Future Business Leaders of America (FBLA) Business Management Practice Test

What occurs when a new company transitions from stage one to stage two in the organizational life cycle?

1. The founder makes all decisions

2. Managers learn to delegate authority

3. The structure becomes taller

4. More employees are hired

The correct answer is: The founder makes all decisions

In the transition from stage one to stage two of the organizational life cycle, it is common for the founder to start making a conscious effort to delegate responsibilities to others rather than making all decisions independently. This shift indicates a growth phase where the company begins to structure itself more formally and allows for managers to step into their roles, overseeing team members and operations. As the organization grows, the founder's role evolves from being the sole decision-maker to taking on a more strategic focus, while empowering other team members with authority. While it's true that more employees may be hired and the structure may become taller, these developments are typically a part of the overall growth strategy rather than defining characteristics of this transition phase specifically. Instead, the emphasis on delegation and management development is a critical marker of moving from a singular leadership model to a more distributed leadership approach, which is essential for sustaining growth and competitiveness in the market.