Organizational Life Cycle: Definition, Models, and Stages
What if you had a detailed guide to help you navigate the entire journey an organization goes through? That’s exactly what an organizational life cycle gives you. And HR plays an essential role in helping the organization through each stage.
No two organizations are the same, so there’s no single blueprint for success—each one follows its own path shaped by people, timing, and context. However, understanding the organizational life cycle gives you a stronger understanding of how the business functions at each stage, how you can work through roadblocks and optimize each stage, and ensure the organization continues to thrive in periods of change.
In this article, we’ll explore the five organizational life cycle stages, how organizations experience these life cycles, how managerial strategies and actions at critical points in an organization’s development determine organizational design and structure, and how HR can shape the life cycle of their organization.
Contents
What is an organizational life cycle?
Organizational life cycle stages
Why is organizational life cycle essential to understand?
Organizational life cycle models
Small business growth models
What impacts the organizational life cycle?
How HR can shape the life cycle of the organization
What is an organizational life cycle?
The organizational life cycle is a concept or model that describes the stage of existence an organization is in based on the changes they experience from initial inception through to growth and maturity, then decline or renewal. Just as living organisms grow and decline in predictable patterns, so do organizations.
Modern sources generally recognize Mason Haire’s 1959 Modern Organizational Theory as the first study that used a biological model for organizational growth.
However, the first historical reference we have of organizational life cycles is Alfred Marshall’s 1890 Principles of Economics, in which he compared organizations to trees in the forest. Marshall described new organizations as seedlings struggling in the shade of their taller neighbors. The few that survive eventually grow tall enough to dominate their neighbors, “and seem as though they would grow on forever,” but ultimately, they decline and fall.
Organizational life cycle stages
Different organizational life cycle models (which we discuss later in this article) define different stages, but we can generally distill five stages from these models: startup, growth, maturity, decline, and renewal. Each of these stages has its own specific challenges and opportunities.
Let’s explore these five stages of the organizational life cycle in more detail, as illustrated in our organizational life cycle diagram below. 
Stage 1: Startup
The startup stage is the initial phase of the organizational life cycle, during which a business is focused on developing a product or service, bringing it to market, attracting early customers, and building revenue.
Challenges at this stage include acquiring funds, building a strong brand, iterating, and refining.
Stage 2: Growth
In the growth stage, organizations expand their operations and expand their customer base, hopefully increasing revenue.
Challenges at this stage include scaling the business, making strategic decisions, and managing and retaining top talent.
Stage 3: Maturity
In the maturity stage, organizations are established in the market and have a solid customer base. Their main focus is maintaining their position.
Challenges at this stage include sustaining profitability, standing out from competitors, and market saturation.
Stage 4: Decline
In the decline stage, an organization may struggle with increased competition, changing consumer preferences, and declining market share. Businesses in this phase must work to discover what’s not working and explore options for restructuring and/or reinvention.
Challenges at this stage include finding the root cause of the decline and people’s resistance to change.
Stage 5: Renewal
This is the final and pivotal stage in the organizational life cycle. The renewal stage provides an opportunity for businesses to transform and revive their growth, leading to long-term organizational success.
Challenges at this stage include uncovering growth opportunities, reimagining business models, and cultivating a culture of adaptability.
Why is organizational life cycle essential to understand?
Here’s how understanding the organizational structure of the life cycle can help HR teams and organizations as a whole.
- Strategic planning: Each stage requires a different strategy to operate effectively. Knowing where the organization stands helps HR practitioners make timely, stage-appropriate decisions that support long-term goals.
- Allocation of resources: Life cycle awareness allows for smarter resource planning. When leaders know what the next stage demands, they can allocate talent, budget, and time more effectively, avoiding both shortages and waste.
- Risk management: Many organizational crises follow predictable patterns tied to human behavior, like overcentralization, loss of innovation, or resistance to change. Understanding the life cycle helps HR and leadership spot these risks early and respond before they escalate.
- Organizational development: Life cycle insights help HR guide the necessary shifts in structure, culture, and workforce strategy—key levers in driving sustainable organizational development.
- Change management: Organizations that recognize change as a constant—and plan for it—navigate transitions more smoothly. Understanding the life cycle helps teams prepare for what’s ahead and avoid being caught off guard.
- A proactive approach: No two organizations follow the same path, but all can benefit from anticipating what’s coming. Life cycle thinking allows leaders to act early, adapt before urgency strikes, and move on at the right time instead of reacting to a crisis.
Organizations don’t fall into decline overnight. Often, the signs, such as rigid structures, clinging to “the way we do things,” and declining innovation, are visible before the crisis hits. When HR and leadership understand what each stage looks like, they can spot those signs early and make the shifts needed to keep the organization moving forward.
As organizations evolve through stages of growth, maturity, and transformation, HR is essential in steering that change.
