Having examined Airbnb under both Greiner’s growth model and Mintzberg’s configurations, I feel that Airbnb is currently at the stage of growth through delegation on Greiner’s model, and that it operates under a divisionalised form structure.
In 2007, Brian Chesky and Joe Gebbia were struggling to pay the rent on their San Francisco apartment. With a design conference set to be held in the city in the coming weeks, the Rhode Island School of Design students decided to rent out three airbeds on the floor of their living room and provide breakfast for their guests the following morning. Less than ten years later, Chesky and Gebbia, as well as their friend Nathan Blecharczyk, are now chief executives of a $30 billion global organisation. (Rosoff and Insider, 2016).
In his 1998 article, ‘Evolution and Revolution as Organizations grow’, Larry E. Greiner explains that as a business grows, it will invariably experience stages of growth, which Greiner termed “stages of evolution”, as well as stages of crisis, or “stages of revolution” (Greiner, 1998). Greiner identified five stages of both growth and crisis, them being the evolutions of creativity, direction, delegation, co-ordination and collaboration and the revolutions of leadership, autonomy, control, red-tape, as well as a fifth revolution he simply labels as “?”.
The first stage of growth an organisation experiences is that of creativity. This stage is where the initial idea for the project is created by the prospective entrepreneurs. In the case of Airbnb, the original idea came about as an attempt by two cash-strapped designers to earn some extra money to help pay their rent. After creating a simple website, airbedandbreakfast.com, and hosting three guests in their living room for a night, Chesky and Gebbia knew there was a bigger opportunity that their fledgling idea could exploit (Carson and Insider, 2016).
Greiner wrote that shortly after the evolution of creativity stage, an organisation will experience a crisis of leadership, during which the founders must decide on someone to lead the organisation and through the initial confusion and managerial problems it faces (Greiner, 1998). He said that the founders are often reluctant to step aside to pass control of their original idea on to someone more suited to the role of business manager. However, to overcome this stage of revolution, Chesky and Gebbia simply enlisted the help of their former room-mate, Nathan Blecharczyk, to develop further the website which they had initially created (Salter, 2012). In allowing Blecharzyk to concentrate on the technological challenges facing the start-up, Chesky and Gebbia were free to focus on the managerial issues concerning Airbed and Breakfast.
Airbed and Breakfast faced two major problems in its early stages, that of securing capital and attracting customers to its site. When Chesky and Gebbia presented their idea to a board of fifteen angel investors, they were left with eight rejections, with seven of the board ignoring them completely (Carson and Insider, 2016).
As Blecharzyk focused on developing the technical aspect of ‘Airbed and Breakfast’, Chesky and Gebbia’s managerial skills came to the fore when the organisation was launched. With Barack Obama due to speak at the Democratic National Convention in Denver in the summer of 2008 and a crowd of 80,000 expected to flock to the city, the pair saw it as a perfect opportunity to gain some customers. They launched the newly-developed website just two weeks before the conference and had 800 bookings within a week. However, despite the large volume of users, the site was not making any money, leaving Airbed and Breakfast still struggling for capital (Salter, 2012).
During the rally, the trio showed their entrepreneurial skills to raise some much-needed capital for the business. They bought huge quantities of cereal and re-packaged them to be sold as limited edition “Obama O’s” and “Cap’n McCain’s” and in turn, raised $30,000 for the company, pulling themselves almost completely out of debt. While the cereal helped to extend the lifetime of the struggling start-up, it also helped to secure the company’s first official investment. Paul Graham, co-founder of ‘Y Combinator’, was impressed by the trio’s improvisation and resilience in keeping the start-up alive, and decided to provide them with $20,000 of funding (Carney, 2013).
This investment was only the beginning for the start-up, operating under the title of Airbnb as of March 2009 (Carson and Insider, 2016). With a further $7.2 million investment received in November of 2010, as well as a “significant amount” courtesy of Ashton Kutcher and an additional $112 million worth of venture funding in July 2011, Airbnb overcame this stage of revolution (Salter, 2012). This shows how Chesky, Gebbia and Blecharzyk used their managerial skills to successfully navigate their business through this stage of revolution and the issues of securing both capital and clients.
Greiner’s next stage of growth is that of direction. During this stage of evolution, an organisation begins a period of sustainable growth under directive leadership (Greiner, 1998). Shortly after Airbnb received these investments, they hired more employees and moved out of the flat where their first office was, and into a more suitable business office (Salter, 2012). This evolution brought a more hierarchical look to Airbnb, as they hired new workers to the company and Chesky, Gebbia and Blecharzyk moved into their more senior roles as co-founders of the business. However, Chesky played a large role in the expansion of Airbnb, as he personally interviewed the first two hundred workers that were hired. He did this because he was keen on having a very clear shared mission within the organisation, and to ensure that each potential worker fit in with this strong culture, he decided to personally oversee the recruitment process (McCann and Medium, 2015).
