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Organizational Life Cycles

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Abstract

providing services to citizens. Traditionally these organizations have mainly been local governments and their departments and myriad state and local agencies. More recently, private and nonprofit organizations, via contracting, voucher programs, and other reforms that challenge traditional meanings of the notion of publicness too have become part of the organizational ecosystem providing services to citizens. A constant of organizations, be they public, private, or nonprofit, is change
O
Organizational Life Cycles
Michael R. Ford
University of Wisconsin-Oshkosh, Oshkosh, WI,
USA
Synonyms
Organizational life span;Organizational death
Definition
Refers to the sequence of events from organiza-
tional initiation/birth to death
Introduction
The eld of public administration has, from its
beginnings, concerned itself with the organiza-
tions providing services to citizens. Traditionally
these organizations have mainly been local gov-
ernments and their departments and myriad state
and local agencies. More recently, private and
nonprot organizations, via contracting, voucher
programs, and other reforms that challenge tradi-
tional meanings of the notion of publicness too
have become part of the organizational ecosystem
providing services to citizens. A constant of orga-
nizations, be they public, private, or nonprot, is
change. Scholars of organizational theory explore
the extent to which organizational change over
time is predictable, asking if organizations expe-
rience life cycles in a manner akin to biological
organisms, if organizational fates are governed by
a degree of chaos, and if organizational trajecto-
ries are dependent on sector, context, or politics.
The common thread holding the diverse scholarly
approaches together is the belief that organiza-
tions are a relevant variable in determining the
performance of the public and nonprot sectors.
Hence, organizational life cycle theory has both
explanatory and normative values to the eld of
public administration.
What Is the Study of Organizational Life
Cycles?
Organizational life cycle theory refers to the belief
that organizations behave in predictable ways
between their founding and death. Economist
Kenneth Boulding (1950) pioneered the study of
organizational life cycles in a text arguing that
organizations experience the common stages of
birth, maturation, eventual decline, and death.
An implicit assumption in Boulding is that orga-
nizations, even though they may experience
periods of stability, are inherently unstable. The
birth stage of an organization, under Bouldings
typology, is primarily a struggle to survive. Mat-
uration occurs after an organization has
established a foothold into the marketplace. In
this stage organizations develop external reputa-
tions and internal management systems. The
period of decline, as it sounds, is characterized
#Springer International Publishing AG 2016
A. Farazmand (ed.), Global Encyclopedia of Public Administration, Public Policy, and Governance,
DOI 10.1007/978-3-319-31816-5_15-1
by diminishing efciencies, declining customer
bases, and a loss of protability. Internally orga-
nizations will suffer from misaligned manage-
ment practices that no longer optimally meet the
needs of the organization and its stakeholders. The
death stage is reached when an organization
ceases to exist. It is characterized by an inability
to turn a prot and meet basic operating costs like
payroll and facilities.
Since Boulding proposed his broad typology,
many scholars in the private and public manage-
ment elds have expanded on the various stages
organizations experience over their life spans.
Larry Greiner (1997) argued that organizations
go back and forth between periods of stability
and slow evolution and revolutionary periods of
dramatic change. How and when these periods
occur is a function of ve different dimensions.
The rst dimension is age. Simply, younger orga-
nizations face different challenges and must make
different decisions in response to these chal-
lengers than older organizations. Arguably the
age of an organization is the most important con-
textual factor determining the trajectory of said
organization. The second dimension, size, is also
a contextual factor. Large organizations are
expected to behave differently than smaller orga-
nizations, and it is impossible to make sense of
their trajectories without considering their size. In
studies of local government, for example, it makes
little sense to assume urban and rural government
organization face challenges that are similar in
size and scope.
The third dimension is the presence of rela-
tively stable evolutionary periods lasting 48
years. During the evolutionary periods, an orga-
nizations systems, goals, and customer base
remain mainly consistent, with any changes
being slow and incremental. The evolutionary
dimension is important for the study of organiza-
tional life cycles because it imposes the assump-
tion of stability over a time period. The fourth
dimension is revolutionary periods characterized
by major organizational changes in management
practices, goals, and systems. Revolutionary
periods may be brought on by internal forces
such as employee demands and management
changes or external forces such as new regulatory
requirements, changing customer preferences,
increased competition, or industry disruption.
The revolutionary periods end with the start of
another stable evolutionary period. The fth
dimension is the growth rate of the industry,
which, like age and size, applies the proper con-
text to an organizations trajectory.
The hypothetical example of charter schools
can illustrate how these dimensions might look
in the eld of public management. Charter schools
are independent public schools that operate under
a (usually) 5-year contract with a school district or
independent authorizing entity. The concept
behind charter schools is funding for perfor-
mance, meaning authorizers can cut off funding
to schools that fail to meet performance targets.
As such, charter schools experience high organi-
zational turnover rates. Age, the rst dimension
identied by Greiner (1997), denes the different
periods of a charter schoolsexistence. A new
charter school is ghting for market share,
attracting human capital, and developing organi-
zational norms in its internal and external audi-
ence management practices. Older charter schools
focus on maintaining market share, retaining
human capital, and improving management prac-
tices. Similarly, a large school deals with a more
complex internal bureaucracy and must apply
more formal and layered management practices
and structures and more complex human resource
systems than a small school with limited staff.
In the charter school case, evolutionary periods
would be characterized by the time between
renewals of 5-year contracts. During those periods
schools have a consistent set of goals and plans
imposed by the contract between the organization
and its authorizing entity. Each contract renewal
would change the schools goals and systems,
disrupting one evolutionary period and creating
another. Finally, the level of competition from
other schools, represented by charter school sector
growth rate, would impact the behavior of the
school and its leadership. In a highly competitive
environment, charter schools may need to special-
ize to differentiate themselves and attract students.
