As an organization grows, it generally progresses through four stages of increasingly formal management structures. 1
Stage 1: In a one-person operation, the owner does everything: sales, bookkeeping, marketing, production and so on. Many firms remain one-person operations indefinitely due to the owner's family obligations, financial constraints, or contentment with the status quo.
Stage 2: As more people join an organization, the business owner becomes a player-coach. The entrepreneur continues to perform day-to-day tasks, but along with other employees. So the owner assumes additional employee management duties such as hiring, scheduling, supervising, and payroll.
Stage 3: Firms reach a major milestone in organizational development when they add an additional level of supervision. The owner relinquishes some direct control and begins working through an intermediary layer of professional managers.
Stage 4: As a company adds more layers of management and processes, it also adopts written policies, budgets, standardized personnel practices, organizational charts, job descriptions, and control protocols.