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Four stages of organizational growth

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Organizational stages of growth

Introduction

As an organization grows, it generally progresses through four stages of increasingly formal management structures.

Click on the links for Stages 1, 2, 3 and 4 below to read more about these stages.

Stage 1

In a one-person operation, the owner does everything: sales, bookkeeping, marketing, production and so on. Many firms remain one-person operations indefinitely due to the owner's family obligations, financial constraints, or contentment with the status quo.

Stage 2

As more people join an organization, the business owner becomes a player-coach. The entrepreneur continues to perform day-to-day tasks, but along with other employees. So the owner assumes additional employee management duties such as hiring, scheduling, supervising, and payroll.

Stage 3

Firms reach a major milestone in organizational development when they add an additional level of supervision. The owner relinquishes some direct control and begins working through an intermediary layer of professional managers.

Stage 4

As a company adds more layers of management and processes, it also adopts written policies, budgets, standardized personnel practices, organizational charts, job descriptions, and control protocols.