Organizational Effectiveness in Entrepreneurial and Professionally Managed Firms

By Smith, Ken G.; Gannon, Martin J. | Journal of Small Business Management, July 1987 | Go to article overview

Organizational Effectiveness in Entrepreneurial and Professionally Managed Firms


Smith, Ken G., Gannon, Martin J., Journal of Small Business Management


ORGANIZATIONAL EFFECTIVENESS IN ENTREPRENEURIAL AND PROFESSIONALLY MANAGED FIRMS

Entrepreneurs, professional managers, and business researchers have paid a great deal of attention to the issue of organizational effectiveness, particularly in recent years. The popularity of books such as In Search of Excellence, A Passion for Excellence, and Theory Z attests to the widespread interest in this topic. A recurring theme of these books is the notion that organizations can improve their effectiveness by becoming more "entrepreneurial.' Rarely, however, do these books recognize that the criteria for organizational effectiveness in entrepreneurial firms may not be applicable to larger firms at subsequent states of development. A growing body of literature indicates quite clearly that the criteria for organizational effectiveness do vary with different states of organizational growth.1

1 For example, see F. E. Quinn and K. Cameron, "Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,' Management Science (February 1983), pp. 33-51. Also see K. S. Cameron and D. A. Whetton, "Perceptions of Organizational Effectiveness over Organizational Life Cycles,' Administrative Science Quarterly (December 1981), pp. 525-544; and R. B. Robinson, et al., "The Relationship Between Stage of Development and Small Firm Planning and Performance,' Journal of Small Business Management (April 1984), pp. 45-52.

This article reports the results of an exploratory study of how the criteria for organizational effectiveness vary with different stages of organizational growth and development. This subject should be of interest to both entrepreneurs attempting to plan for the growth of their organizations and professional managers seeking to make their organizations more entrepreneurial.

In this study, the effectiveness criteria employed by entrepreneurs from small start-up firms in their initial stages of growth are compared to those employed by professional managers from both high-growth firms and more mature firms experiencing decline. The criteria for effectiveness were operationalized by gathering information from entrepreneurs and professional managers on their ten key prescriptions for effective management.

SAMPLE AND METHOD

Management researchers have long recognized the importance of the stages of organizational growth.2 In 1959, Mason Haire, an organizational psychologist, developed the hypothesis that an organization follows a definite and predictable pattern of growth similar to that followed by individuals.3 Since then, a large number of stage models of organizational growth have been constructed and tested.

2 James Mooney and Alan Reilly, Onward Industry! (New York: Harper and Brothers Publishers, 1931).

3 Mason Haire, "Biological Models and Empirical History of the Growth of Organizations,' in Modern Organizational Theory, ed. M. Haire (New York: Wiley, 1959).

The most common model describes three stages of organizational growth: the start-up, or initial entrepreneurial stage; high growth; and maturity. All of the well-known stage models were reviewed for this study and a three-stage model was operationalized in order to classify each participating firm by growth stage (see table 1). The method underlying this classification system has been reported elsewhere.4

4 K. G. Smith, T. R. Mitchell, and C. E. Summer, "Top Level Management Priorities in Different Stages of the Organizational Life Cycle,' Academy of Management Journal (December 1985), p. 799-820.

Thirty-one entrepreneurs and professional managers from 27 firms participated in this study. The subjects were interviewed and completed a questionnaire (in the presence of the first author) which was designed to assess each organization's stage of growth and the "ten commandments' or prescriptions for effectiveness used by each entrepreneur/professional manager. …

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