To plan change, managers must predict and diagnose the need for change. An organizational development theory developed by Larry E. Greiner is helpful in change management. Greiner's model shows an organization as it evolves through the five stages of growth, and the end of each of these stages is marked by a crisis that calls for a change. The five stages of growth are as follows:
- Creativity. The founders of the organization dominate this stage, and the emphasis is on creating both a product and a market. But as the organization grows, management problems occur that cannot be handled through informal communication. The founders find themselves burdened with unwanted management responsibilities, and conflicts between the employees and management grow. It is at this point that the crisis of leadership occurs, and the first revolutionary period begins.
- Direction. During this period, a strong manager, who is acceptable to the founder and who can pull the organization together, is appointed. During this phase the new manager and key staff take most of the responsibility for instituting direction, while lower level supervisors are treated more as functional specialists than autonomous decision‐making managers. Lower level managers begin to demand more autonomy, and the next revolutionary period begins.
- Delegation. This stage often poses problems for top managers who have been successful at being directive: They may find giving up responsibility difficult. Moreover, lower level managers generally are not accustomed to making decisions for themselves. As a result, numerous organizations flounder during this revolutionary period, adhering to centralized methods, while lower level employees grow disenchanted and leave the organization.
When an organization gets to the growth stage of delegation, it usually begins to develop a decentralized organization structure, which heightens motivation at the lower levels. Eventually, the next crisis begins to evolve as the top managers sense that they are losing control over a highly diversified operation. The crisis of control results in a return to centralization, which is now inappropriate and creates resentment and hostility among those who had been given freedom.
4. Control.This stage is characterized by the use of formal systems for achieving greater coordination, with top management as the watchdog. It results in the next revolutionary period, the crisis of red tape. This crisis most often occurs when the organization has become too large and complex, and is managed through formal programs and rigid systems. If the crisis of red tape is to be overcome, the organization must move to the next evolutionary phase.
5. Collaboration.The last of Greiner's phases emphasizes greater spontaneity in management action through teams and the skillful confrontation of interpersonal differences. Social control and self‐discipline take over from formal action. Greiner's model shows uncertainty about what the next revolution of change will be, but anticipates that it will center on the psychological saturation of employees who grow emotionally and physically exhausted by the intensity of teamwork and the heavy pressure for innovative solutions.
To plan change, managers must predict and diagnose the need for change. Greiner's model of organizational growth and change can help managers understand how the need for change relates to the organizational cycles.