In the entrepreneurship phase, the organization is usually very small and agile, focused on new products and markets. Founders typically take on a variety of responsibilities and communicate frequently and informally with all employees. Employee relationships are very informal, work assignments are flexible, and the organization usually has a loose, organic structure.

Entrepreneurship Phase of the Organizational Life Cycle

In the survival and early success phase, the organization scales up and finds continuing success. It develops more formal structures around more specialized job assignments, adopts incentives and work standards, and communication shifts to a more formal tone with the introduction of upper- and lower-level managers. Personal relationships among every employee become impossible, and mechanistic structures are appropriate at this stage to support the standardization and formalization needed for effective coordination across the organization.

Survival and Early Success Phase of the Organizational Life Cycle

In the sustained success or maturity phase, the organization expands and the hierarchy deepens with multiple levels of employees. Lower-level managers gain greater responsibility, and top executives rely almost exclusively on them to handle administrative issues so executives can focus on strategic decisions affecting the overall organization. The mechanistic structures of the organization are strengthened and functional structures may be introduced. Tension often emerges over how to balance mechanistic bureaucracy with the innovation and flexibility associated with organic structure.

Sustained Success or Maturity Phase of the Organizational Life Cycle

The transition to the renewal or decline phase occurs when an organization expands to the point where its operations are far-flung and need to operate somewhat autonomously. Functional structures become almost essential, and subunits may begin to operate as independent businesses. Tensions between mechanistic and organic inclinations can fall out of balance, so the organization must be reorganized or restructured to achieve higher levels of coordination between and among different groups or subunits. Managers may also need to address fundamental questions about the organization's overall direction and administration.

Renewal or Decline Phase of the Organizational 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.

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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

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

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.

Differentiation During Organizational Growth

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

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