Greiner states that following this growth through direction, an organisation will experience a crisis of autonomy, as lower-level managers and employees become restricted by the inflexible nature of the centralized hierarchy (Greiner, 1998). As they are more exposed to the day-to-day operating procedures of the firm, they begin to accumulate more knowledge and thus, no longer feel as though they must strictly abide by the standardized procedures in the organisation.
Greiner’s third stage is growth through delegation. Delegation is a strategy often adopted by many growing firms to solve the crisis of autonomy, and to allow employees to be liberated from the strict protocols they had to follow (Greiner, 1998). As Airbnb grew and expanded, Chesky, Gebbia and Blecharzyk gave employees more freedom to apply their own knowledge to their jobs, satisfying their esteem needs and improving motivation.
Airbnb currently has over 100 million users, 640,000 hosts, and is available in over 57,000 cities across 191 countries worldwide (Smith, 2017). With employment opportunities in locations like Beijing, Sydney and Paris (Airbnb, 2017), Airbnb is one of the biggest organisations in the world. I believe Airbnb is at the third stage of Greiner’s model. Its co-founders now oversee the development of their organisation from the company headquarters in San Francisco. With worldwide offices, delegation has been successful thus far as the organisation continues to grow.
In “Organization Design: Fashion or Fit?”, Henry Mintzberg discusses the five structures an organisation may adopt, and explored the characteristics of each. These five configurations are the simple structure, the machine bureaucracy, professional bureaucracy, divisionalised form and the adhocracy (Mintzberg, 1981).
To effectively analyse and distinguish each different configuration, Mintzberg devised a structure consisting of five components. The first component was the strategic apex, made up of the people with the original idea. The entrepreneur(s) then hire people, forming the operating core. As the organisation expands, the chief executives employ intermediate managers who act as a link between themselves and the operating core. The organisation may need people to design systems which regulate both formal planning and control, and another group of people who provide services such as the mail room and legal counsel. These two groups are known as the techno-structure and support staff (Mintzberg, 1981).
Mintzberg wrote that the most common example of the simple structure is the “classic entrepreneurial company” (Mintzberg, 1981). He said that very few of the simple structure’s activities are standardized which means there is no requirement for analysts or intermediate managers, as most co-ordination is achieved by direct supervision from the strategic apex (Mintzberg, 1981). When Chesky, Gebbia and Blecharzyk began working on Airbnb, they were responsible for developing a basic website and renting out their apartment (Salter, 2012). This shows how Airbnb once adopted the simple structure configuration.
Mintzberg’s second configuration is the machine bureaucracy, which places emphasis on standardization as a method of achieving ultimate efficiency. This configuration leads to low-skilled jobs being carried out by workers who are highly specialized in their role. Mintzberg said this configuration is most common in companies who mass-produce or provide a mass-service (Mintzberg, 1981). While Airbnb does provide a service to millions today, it doesn’t mass-produce and rely on the specialization of its employees. For this reason, I do not believe the machine bureaucracy configuration applies to Airbnb.
The professional bureaucracy is the third configuration. Unlike the machine bureaucracy, the professional bureaucracy places emphasis on the standardization of skills rather than outputs. A great deal of responsibility lies with the highly-trained professionals that carry out different tasks within the organisation, as they are given a lot of power and control over the work they do (Mintzberg, 1981). Because most of the training for the job takes place externally to the workplace, there is little need for a techno-structure to support the professionals. However, there is often a large support staff who back up the professionals and carry out routine tasks that their highly-skilled counterparts would not. Mintzberg described the professional bureaucracy as “not a structure to innovate but one to perfect what is already known” (Mintzberg, 1981). This accurately describes the structure Airbnb adopted when Chesky, Gebbia and Blecharzyk moved out of their apartment and into their first office, hiring more staff in 2011 (Salter, 2012). There are currently departments operating within Airbnb such as engineering, data analysis, finance and business development (Airbnb, 2017). This highlights the wide range of skills that Chesky, Gebbia and Blecharzyk required in their employees to ensure that Airbnb grew and developed successfully. I feel this shows how Airbnb operated under a professional bureaucracy structure when it moved into an office for the first time.
