So far, we have discussed what growth is, how to achieve it, ways to protect it, and the responsibilities that come with it. Yet, we have not reflected on the organizational internal growth process and, most of all, if, in the end, this growth is worth all the energy spent. In other words, it is virtually impossible to preclude the inevitable organizational problems that growth brings about! Then, is growth worthwhile? To me, the simple answer is YES! But that is just me, a person happy to live, learn, and seek happiness in the little things. Growing, for me, is a part of the journey.

I have written in my previous reflections that an organization is like a living organism and that growth is a natural process as much as birth and death. I have also compared the group of individuals who run a company to Aristotle’s writings on the soul of an organism. I can now dive into the growth process and look at the “soul” as an intrinsic part of the organism, which we call an organization or company. As individuals are what form this “soul,” I wonder how their personal “needs and wants” affect the organization’s growth. Also, as the growth process can be long and last generations, how does the change in the individuals who compose the soul affect or hinder growth? Can this be overcome? I believe that thinking about these questions will help me understand why organizations have a desire to grow and also why this process is so complex. 

I am often curious about how entrepreneurs can take an idea and turn it into a profitable business. Moreover, how these small companies may turn into giant corporations. Often, we see these entrepreneurs leaving and often through what seems to be a takeover by other stakeholders. Although Penrose explains the dynamics and necessities of the management team in order to grow, Greiner focuses his article on the phases of growth and that within these phases, there are moments of evolution, which lead to revolutions that pave the way to the next stage’s evolution phase. As Greiner’s ideas are more focused on what the management team needs to do according to the organization’s phase, we can draw similarities to human growth. At each stage of our life, our needs as individuals change. For example, as a baby, we need more care, and as we grow and become more independent, we as young teens might rebel against strict parents as the need for care changes to a need for guidance. For Greiner, these changing needs generate internal conflicts, and companies that can surpass this revolution stage will enjoy a period of growth in the next stage until a new revolution happens. This, in my opinion, happened to Lincoln Electric through its global expansion. As Lincoln was enjoying a period of evolution, Willis’s desire to become global caused turmoil and even a period of financial instability. Once Hastings became the new CEO, understood the issues at hand, circumvented the situation, and regained the trust of its people, Lincoln was able to return to an evolution stage of growth with a better handle on the tumultuous realm of globalization as coined by Hastings.

At each stage, there are not only structure changes, but the people involved must also change. This fascinating concept would explain why so many entrepreneurs give up the top seat after the organization enjoys some growth to act only as a shareholder or board member. If these individuals cannot grow and change their focus and style through this growth process, they need to step aside, so it does not affect the company’s future. The hiring of Eric Schmidt to be Google’s CEO is a great example. One could explain that Larry and Sergey’s later return was due to their maturity and how they were now more prepared to retake control. Still, Greiner could say that not only they have changed and matured, but Google was also at a different stage, where Schmidt was no longer the best fit. Google then needed Larry and Sergey again at the top for some time, until they left to focus on AlfabetInc.

As one person might act as a leader, they do not control most companies alone, especially once they start achieving growth. The word team in the management team is vital as this unit shapes and stirs a company through its journey. Penrose explains how the management team’s experience is crucial to the growth process. This team is responsible for finding imbalances and managing the expansion process. As described by Penrose, the management team needs to accumulate more functions to expand, which can also be the limiting factor for growth. Therefore, this team needs to expand itself to achieve growth. One of the challenges of growing the management team is that this expansion requires experience, but on the other hand, to gain experience, the new managers need time. This conflicting process described by Penrose ends up limiting expansion or, in my opinion, in many cases causing companies to fail or “grow out of business.” By joining these ideas, I can only conclude that Penrose’s description of the expansion process happens during the evolution phase that Greiner proposes. Once this condition is satisfied and the organization is in a smooth evolution, what Mintzberg defines as the political arena starts influencing the process, and it enters the revolutionary phase.

Going back to the idea that individuals form the company, it is natural that conflicts will arise. We can establish that each member of the company, as an individual, be it a manager or subordinate, has a personal objective that has to align with the company’s strategy. The difficulty, I believe, comes from everyone having a common view of where the company should be heading and how to achieve this common goal. Strategy and vision become very important, but communication becomes crucial. This failure to align personal objectives, shared goals, and company strategy can lead to dysfunctional politics. There is no doubt that political games are ongoing in any organization, but I would say that in order for the evolution phase to be smooth, there must be moderate conflicts. Surely this can be observed in the Ross Perot case, how different views of how the company should proceed caused internal feuds. Once again, combining ideas from both authors, we can consider that as the evolution process gets to its final natural stage, the company needs to shift its view, correct its path, and sometimes define a new objective. This, in turn, can create significant disagreements that could foster political games intended to effect organizational change, such as what Mintzberg classifies as Strategic Candidates and even Rival Camps within top management. According to Greiner, this political turmoil, if resolved, will elevate the organization to a new evolution stage. This process should repeat itself until this organization, due to its managers, cannot overcome the revolution phase. If this company cannot prosper through the next evolution phase, it will result in death or a severe downsize, as we have seen from GE in the last few decades.

I conclude from these readings that what makes an organization grow from an entrepreneur’s idea is its ability to align personal goals with company objectives. As company goals change due to the organization’s size and place in the environment, so must its managers. If we think about individuals and the functioning of the human mind, we can also wonder, if the only certainty a person has is that they will die someday, why do we choose to live fully and sometimes intensely? Why do we search for forever happiness if we will not escape death someday? These personal feelings are innate to humans, and growth is the journey. If, as individuals, we manage companies, it is natural that we transfer these personal feelings to everything we do. Therefore, it is not a matter of if it is worth growing. By now, I have realized that growth is a natural process and that regardless of the outcome, we must go through it. Only through change and knowledge can we extend life and make it worthwhile, even if the end is certain.

Credit: The original work for this article was done for ADM730 – Fundamentals of Strategic Thinking @ COPPEAD – Universidade Federal do Rio de Janeiro in June 2022

References:

• Penrose, E. (1959) The Theory of the Growth of the Firm, Oxford University Press, chap. 4.
• Greiner, Larry (1998) Evolution and Revolution as Organizations Grow. Harvard Business Review, May-June 1998, p. 55-67.
• Mintzberg, H. (1985) The Organization as Political Arena. Journal of Management Studies, vol. 22, n. 2, p. 133-154.