AIHR’s Organizational Development Certificate Program teaches HR professionals to design impactful interventions, drive culture change, and align organizational design with business strategy at every stage of the life cycle.
Organizational life cycle models
Between the 1960s and the 1990s, scholars and consultants proposed many organizational life cycle models. Although the models have some similarities, there are differences in the perspectives and the research methods.
Here are some of the most well-known models and their organizational life cycle theory.
Lippitt and Schmidt Model
In 1967, Gordon L. Lippitt and Warren H. Schmidt applied personality development theories to the creation, growth, maturity, and decline of a business organization.
Their purpose was to predict the results of handling critical concerns of critical issues in the lifecycle stages of birth, youth, and maturity.
They found that the managerial handling of six predictable crises determined the organization’s developmental stage rather than its size, market share, or sophistication.Developmental stage Description Critical concern Key issues Consequences if concern is not met Birth Similar to the “startup” stage, the organization is formed, focused on developing their offering, attracting early customers and building revenue. To create a new organization What to risk Frustration and inaction To survive as a viable system What to sacrifice Further subsidy by “faith” capital Youth The youth stage is similar to the “growth” stage, where organizations expand and grow. To gain stability How to organize Reactive, crisis-dominated organizationOpportunistic rather than self-directing attitudes and policies To gain reputation and develop pride How to review and evaluate Difficulty in attracting good personnel and clientsInappropriate, overly aggressive, and distorted image building Maturity The maturity stage of this model comprises elements of the “maturity,” “decline,” and “renewal” stages. Organizations in this stage are established and focused on maintaining their position, while preparing to adapt to prevent stagnation. To achieve uniqueness and adaptability Whether and how to change Unnecessarily defensive or competitive attitudes; diffusion of energy.Loss of most creative personnel To contribute to society Whether and how to share Possible lack of public respect and appreciationBankruptcy or profit loss
Lippitt and Schmidt also give examples of the consequences of handling or mishandling each of the six managerial crises:Critical issue Result if the issue is resolved correctly Result if the issue is resolved incorrectly Creation New corporate system comes into
being and begins operating.Idea remains abstract. Company is
undercapitalized and cannot adequately
develop and expose product or service.Survival Organization accepts realities, learns
from experience, becomes viable.Organization fails to adjust to realities of its
environment and either dies or remains
marginal–demanding continuing sacrifice.Stability Organization develops efficiency and
strength, but retains flexibility
to change.Organization overextends itself and returns
to survival stage, or establishes stabilizing
patterns which block future flexibility.Pride and reputation Organization’s reputation reinforces
efforts to improve quality of goods
and service.Organization places more effort on image
creation than on quality product, or it builds
an image which misrepresents its true capability.Uniqueness and adaptability Organization changes to take fuller
advantage of its unique capability and
provides growth opportunities for its
personnel.Organization develops too narrow a specialty
to ensure secure future, fails to discover its
uniqueness and spreads its efforts into
inappropriate areas, or develops a paternalistic
stance which inhibits growth.Contribution Organization gains public respect and
appreciation for itself as an institution
contributing to society.Organization may be accused of “public be
damned” and similar attitudes.
Greiner Growth Model
Larry E. Greiner based his growth model on the age and size of the organization on the premise that organizational practices change over time and that “management problems and principles are rooted in time.”
He based his theory on European psychologists who maintain that past events and experiences shape our behavior.
Greiner showed that leaders hold on to obsolete structures to consolidate their power. So, instead of looking inward to develop the organization, they focus exclusively on external forces. The consequent stagnation leads to revolutionary phases that shake up the organization.
The resolution of the revolution decides whether the company will move forward or decline.
Market forces determine the duration of the evolutionary and revolutionary phases of the organizational life cycle. When profits are plentiful, evolution prevails, but those profits only buy time before a revolutionary upheaval.
Greiner presents five phases of growth, interspersed by periods of revolution. Each phase results from the previous one and causes the next.Phase of life cycle Description Key issues Phase 1: Creativity The lack of structure and management creates a leadership crisis.
Non-viable product.The lack of structure and management creates a leadership crisis.
Non viable product.Phase 2: Direction A structure begins to form, with systems, work standards, and a hierarchical reporting structure. Leadership bottlenecks as decision-making stays centralized.
Growing frustration among lower levels due to reduced autonomy.
Need for stronger middle management.Phase 3: Delegation Successful delegation allows companies to expand. A crisis of autonomy occurs when decision-making is too centralized to be effective.
Organizations try to adapt with delegation, but if the organization isn’t ready, talent will leave.
Often results in autonomous managers with a parochial attitude, creating a “silo” effect resulting in a crisis of control.Phase 4: Coordination Formal systems for planning, control, and resource management are implemented. A divide grows between headquarters and field managers.
