Growing Pains

Posted: August 21, 2017 by Robert Craven

There has been a lot of talk about how can business owners know what is the next thing that is going to happen to their business. How can they prepare for what appear to be so many random and conflicting demands?

I would argue that the demands are not conflicting, random or unpredictable. Of course, they don’t appear as tidy, neat packages but your stage of growth will predict the demands being made on you and your business.

Your structure needs to be appropriate to your size and scale of operations. As the business grows, your shape constantly morphs as you try to respond to outside pressures.

At different sizes, your requirements will be different.

It is at key inflection points that the current/old structure will be stretched to its limits.

Think of this as a business lifecycle, a series of stages – a little like human stages of: baby, toddler, child, adolescent, young adult, adult.

For a business the stages could be represented as:

1. Existence: Growth through Creativity; open to a crisis of leadership
2. Survival: Growth through Direction; open to a crisis of autonomy
3. Success: Growth through Delegation; open to a crisis of control
4. Take-off: Growth through Coordination; open to a crisis of bureaucracy
5. Maturity: Growth through Collaboration; open to various forms of crisis!

To be honest, I have resisted acknowledging the growth curve to be a universal truth but I now struggle to deny its existence! Notably, L Greiner and Churchill and Lewis have documented these stages in Harvard Business Review. It may seem like academic cleverness but actually it describes reality (but maybe in words we find difficult to relate to).

 

Each growth stage, in theory, has a certain phase of its basic fundamental parts: the role of the owner, the sophistication of systems, the sales impetus, role of management, and financial priorities. And these develop with the growth and development of the business. In reality, the characteristics of each stage are not all at the same stage of development at the same time. For instance, you may have the focus of Stage 2 but everything else in Stage 3.

 

Specifically, Greiner looked at the following for the first four phases from existence to survival to success to the take-off stages:

• Management focus:
  from make and sell to operational efficiency to market expansion to organisational consolidation
• Organisational structure:
  from informal to centralised/functional to decentralised/geographical to line staff/product groups
• Top management style:
  from entrepreneurial/individualistic to directive to delegative to watchdog
• Control system:
  from market results to standards/cost centres to reports/profit centres to plans/investment centres
• Management reward emphasis:
  from ownership to salary/merit increases to individual bonuses to profit sharing/stock options

 

Each stage of growth is characterised by a different impetus to grow and is threatened by a different crisis. As one passes from one stage to another, it is critical for the owner to know when to relinquish control and delegate to others.

More significantly, as the agency/business grows there is a clear trade-off as the owner needs to do less doing and more delegating.  Some people can cross the chasm to the other side, from working IN to working ON the business.