The Business Book

59

See also: Beating the odds at start-up 20–21 ■ Take the second step 43 ■ How fast to grow 44–45 ■ From entrepreneur to
leader 46–47 ■ Keep evolving business practice 48–51 ■ The weightless start-up 62–63

illustrated on a graph that came
to be known as the Greiner Curve.
He noticed that companies of all
types go through periods of growth
followed by inevitable crises, when
major organizational change is
needed to maintain momentum.

Stages of growth
Greiner initially identified five
stages of growth, but later added
a sixth. The first of these stages is
“growth through creativity.” During
this stage, the start-up is small and
growth is fueled by the enthusiasm
of its founders. Management
procedures, communications—and
even interactions with customers—
are usually informal and ad hoc.
However, as more staff joins and
production expands, more capital

will be required (perhaps from banks

or venture capitalists), and the need

for formal systems and procedures

increases. The founders—who

are likely to be technically or

entrepreneurially oriented—find

themselves faced with their first

crisis, as they become burdened by

management responsibilities that

they are ill-equipped to deal with.

This first crisis is therefore one of

leadership: who will lead the

company out of confusion and solve

the new management problems?

Change of leadership required for

phase two may only be a question of

internal reorganization and a change

in style, abandoning the casualness

of the company’s early days in favor

of greater formality and more rigid

systems and procedures. But in

many cases the original founders

have neither the skills nor the desire

to take on more formal leadership.

In 2002, chef Jamie Oliver founded

Fifteen, a chain of restaurants that

also provide training opportunities

for disadvantaged young people.

As the chain grew, he handed over

the management to a CEO, so that

he could return to doing what he

does best: being a commercially

successful celebrity chef.

Under professional managers,

business growth continues in

an environment of more formal

structures and budgets, and with

the establishment of separate

functions, such as production

and marketing. This is the second

stage of growth, known as “growth

through direction.” As the new ❯❯

START SMALL, THINK BIG

Start-ups are

exciting places

to work...

...but growth

brings inevitable

crises.

These crises are

predictable and can

be managed by using

the Greiner Curve.

The Greiner Curve
illustrates the six
stages of growth that
any company might
undergo during its
development. Each
growth phase
generates a crisis,
the resolution of
which leads to the
next growth stage.

Phase 1

Growth

through

creativity

Phase 2

Growth

through

direction

Phase 3

Growth

through

delegation

Phase 4

Growth

through

coordination

Phase 5

Growth

through

collaboration

Phase 6

Growth

through

alliances

TIME

SIZE OF ORGANIZATION

Crisis 1:

Leadership

Crisis 2:

Autonomy

Crisis 3:

Control

Crisis 4:

Red tape

Crisis 5:

Growth