Knowing the Phases of Growth

In this sixth article, we will examine how growing up as an organization is an important challenge to face, and how successful owner-managers overcome it.

As an organization grows, it will need to modify and adapt its systems, structures, and processes. This may be a statement of the obvious, yet many business founders unconsciously assume that the organization they created on day 1 will be fundamentally the same in year 5—they just need more people, bigger offices, and more technology. Businesses, however, are like people. They go through phases of growth and maturity. Today's teenagers are often taller than their parents. But, would you trust them with the keys to your car?

Phases of growth. The phases of business/practice growth are well attested by research. In the early days, a business survives through the creativity of the founder, as he/she assembles the assets needed to service the market opportunity. Employee numbers are small, the business is highly focused, and communication is direct. If the business practice continues to expand, however, the founder can no longer use informal control. New staff members cannot just pick up the required skill sets as they go along. Processes and systems that ensure the business practice runs when the boss is out of the office need to be in place.

Direction. The new phase of growth demands direction. The owner does less, but provides direction of what needs to be done by others, through systems or processes that everyone—in theory—understands. The owner has to stand back and set the goals and targets that enable the staff to deliver their contributions. Businesses in this phase, if they continue to grow, tend to hit a point we term crisis of autonomy. The senior team wants more freedom to manage their parts of the business, especially if they are talented and ambitious. If frustrated beyond a certain point, they will grow discontent, and, eventually quit.

Delegation. To survive and prosper, the business practice needs to change yet again, to enter the new phase of delegation. To retain and motivate good people, the boss has to cede an increasing element of control, or in the jargon of today, empower his/her team. The need for delegation is often triggered by a crisis—such as the departure of a key individual—and the boundaries of freedom and discretion only emerge after review and negotiation. By this stage, the founder may no longer know every employee by name, and certainly not have their personal histories at his/her fingertips.

The overall health of the business depends on a subtle balance between the employees' discretion over their jobs and the boundaries set by systems and controls. