It is important to note that each phase is at once a result of the previous phase and a cause for the next phase. 

Phase 1: Growth Through Creativity

In the birth stage of an organization, the emphasis is on creating both a product and a market to get the company off the ground. Everything else – communication, processes, wages, etc are on a need-to-do basis which, as the company grows, become the problem. The company’s founders find themselves burdened with unwanted management responsibilities. 

This phase ends with a Leadership Crisis, where professional management is needed. The founders may change their style and take on this role, but often someone new will be brought in.

Phase 2: Growth Through Direction

Those companies that survive the first phase by installing a capable business manager usually embark on a period of sustained growth under able, directive leadership.

Although the new directive techniques channel employees’ energy more efficiently into growth, they eventually become inappropriate for controlling a more diverse and complex organization. They are torn between following procedures and taking initiative on their own.

This phase ends with an Autonomy Crisis: New structures based on delegation are called for.

Phase 3: Growth Through Delegation

The next era of growth evolves from the successful application of a decentralized organizational structure. The delegation phase allows companies to expand by means of the heightened motivation of managers at lower levels.  Top-level executives sense that they are losing control over a highly diversified field operation. Freedom breeds a parochial attitude. Too much autonomy!

This phase ends with a Control Crisis: a much more sophisticated head office function is required, and the separate parts of the business need to work together.

Phase 4: Growth Through Coordination and Monitoring

The evolutionary period of the coordination phase is characterized by the use of formal systems for achieving greater coordination and by top-level executives taking responsibility for the initiation and administration of these new systems. For example, decentralized units are merged into product groups. The many systems and programs introduced begin to exceed their usefulness. A red-tape crisis is in full swing.

This phase ends on a Red-Tape Crisis: a new culture and structure must be introduced.

Phase 5: Growth Through Collaboration

Phase 5 emphasizes spontaneity in management action through teams and the skillful confrontation of interpersonal differences.

This phase ends with a crisis of Internal Growth: further growth can only come by developing partnerships with complementary organisations. This transition is especially difficult for the experts who created the coordination systems as well as for the line managers who relied on formal methods for answers. The Phase 5 evolution then builds around a more flexible and behavioral approach to management.