The Growth Paradox

Strategic Partner, Diane Janovsky, a Certified Stages of Growth Consultant, has hit it out of the park on this week’s Power Idea. Diane shares with us what has happened since the Great Recession ended and how businesses are now required to manage differently as they begin to grow….some very dramatically in the last few years.

Almost ten years after the start of the Great Recession, the economy is steadily improving and the businesses that survived are now in growth mode. Hiring is on the rise, which is great news. The question now is whether companies and senior leaders are prepared to manage the additional complexity and implement the necessary changes that come with a larger employee population. While growth is the life-blood of an organization, it also creates challenges along the way that can threaten long-term sustainability. If you are a business owner or leader of a small or mid-size company, how do you most effectively anticipate and address those challenges?

First, we need to recognize that an entrepreneurial business goes through three predictable stages as it grows, characterized largely by the role played by the founder/owner.

  1. Small/Start-up – The business founder/owner is hands-on, driven by passion and willpower, and communications are informal. Employees are flexible and agile, and work is frequently done by trial and error. The initial overriding focus is on generating sales. As volume increases, more people are hired and the financial focus broadens to include profitability and cash flow.
  2. Growth/Professional – The business has now expanded in size and complexity and it is no longer possible for the founder/owner to manage effectively on their own. It becomes necessary to give up some control, delegate and create a structure with supervisory levels, which in turn necessitates development of operational systems and performance metrics. The fiscal priority is to maintain market position and manage costs. People management requires investment in recruiting, training and more formal communication processes.
  3. Mature/Strategic – The main responsibility of the business founder/owner at this stage is to optimize performance by integrating the various functions and departments, or in other words, to make sure the left hand knows what the right hand is doing. Their sole role is to be CEO, not a hands-on technician any longer. The focus is on strategy in the larger marketplace, business planning and creating a compelling future vision and organization culture. The greatest challenge is continuing to foster innovation and an entrepreneurial spirit inside of an increasingly complex bureaucracy.

Within those stages, growth primarily consists in doing more of the same thing. Adding capacity by hiring more people, acquiring more space or investing in more equipment is an appropriate response. However, between those stages, growth requires a more fundamental change in how things are done. It is critical for the leader to understand that the approach that got a business to its current level of success will likely NOT move the business to the next level. In other words, “what got you here won’t get you there”.

In fact, simply doing more of the same thing can actually lead to contraction rather than growth. Consider the owner of the small/start-up company who has likely achieved success through personal involvement, effort and dedication. When their business reaches a certain size, it becomes humanly impossible to continue to manage the same way. They become a bottleneck in their own operation and performance suffers, resulting in frustrated employees, unhappy customers, lost sales and lower profits. They fall victim to the Growth Paradox.

Fortunately, there is a model based on 6 years of research with over 600 CEOs of small to mid-size companies that dependably and consistently delineates the stages of growth for entrepreneurial businesses. This model makes it possible to reduce risk and improve the probability of success by providing business owners and leaders with visibility of what to work on and when. It’s almost like having a crystal ball! We invite you to contact us at info@hpisolutions.com for a free no-obligation consultation to learn more about how you can avoid the Growth Paradox in your business.

 


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