hiring large numbers of control and supervisory staff, capping capital expenditures, treating each unit as a cost center, centralized data processing, etc. At this point, stock options and dividend payments are used to encourage employees to identify themselves with the organization.

These systems are useful for achieving growth through more efficient allocation of resources. And they encourage field managers to look beyond their units. And while they still have a lot of decision-making responsibilities, they end up learning how to justify their actions more carefully to a watchdog audience at the headquarters.

REVOLUTION 4. However, gradually a lack of trust is generated between the headquarters and the branches. The numerous systems begin to exceed their usefulness, leading to a bureaucratic crisis, causing widespread criticism of the system. Procedures are prioritized over problem solving, innovation fades and the organization is too large and complex to be managed through formal programs and rigid systems. The Phase 4 revolution is underway.

Phase 5: Collaboration.

EVOLUTION 5. The last observable phase emphasizes strong interpersonal collaboration in an attempt to overcome the crisis of bureaucracy. Spontaneity in management actions through teams, and skillful confrontation of interpersonal differences are emphasized. Social control and self-discipline replace formal control. This transition is especially difficult for the experts who created the coordination systems, as well as for those who relied on formal methods to provide answers.

There is a more flexible and behavioral approach to management, characterized by fast problem solving through teams, which combine themselves across roles to handle specific tasks.