By Edward D. Hess,
Distinguished Executive in Residence, and
Adjunct Professor of Management, Goizueta Graduate School of Business
Every business builder strives for growth – as much as he or she can achieve as fast as possible. Growth becomes the all-consuming goal.
Based on my experience, entrepreneurial ventures often fail for one of three reasons:
- The entrepreneur has a business idea, but the idea is not a good business opportunity
- The entrepreneur has a good business opportunity, but does not attract enough profitable customers fast enough to support the business and thus, runs out of money
- The entrepreneur has a good business opportunity, is able to attract sufficient profitable customers, but is unable to scale the business successfully to accommodate growth.
Growth requires a business builder to:
- Hire more people quickly
- Get them productive quickly
- Put in place structure and controls
- Teach a business culture
- Transition from being a doer to becoming more of a manager
- Not lose the entrepreneurial spirit and not lower quality standards
Growth requires the business builder to change and the business to change. Many business builders are good doers but are not able to transition successfully to managing people. Some are overwhelmed by the process issues.
Growth can be good and growth can be bad. Managing growth is a disciplined process. It depends on the personality, skills, adaptability, and willingness of the entrepreneur to change. Doing something you love and are good at is far easier than delegating and managing people. Management is hard – it is getting people to do what you want, when you want and how you want. How do you instill the pride, the quest for excellence, the love of the product into others? How do you hire, train, critique, manage, sell, and compete at the same time? How do you do all of this and still have fun? How do you make it fun for your employees?
It is a major transition. No longer can entrepreneurs have direct contact every day with every employee and every customer. One feels like one is losing control and you are! Only through others can you leverage your business and grow. It is through others that you will or will not survive the growth stage.
Every business as it grows will face the following conflicting tensions:
- flexibility vs. rules
- employee autonomy vs. controls
- informality vs. formality
- no bureaucracy vs. creating bureaucracy – administrators
- decentralization vs. centralization
- one leader vs. managers
- vertical structure vs. horizontal hierarchy
- open communication vs. need-to-know
- hands-on informal reporting vs. functional or product reporting
- informal HR policies and reviews vs. formal HR policies and reviews
- entrepreneur involvement in everything vs. delegations
The time to think about these issues is before you face them. Business builders should think about the “what if’s?” of growth. Think about what your business will look like if you double in size or even quadruple in size. Disciplined, managed growth is good; undisciplined, unmanaged growth will kill your business.
You need to answer the following questions – before you face them:
- What type of skills and personalities will you be looking for in the people you hire?
- How will you teach the new people? How many can you teach at one time?
- How will you make sure the new people will not destroy the good employee chemistry you currently enjoy?
- How will you organize people? Everyone cannot report directly to you.
- Who will you make managers? How will you teach them to manage?
- What results or objectives will you measure? How often? How will you manage by objectives?
- How will you manage by exceptions?
- How will you make sure you get the problems resolved quickly? How will you make sure you know what the problems are?
- What will you reward? How? When?
- What business information will be communicated and to whom? When? How often?
- What are the values or meaning which you want to preserve?
Every business builder needs a plan on the shelf which answers these basic questions in preparation for growth.
This Growth Plan must be founded on three key principles:
- What are our values and purpose? Why should someone join us, and what are we trying to build?
- What personality traits and skills are most important for our business?
- What is the key economic measure that all employees must focus on every day?
Growing requires you to refocus part of your time away from customers to hiring and teaching. It is a time-consuming and daily process.
Growth will change you, it will change what you do, it will change what you focus on, and growth will scare your employees. Will growth be constructive and productive or chaotic and demoralizing? Will the growth preserve the essence of what you are trying to build or will growth destroy it? What do you need to do in order not to lose control? What are the mission critical items you must not lost control of?
As you grow, keep in mind the U.S. Army Leader’s Recon: The leader’s job is to ask 3 questions every day. What is happening? What is not happening? What do I need to do to influence the outcome?
The message of this Perspective is quite simply: If you wait to think through these issues when you have the problems of growth, it may be too late.
In a later Perspective, we will talk about one way of thinking through these issues. Remember – growth can be good. But poorly managed growth can be your downfall!