Today, I feel that Airbnb operates under the fourth configuration, the divisionalised form. Mintzberg said that a divisionalised form often comes about because of diversification by an organisation. This configuration differs to the professional bureaucracy in that the operating core of the divisionalised form is made up of different units or ‘divisions’, whereas the operating core of the professional bureaucracy consists of the aforementioned highly-qualified professionals. I feel that as Airbnb began to build offices around the world, it moved toward a divisionalised form. While its co-founders still maintain control through visiting each worldwide office, they rely on the standardization of outputs to ensure performance levels of each division are regulated. Each division is headed by a manager who is responsible for ensuring the high performance of their respective division. Mintzberg said that the machine bureaucracy is an effective structure for each individual division to adopt as it ensures the standardization of outputs and promotes specialization amongst workers (Mintzberg, 1981). This is an effective system for Airbnb to operate under as each office still operates the same areas of technical expertise as were operated in the first Airbnb office; areas such as customer experience, information technology and marketing (Airbnb, 2017). With high levels of specialization amongst their employees in every office, Chesky, Gebbia and Blecharzyk can be confident that high quality service is being delivered to Airbnb customers worldwide. Thus, less direct supervision is required on their behalf.
The fifth configuration is the adhocracy. Co-ordination and control within an adhocracy materialize through informal interaction and communication between highly competent experts who are tasked not with perfecting pre-established skills, as in the other co-ordinations, but rather working together to create new things (Mintzberg, 1981). The adhocracy relies heavily on mutual adjustment to ensure co-ordination, so requires liaison mechanisms such as integrating managers and task forces. Mintzberg wrote that there are two types of adhocracy; operating adhocracies and administrative adhocracies. The operating adhocracy is contracted by clients to carry out innovative projects, and treats each project as unique, unlike the professional bureaucracy, where the project is generalized so a standard skill can be applied to it (Mintzberg, 1981). The administrative adhocracy undertakes projects of its own accord, but the main difference to the operating adhocracy is its division into an administrative component and operating component, which ensures the standardized administrative work does not interfere with the operating task at hand (Mintzberg, 1981). As the adhocracy is focused around developing new and creative projects, I do not feel that it applies to Airbnb.
In the future, I believe Airbnb will move further along Greiner’s model. I feel that currently, Airbnb sits at the stage of growth through delegation. Greiner wrote that following the evolution through delegation comes a crisis of control. This revolution involves the top management attempting to regain control of the organisation, often through the “re-centralization” of management. However, this often fails because of the new-found vast nature of the organisation (Greiner, 1998). I feel that as Airbnb expands into other countries, its co-founders may find it difficult to adapt to their roles of top managers of the organisation, where they are no longer responsible for every minute activity concerning Airbnb. I believe this uncertainty may see them attempt to regain control of their company, but struggle to do so simply due to its sheer size.
This stage of revolution is overcome by growth through co-ordination. This stage involves using formal systems implemented by top management to achieve greater co-ordination within the organisation. Some of these measures include formal planning procedures being established and intensely reviewed, and ensuring daily operating tasks are de-centralized (Greiner, 1998). I would imagine that Chesky, Gebbia and Blecharzyk would take these steps to maximize co-ordination amongst their company.
The next stage of Greiner’s model is the red-tape crisis, during which employees grow tired of being directed by their superiors who are not completely knowledgeable about the local conditions concerning the tasks the organisation faces. This leads to criticism by both workers and intermediate managers of the bureaucratic structure that has developed within the organisation, resulting in a fall in productivity. At this stage, the organisation has become too large and complex to be managed using rigid and inflexible systems and procedures (Greiner, 1998). As Airbnb continues to grow, it may need to reconsider its daily operating procedures to meet the dynamic demands that the nature of the room-letting industry brings. For example, following the travel ban imposed by US President Donald Trump, Airbnb announced that they would offer free housing to anyone who was affected by the ban (Amy B Wang By Amy B Wang, 2017). It is these innovative ideas Airbnb will need to consistently implement if it is to overcome the red-tape crisis and continue as one of the biggest organisations in the world of business.
This final stage of evolution in Greiner’s model is that of growth by collaboration, which places great importance on replacing the rigid procedures of Stage 4 with greater spontaneity in management as well as overcoming problems through teamwork and skillfully confronting interpersonal differences (Greiner, 1998). As the organisation pushes towards this flexible and spontaneous culture, it will face the challenge of continually motivating its workers and ensuring the business continues to perform to a high standard. This is the stage of revolution which Greiner termed “?”, and is focused on the mental saturation of employees who have become both “emotionally and physically exhausted” due to the intense nature of the innovative demands of their jobs (Greiner, 1998). Airbnb will face the challenge of continuing to motivate its employees by allowing them time for reflection to revitalize themselves.
Regarding Mintzberg’s configurations, I do not see Airbnb adopting a different organisational structure in the coming years. I feel that due to the service it provides, I feel that the divisionalised form best suits the organisation. I think that Chesky, Gebbia and Blecharzyk will continue to oversee the whole organisation from the Airbnb headquarters in San Francisco, and regional managers will be responsible for ensuring the continued success of their respective region. I believe that this structure works well for Airbnb and should ensure it continues to excel in the years to come.
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