Organization is too large to operate under formal and rigid systems.Phase 5: Collaboration If the organization survives the fourth revolution, red tape is supplanted by collaboration, social control, and self-discipline. A crisis in the psychological saturation of emotionally and physically exhausted employees breaking under the burden of excessive teamwork and pressure to innovate.
Adizes Ten Stages Model
Dr. Ichak Adizes created his model in 1979, and it is still used today. The model changes with the times and embraces current technologies and organizational practices.
Adizes theorized that changes in the life cycle occur because of four activities:
- Producing results
- Acting entrepreneurially
- Administering formal rules and procedures
- Integrating individuals into the organization.
Over the life cycle, the organization assumes different roles that determine behavior.
At the foundation of effective management for any organization is the fundamental truth that all organizations, like all living organisms, have a life cycle and undergo very predictable and repetitive patterns of behavior as they grow and develop.Dr. Ichak Adizes
Adizes describes ten stages of organizational growth. Progression occurs when the organization overcomes the growth problems of each successive step.Life cycle stage Description Growth problems Courtship The initial phase is the development of the idea and forming the business. Raising capital.
Distraction of other business ideas.Infant As the name suggests, this phase is the start of doing business. The company may experience infant mortality. Go-go Things get frantic, perhaps chaotic. It may experience the Founder/Family Trap, where the business and family life come into competition. Adolescent During the adolescent stage, the company begins to define itself and establish its place. It may experience divorce, either from premature aging or a disappointed entrepreneur. Prime During its prime, the organization is fit, healthy, and profitable. The fall The prime phase ends. The business starts to lose its edge. Aristocratic The organization remains strong because of its successes and presence but loses market share. Falling prey to technology changes and market trends. Recrimination Onset of doubt, problems, and internal issues over the decline. Can cause the company to lose its purpose. Bureaucracy The organization seeks an exit or divestment.
It is ripe for takeover at a bargain price.Too much internal focus on process and procedure. Death The organization renews itself and starts the cycle again, or comes to an end via the closure or sale of the business. Resistance to change.
Bankruptcy.
Miller and Friesen Model
Like many other organizational life cycle models, Miller and Friesen presented a five-stage predictable pattern.
They based their proposed model on a longitudinal study of 36 large organizations.
According to the reanalysis of their work by Robert Drazin and Robert K. Kazanjian of Emory University, it was a rare opportunity to test empirical data rather than assuming the existence of different phases.
The five phases in the Miller and Friesen study are:Life cycle stage Description Birth The firm, less than ten years old, is dominated by the owner-manager. Growth Sales are growing by over 15 percent. The company has a functional structure and some formal policies. Maturity Sales growth slows, and the company becomes more bureaucratic. Revival Sales growth returns, and the company diversifies its product lines.
It has a divisional structure and sophisticated systems.Decline Profitability declines as sales levels off and innovation stalls.
Small business growth models
Small business models differ from corporate models in that their success or failure most often rests on the ideas, skills, and determination of one owner, who is the business.
Reluctance to relinquish control can be the catalyst for failure.
We will examine two examples of models that show how small businesses progress through a series of crises in their quest for stability.
Churchill and Lewis Growth Model
In 1983, Neil C. Churchill and Virginia L. Lewis examined the life cycles of small businesses. They started with concepts from Greiner and the work of Lawrence L. Steinmetz, who studied the stages of small business growth.
Among other factors, Churchill and Lewis were dissatisfied with previous research that ignored the early stages of growth and inappropriately used only size and maturity as dimensions.
Their model evaluates the size, diversity, complexity, and five management factors: managerial style, structure, systems, strategic goals, and owner involvement in the business.
Churchill and Lewis defined five stages of small business growth:Stage Description Key goal Stage I: Existence Owner focuses on finding customers and delivering products or services. Handles everything, including staff and capital. Stay in business without depleting capital. Stage II: Survival The business aims to break even and stay viable. May face a decision to sell or shut down if it can’t progress. Achieve sustainability and break even. Stage III: Success Business reaches economic stability. Owner can grow the company (III-G) or step back and treat it as an income source (III-D). Maintain profitability or prepare for growth. Stage IV: Take-off Rapid growth is the focus. Challenges include financing that growth and delegating to capable managers. Scale successfully while managing cash and team. Stage V: Resource Maturity The business has strong finances, systems, and talent. Focus shifts to long-term viability and preventing stagnation or decline. Sustain success and prevent decline.
Here’s a visualization:
Steinmetz small business growth model
In 1969, Lawrence L. Steinmetz proposed an S-curve growth model for small businesses, with three critical stages.
