dumpster planter with phrase "always room to grow" on side
PHOTO: Kyle Glenn

As an HR professional, tackling problems like hiring, engagement, turnover and productivity can sometimes feel like a constant battle. You put out one fire, only to have another one pop up. HR is the department that is often blamed and charged with finding new solutions, but there's good news — it doesn’t have to be this way.

The Greiner Curve: How Organizations Evolve

Every company has different challenges they are or will be facing at different stages in their growth cycle. While certain learning and development, management training and engagement programs you’ve put in place may achieve amazing results during one phase of growth, at the next point they can become less effective or even obsolete due to the company’s evolving environment and needs.

Having studied the way companies grow and evolve throughout their lifecycle, in 1972 professor of management and organization Larry E. Greiner developed a way to explain and even predict this phenomenon which is still used today. Rather than going through a stable evolution, Greiner proposed companies go through five (an updated version now includes six) phases of growth.

greiner curve

Image source: High Growth Knowledge Company

Each phase of the Greiner Curve is characterized by a period of relatively stable growth followed by a crisis point during which a company has to radically change its processes and way of thinking in order to reach to the next phase. Of course, all companies will evolve at different rates based on their age, size and industry, but Greiner’s theory maintains that whether faster or slower, each company will go through the same evolutionary phases.

how companies grow

When reading through the descriptions of each phase it’s amazing how accurately it describes some of the challenges your own company, or others you’ve worked with in the past, go through.

Understanding each stage of the Greiner Curve will help you understand and anticipate the challenges your company may face at different stages in its growth cycle and prepare a strategic performance management plan that can help you meet these challenges head on.

Related Article: How 3 Companies Benefited by Changing Performance Management 

A Performance Management Plan for the 6 Phases of Growth

Here we’ll go through the six phases, the associated crisis points, and provide advice on how you can shape your performance management plan at each phase.

Phase 1: Creativity

The first phase of growth is characterized by a strong focus on creating a product and finding a market for it. At this early stage there are few employees, mostly made up of founders and other early stage hires who are motivated more by growth than salaries (there usually not being much funding to provide high salaries anyway).

As all activities are mainly product- and market-focused, it’s highly unlikely any formal people processes are in place yet and most likely the company doesn’t yet have someone whose sole focus is on HR. At such a small size, informal communication and a very flat organizational structure suffices as opposed to formal performance management processes and manager-employee relationships.

Crisis Point: Crisis of Leadership

The crisis point occurs when, through the success of this fast intensive growth, the company has the funds and the need to hire more people with more extensive knowledge in each field. Instead of having one person doing customer success, office management and HR, you begin to hire individuals who can take on each of these responsibilities. However, with new hires there’s a need to start putting more formal processes in place.

To get to the next phase we suggest:

  1. Clearer team dileniations, with team leads who can communicate wider company objectives and keep individuals on track and motivated.
  2. Regular all hands meetings to share company info and vision including Q&A (still small enough to do so).
  3. The beginnings of a performance management process to distribute salaries, bonuses, train new managers, support learning and development, and ingrain new values and culture.

Phase 2: Direction

At this phase, the company introduces a management structure and more formal processes, giving the new body much-needed direction. The crisis point occurs when the very structures that were developed to provide this direction become restrictive to the employees working under them.

Crisis Point: Crisis of Autonomy

According to Greiner, this process can cause many employees to become frustrated with what is seen as a lack of autonomy due to a rigid decision-making structure. This can potentially result in high turnover. To overcome this challenge, the organization needs to begin paving the way for the redistribution of responsibilities by providing people with the tools, knowledge and structure they need to act autonomously.

To get to the next phase we suggest:

  1. Focus management trainings on setting clear expectations and goals. Turn managers into coaches.
  2. Include upward feedback in performance reviews. Help managers become better leaders by giving them insights on their leadership skills directly from their team.
  3. Introduce real-time feedback — people have autonomy to make decisions but can ask their managers for advice when they need it.
  4. Avoid turnover by introducing engagement surveys. How do people actually feel about company structures and processes? How can they be improved to work more effectively for your people?

Related Article: A 3-Pronged Approach to Employee Feedback

Phase 3: Delegation

At this stage, the company achieves greater agility as greater autonomy allows people to respond quickly to shifts in the market.

Crisis Point: Crisis of Control

However, at the same time executives start to feel they’re losing control as more and more decisions are being made at lower levels. With this greater more decentralized autonomy, a crisis occurs when the business realizes there needs to be a more coordinated system for decision-making to avoid the creation of silos and ensure the organization is moving in the same direction towards coordinated goals.

To get to the next phase we suggest:

  1. Opening up communication flows between teams and units.
  2. Include 360-degree feedback in performance reviews. At this stage peers may have more insightful development advice for each other than managers. This move acknowledges employee expertise and keeps everyone accountable.
  3. Make company, team and individual goals open and transparent to everyone in the organization improving alignment and again increasing accountability of individual units.

Phase 4: Coordination

During this phase interdisciplinary teams, product-focused groups and formal planning structures are introduced to take on challenges through a coordinated response from different sides of the business. Further control is exercised over these decentralized units by allocating funds based on their ability to prove return on invested capital. Keeping the purse strings tight keeps them in line and aware of the need to justify how their strategies work towards the overall company strategy.

Crisis point: Red-tape crisis

However, this increased bureaucracy eventually begins to stifle creativity and innovation. While during the previous phase the need for greater alignment pushed through the creation of formal processes, eventually these processes become a barrier.

At this point a major culture shift is needed. Instead of relying on rigid structures to keep the organization aligned, the next phase is characterized by self control through the creation of behavioral norms.

To get to the next phase we suggest:

  1. Help managers and employees develop the soft skills needed to work together by introducing an open feedback culture.
  2. Provide training to help people learn how to express and accept feedback effectively.
  3. Motivate people to share praise and recognition regularly through habit forming processes.

Related Article: What's the Risk of Innovation?

Phase 5: Collaboration

A much more flexible system emerges in which interdisciplinary teams are created to respond quickly and effectively to challenges. The interdisciplinary nature of these teams means there is less need to rely on rigid processes of coordination. The team becomes the most important unit with rewards focused on team, rather than individual, achievement. However, they can only work with a high degree of psychological safety being formed.

The autonomy needed for true creativity and innovation is present but actions are regulated through a greater emphasis on developing the behavioral and communication skills needed to navigate conflict and interpersonal relationships effectively.

Crisis point: Crisis of Identity

At a certain stage in a company’s development, it simply cannot achieve the growth it needs internally. This is when companies begin reaching externally to form mergers, acquisitions and partnerships. However, an identity crisis occurs when, through these large-scale changes, the existing culture and values begins to become diluted.

To get to the next phase we suggest:

  1. Strengthening and reinforcing values and culture through values-based performance reviews and engagement surveys.
  2. Create an onboarding program which includes feedback training, especially for new management.

Phase 6: Alliances

At this stage a company continues growing through mergers, acquisitions and partnerships, while focusing on maintaining a healthy culture and strong set of values.

Create a Strategic Performance Management Plan

Each company will experience these phases at a different pace depending on their unique conditions — and may even experience them in a different order. The key takeaway here is you don’t have to operate in a constant state of flux. Studying the Greiner Curve allows you to identify the signs and anticipate when your organization is beginning to go through a crisis point. 

This knowledge empowers you to go on the offensive, creating a strategic performance management plan that can address your workplace’s current needs and create a smooth transition to the next phase.