Companies are dynamic entities that are faced with different challenges at each stage of their development. It is the ability to transition from one stage to another that is the key to long-term success.
Depending on the business’ stage of development, the transition will require a particular organizational transformation. For example, an entrepreneurial company may need to evolve into a more professionally managed organization. Or, a long-standing organization may require a revitalization strategy.
The first step toward a successful transition is to determine the degree of organizational development that a company has achieved. In order to do this we use a framework called the Pyramid of Organizational Development as a lens through which organizations can be examined and evaluated. As shown below, the pyramid includes six organizational development areas or tasks that are important to every business. These areas represent the “basics” of organizational development – the building blocks that provide the foundations for success. A company’s stage of growth dictates which area of organizational development requires the greatest attention.
All organizations pass through various stages of development that are determined, at least in part, by the organization’s size, as measured by its annual revenues. For example, a relatively new service venture with sales of less than $300,000, will focus upon the Markets and Products levels of the Pyramid of Organizational Development. Here the firm will identify and define its market, and, if feasible, its “market niche.” A market is made up of the present and potential buyers of the goods and/or services that a firm intends to produce and sell. Products must create value for those buyers. A market niche is a place within a market where a firm can potentially develop a sustainable competitive advantage in providing goods and/or services to satisfy customer needs.
A service firm in the rapid expansion stage, with revenues between $300,000 and $3.3 million, will emphasize the Resources and Operational Systems levels of the pyramid. At this stage, a firm must acquire and manage the resources needed for growth as well as develop the day-to-day systems needed to administer operations, the “organizational plumbing.”
The six tasks of organizational development shown in the Pyramid of Organizational Development are critical to a firm’s successful functioning, not only individually, but also as an integrated system. The leaders of an organization must learn to visualize the entire pyramid and evaluate their organization in terms of the extent to which its pyramid has been successfully designed and built.
Dr. Diana Troik is Executive Vice President of Management Systems Consulting in West Los Angeles, which specializes in helping entrepreneurial companies become more professionally managed. She can be reached at (310) 470-2146 or [email protected].
