As an organization grows, rising workload creates a need for more workers, and employees begin to specialize. Differentiation organizes employees into groups focused on specific organizational functions.

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The organizational life cycle model describes how an organization's patterns and structures evolve over time, through four predictable phases, as it grows or declines. Different structures are needed at different stages of development.

Organizational Life Cycle

OpenStax Organizational Behavior. Source pages used for organizational culture and organizational change topics. https://openstax.org/books/organizational-behavior

Organizational Behavior - OpenStax

A key insight of the organizational life cycle is that the needs of an organization will evolve over time, and the needs of its employees will also change.

Evolving Organizational Needs Across the Life Cycle

As an organization grows or declines, its patterns and structures evolve through four predictable phases: entrepreneurship; survival and early success; sustained success or maturity; and renewal or decline.

Four Phases of the Organizational Life Cycle

Many organizations begin as very small systems with loose structures. In a new venture, employees may contribute across many parts of the organization's work.

Early Loose Structures in New Organizations

Differentiation During Organizational Growth

Within the organizational life cycle, employees' needs also change over time.

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