As businesses grow, entrepreneurs must cope with changes in the business model and therefore adapt their management style to the organizational structure.
A good example of this can be seen when Control at a company must change as the company grows. In the first stage, it is literally a ‘one-man show,’ but in the second stage the control must grow beyond one man.
Stage One companies are typified by an entrepreneur who launched the company to promote an idea, product or service. As such he or she makes all of the important decisions personally and wants to be (as he or she should) involved in every detail. And in this role, the structure is a ‘top down’ with most of the employees (at least in the very beginning) reporting directly to the entrepreneur.
There is usually less planning and the result is a lot of ‘last minute’ action to make something happen. However, this same weakness in planning. becomes a strength when it comes to being dynamic and flexible.
Stage Two businesses have grown and the entrepreneur is replaced by functional managers. This transformation can be very difficult for some entrepreneurs since they should relinquish decision making responsibilities to these managers so that more work can be done faster.
Stage Three business are typically much larger and are in more than one type of industry and geographical area. This means that there are multiple divisions, with multiple product lines and product mixes. In order to manage this type of organization, the company centralizes its authority over the other regions and/or divisions. The headquarters manages the operation using different performance results oriented goals.
At this point, i.e., stage three, the strength of the organization is the amount of resources yet can include specialization. However, it is on the opposite side of the spectrum to the entrepreneur when it comes to complexion and flexibility.
Below is a table discussing business stages and the opportunities at each stage.
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