In a low competition environment, merely being a
charter school may be enough to attract students.
2 Organizational Life Cycles
Greiner (1997) also created a framework for
mapping the trajectory of organizations, speci-
cally concluding that all organizations traverse
through ve different phases during their life
cycles. The rst phase, creativity, is when a new
organization is creating itself and establishing an
identity through the implementation of its original
management structure and processes. The second
phase is direction, wherein an organization has
established itself as a legitimate actor in the mar-
ketplace and must decide on, and implement, its
growth plan. The third phase, delegation, assumes
a growing complexity within the organization that
requires leadership to begin subdividing tasks and
delegating authority among a system of
department-level managers. Phase four, coordina-
tion, is when management masters the ability to
coordinate delegated tasks between all layers of
management. Finally, in the fth and nal collab-
oration phase, a mature organization begins to
shed some of the bounds of structure and attempts
to overcome the inefciencies, trained incapaci-
ties, and general staleness characterized by what
Merton (1957) called the pathologies of bureau-
cracy. The broad takeaway from Greiners
(1997) framework of dimensions and phases is
twofold. First, context factors as size, age, and
sector shape an organizations behavior in each
phase of its life span. Second, organizations
become more complex over their life spans.
Much of the literature inspired by the work of
Boulding (1950) and Greiner (1997) focuses on
the beginning and end of organizational life
cycles. Lewis and Churchill (1983), for example,
present a framework by which a new organization
must overcome its liability of newness (see
Stinchcombe, 1965) before growing into a mature
stable organization. Their ve phases of organiza-
tional growth are existence, survival, success,
takeoff, and nally resource maturity. Like
Greiners, Lewis and Churchill assume that orga-
nizational behaviors occur at different stages of an
organizationsdevelopment. In contrast, Herbert
Kaufman (1991) offers a critique of the dominant
organizational life cycle literature, arguing that
the success or failure of organizations is attribut-
able to randomness. Kaufman concludes that
organizations survive until they run out of
resources and that organizations may run out of
resources for any number of unpredictable
reasons.
How Can the Study of Organizational Life
Cycles Be Applied?
Despite its origins in the business literature, the
theory of organizational life cycles has frequently
been used in the business, public, and nonprot
sectors to explain the actions of organizations.
Delmar and Shane (2004), for example, explain
how organizations take specic actions such as
legal incorporation and completion of a business
or strategic plan in order to create legitimacy in
the eyes of internal and external stakeholders.
Their basic argument is that legitimacy is a key
factor in overcoming the liability of newness
problem and that early-stage organizations gener-
ally take actions aimed at creating legitimacy in
the eyes of stakeholders.
Lecy and Searing (2015) apply organizational
life cycle theory to the nonprot sector, conclud-
ing that young nonprots are prone to
underestimating their infrastructure expenses.
Why? The pressure from donors and managers
to demonstrate low overhead costs results in busi-
ness and strategic planning that is divorced from
organizational reality. To obtain resources organi-
zations must appear efcient, but underestimating
overhead costs could put the future of the organi-
zation in jeopardy. Hager, Galaskiewicz, and
Larson (2004) also apply organizational life
cycle theory to the nonprot sector, but emphasize
context by focusing on organizational growth in
the single market of St. Paul, MN. Restricting
their study to one sector in a single
market allows them to account for the dimension
of growth rate in an environment where study
organizations face common challenges and serve
similar customers.
Aldrich and Martinez (2001) use organization
life cycle theory to explain how individual entre-
preneurs shape their organizations at different
times in the rms development. As discussed,
previous studies illustrate how contextual factors
including age, time, and competition impact orga-
nizations in predictable ways; Aldrich and Marti-
nez (2001) add entrepreneurial decision making
Organizational Life Cycles 3
as an additional contextual factor worthy of study.
Finally, Ford (2011) applies organizational life
cycle theory to explain the success or failure of
nonprots providing services traditionally pro-
vided by the government sector. Ford concludes
that nonprots highly dependent on government
funding struggle to overcome their liability of
newness in their rst few years of operation.
All of the previously discussed applications
demonstrate the explanatory and normative
power of organizational life cycle theory. As the
use of networks in public service delivery
becomes more commonplace, there is value in
explaining how and why organizations are born,
evolve, and die. Organizational life cycle theory
also has normative value when used by
policymakers to understand how successful orga-
nizations can be created, nurtured, and protected
so as to address societys more wicked problems.
Ford and Andersson (2016), for example, use the
Milwaukee voucher school experience to explain
how policies predicated on predictable organiza-
tional life cycles can be implemented to minimize
the risk of a school failure. Generally, the theory
can be applied to better understand the ecosystems
of organizations providing publicly funded or
subsidized services to citizens.
Conclusion
Understanding the way in which government ser-
vices are provided to citizens is impossibly with-
out understanding the various actors that
coordinate and deliver said services. Government
itself is a vast network of organizations that col-
lectively serve the public whom donate freedom
and treasure to participate in a governed society.
Yet, the way in which services are provided fre-
quently changes. Government agencies are cre-
ated, evolve, and sometimes are eliminated. The
nonprot organizations increasingly involved in
publicly funded service delivery similarly are
born, evolve, and die. Studying organizational
life cycles allows both scholars and practitioners
of public administration to better understand the
common challenges faced by organizations over
their life spans. Better understanding these life
cycles can help policymakers and managers create
stronger organizations that better serve the public.
Cross-References
Life Cycle of Nonprot Organizations
Life Cycle Governance
References
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Boulding KE (1950) A reconstruction of economics.
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Ford M (2011) School exits in the Milwaukee parental
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Delmar F, Shane S (2004) Legitimating rst: Organizing
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Ford MR, Andersson FO (2016) Determinants of organi-
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4 Organizational Life Cycles
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