He described the stages in terms of supervision, from the direct control aspect of a start-up to a divisional, distributed hierarchy. In each stage, there is a leadership crisis as the nature of supervision changes.Stage Description Key challenges / Focus Stage I – Direct Supervision
(Live or Die)Owner leads based on ownership, not leadership skills. Supervises all activities directly. If not among the 50% that run out of cash, the business grows until direct supervision is no longer feasible. Owner is overwhelmed by management tasks and must evolve or risk failure. Stage II – Supervised Supervisor
(Being a Manager)Owner begins to delegate and focus on managing others. If done successfully, economies of scale increase profitability. Growth slows as common operational and people issues start reducing profitability. Stage III – Indirect Control
(Stability)The business stabilizes, but new problems emerge: rising costs, competition, overstaffing, and internal conflict. Some business areas may no longer be profitable. Managing complexity, controlling costs, and resolving inefficiencies. Stage IV – Divisional Organization The organization must decide whether to stay small, grow organically, expand through acquisition, or merge. This stage requires a strategic shift to a more complex structure. Making strategic growth decisions and choosing the right long-term structure for sustainability or expansion.
The patterns within these organizational life cycle models
Although all of these models vary in the number of stages and what those stages entail, there are key elements in all of them that parallel the five stages in the organizational life cycle we outlined earlier in this article. These key elements are:
- A birth event where the organization is founded to solve a problem or seize an opportunity.
- A growth stage where the organization either grows or fails.
- A maturity stage where the dangers are stagnation, bureaucracy, and failure to innovate.
- A decline stage where growth and innovation slow, and the organization becomes a self-perpetuating bureaucracy that creates diminishing returns.
- A renewal stage, which can take many forms: a change or reorganization in the right direction, merger, acquisition, or sale.
We now see many decentralized organizations where parts of the business may be in different stages. They often comprise a stable central core with innovative sub-organizations in startup or growth phase.
What impacts the organizational life cycle?
There are many internal and external factors that influence the organizational life cycle.
Internal factors
Internal factors, including leadership styles, company culture, and operational efficiency, can all impact the organizational life cycle.
Optimizing internal processes is key to efficiency and growth, but it requires significant work and investment in technologies to boost productivity. Rapid expansion often leads to bigger teams and workloads, which can harm employee engagement and performance. Attracting and retaining top talent is essential to sustain growth.
Organizations with vibrant, inclusive cultures that champion feedback will be better positioned to nurture their people during the growth stage. Embracing change is essential to minimizing disruptions during the organizational life cycle, but many resist it. Companies with leaders who are ready to adapt and able to take constructive criticism and act on it are better placed to grow the organization in the initial stages and renew it in the latter stages.
External factors
External factors that impact the organizational life cycle include market trends and economic conditions. For example, changing consumer needs and wants, as well as spending habits, can play a huge role in a business’s growth and success. In addition, shifts in the economy often directly impact how and where people spend their money and the number of businesses that open, close, or expand.
Technological advancements continue to change the way businesses operate. For example, advancements in generative AI can boost productivity and help businesses move quickly from the birth to the growth stage.
Businesses that encourage continuous learning and development will build innovative teams that seek out new opportunities and embrace change, which are essential to remaining competitive in a crowded and unpredictable market.
How HR can shape the life cycle of the organization
Here are some tips that can help HR shape the life cycle in their organization.
- Align talent strategy with the business stage: Different stages call for different skills and levels of adaptability. For example, in the startup stage, it may be more beneficial to have people with generalist skill sets who can work across vocations and keep the business flexible. However, as the business grows, you might shift toward people with more specialist skills and more structured and clearly defined roles and departments.
- Design roles and structures that match your stage: Flatter structures work better in earlier stages of the life cycle. As complexity increases, you can introduce more layers or clear lines of accountability.
- Invest in scalable HR systems: Avoid overly complex systems early on, but don’t delay implementing the basics. Choose flexible tools that can grow with your business.
- Watch for signs of stagnation: During the maturity phase, HR can help leaders spot when growth declines. For example, declining employee engagement rates, increases in attrition, resistance to change, and loss of innovation are all warning signs of stagnation. The earlier these are detected, the sooner leaders can begin the renewal phase to kickstart growth again.
- Support organizational renewal: If the organization is in decline, HR can help to drive renewal through restructuring, injecting new talent, and leading change management efforts.
- Continuously reassess workforce needs: HR must regularly assess whether the current workforce headcount and skills meet the business’s needs, not only today but also in 6-12 months.
- Act as a strategic advisor: HR should work with leaders and participate in discussions about the future so they can help to plan the workforce accordingly. This includes discussions on scaling, entering new markets, and pivoting.
Put your organizational life cycle knowledge to work
When you understand how an organization organically evolves over time across each stage of the business life cycle, you can pinpoint which stage you’re currently in and shape your organizational design to achieve your business goals while maintaining adaptability for later stages.
Planning ahead for the next developmental stages early will help minimize disruption and crisis, facilitate a smooth transition to the next stage, and ensure your organization’s success today and in the future.
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