Solution 5: Reducing the size of the organisation

Reducing the size of the organisation is sometimes necessary. Especially when the analysis is made that

• the actual size of the organisation is not caused by 'natural' growth, but by incidental (not structural) inflow of money
• the organisation is too big for the work that has to be done.

Organisations develop a sort of 'natural growth'.

What is natural growth?

Organisations have a life cycle with different stages. The pioneer stage is often the first stage. Some organisations will never enter a second stage, because they stay the same, or they simply disappear. This is no drama. In the contrary, it is a natural and sane phenomenon: some organisations go on and survive, some will disappear.

The match between the organisation (its aim and its approach) and the needs articulated in society is the decisive factor. Organisations who match well have a basis for survival. If they enter a next stage in their life cycle this is considered natural growth.

This natural growth is sometimes frustrated by external intervention for instance by donors. Donors normally want to fund organisations because of their programmes and impact. But if donors are confronted with a sellers market (as once was the fact in former Yugoslavia, where donors were crowding each other out) then a unnatural 'inverse' situation may arise. The struggle to be funded becomes a struggle to fund. Donors are seriously looking for organisations to fund, mainly because they have an obligation to spend the in their homeland publicly collected or politically earmarked money. This may lead to an insane situation. The survival and growth of organisations is not caused by success, but by the over-representation of funding. Natural growth is frustrated, and replaced by growth because of abundant money. The main symptom of this unnatural growth is growth in size without accompanying organisational growth. The structural and organisational characteristics of early phases in the life cycle do not develop into ripened structures. The baby is growing but she still has to sleep in the same cradle. The problems that may arise are consequences of this unnatural growth: often professionalisation of workers without professionalisation of the organisation: divisions and subdivisions with a strong central control, discontent among the workers, frustrated management.

In order to understand the unnatural growth we should look at natural growth.

Models of organisational growth.

Some people describe organisational growth in a three phase model, others in a five phase model.

We describe both.

The three phases of the organisational grow model of Scott.

(Scott: Stages of corporate development. Harvard Business School, 1970)

• The first phase is the small organisation with a small number of functions for the most part executed by the owner or founders. Growth takes place by subdivision of the main functions and by developing support services like administration and cleaning and so on. Other services are bought externally.
  • strategic choice: dependent on the personal aspiration of the owner/leader
  • structure: centralised with little internal differentiation.
  • research and development: by owner/leader
  • performance measurement: on a personal and subjective base
  • salary: without system and paternalistic
  • management system: personal
• In the second phase the organisation grows towards a completely departmental organisation. The division of departments will be done on the base of geographic expansion, by market development, or by the development of subdivisions. The size makes it possible to contract own specialists and a technical and support staff is developed.
  • strategic choice: growth of the market, expansion by related products or markets
  • structure: centralised with a lot of internal differentiation.
  • research and development: independent department
  • performance measurement: impersonal, based on technical and economic criteria
  • salary: systematic and objectified
  • management system: delegation
• In the third phase a multi-divisional organisation is developed.

The five phases of the organisational growth of Greiner.

(Greiner: Evolution and Revolution as organisations grow. Harvard Business Review, July-August 1972, 37-46)

Greiner describes organisational development as the alternation of quiet periods of growth and moments of crisis that indicate a new stage. Each evolution creates its own revolution.

Each stage has a typical style of management, each revolution has a typical management problem that should be solved to enter the new stage.

• The first stage, that of the pioneer, is based on creativity. Management is characterised by informality and dedication. The first management crisis, leadership crisis,  shows that the management is no longer able to direct the organisation: the professional management enters the organisation.
• The second stage is characterised by growth within a dirigiste approach. The crisis is created by the lack of autonomy of the workers: the autonomy crisis.
• The third stage is that of the delegation. But top management will gradually feel that control is lacking: control crisis.
• The fourth stage is characterised by reducing the management levels and strengthening of the central technical and support staff. growth by coordination is developing. At the end of this phase a bureaucratic crisis is showing up.
• The fifth stage will be characterised by cooperation. Sometimes based on mutual adjustment (meetings, talking, agreements) ending in a deliberation (consultation) crisis.

Some authors think that maybe a sixth and seventh stage will follow, characterised by business-like management ending up in anidentity crisis, followed by a style of management directed to human and environmental policy.

Absence of natural growth.

An organisation may compare its own growth with the growth models described above. If the organisation is growing in size without organisational growth, one of the symptoms could be a continuing leadership and/or autonomy crisis.

The only solution for the problem of unnatural growth is intentionally reducing the size of the organisation. It is a form of rebirth, making natural growth as yet possible. Not all organisations will survive such a rebirth. It is quite difficult not to see this as a set back. It is like accepting a cut off of salary after a long period of automatic promotion. It requires clear understanding of the dynamics that led to this situation, voluntary cooperation of all the people involved, and an absolute belief in the necessity of the existence of the organisation. Some organisations will not be able to accomplish such a change. But that is not per se a drama. Some organisations will survive, others don't. Such is organisational life.