The crisis of red tape is resolved by increased informal collaboration. Control is cultural rather than formal. Growth is encouraged though participation and mutual goal setting. Managers focus on problem-solving activities, which ensure the organization’s survival but also emphasizes innovation for continued growth. The leadership style should encourage collaboration and co-operation, whilst managers focus on long-term high-level strategic development matters.
The first phase of growth is achieved by some creative idea, product or service which enables the organization to become established in the market place. This is essentially the first part of the S-curve hypothesis and the first stage of the organization life cycle. Eventually, however, a crisis occurs when the entrepreneur’s informal and personal approach to managing the business simply cannot cope with its increased size: this is crisis of leadership.
If the organization and the entrepreneur can adopt more formal of management, there will be a basis for further growth though direction. This period of growth will last for a considerable period if the organization is growing slowly, but will be short-lived for the rapidly growing organization. In both cases a crisis situation will eventually arise, because the organization has reached a size where the slowness and costs of making decisions in a centralized way through the formal hierarchy are proving to be major stumbling blocks: there is a crisis of autonomy.
Only if ways are found of operating in more decentralized way will the crisis of autonomy be overcome. Decentralisation will involve the owner and senior managers delegating powers of decision-making to members of the organization closer to the customers or production processes than they are. There will almost certainly be reluctance to do this, because of the perceived risks involved, but it is essential, if the crisis is to be solved, to permit growth though delegation.
Delegation should permit quicker and more effective decision-making. In this way further growth can be achieved. And the organization is very likely to achieve some of this by diversifying into areas of business. The next crisis will be when senior managers start to fear that they losing control l over the highly decentralized and diversified organization. They have to find a solution that does not involve reverting to their earlier directive methods.
The solution to the crisis of control usually involves the implementation of more sophisticated management accounting information systems to permit effective monitoring of decisions without the need to intervene in actually making them all. Other actions may be to introduce product groups and formal planning procedures to improve co-ordination. These actions will facilitate growth through co-ordination in phase 4.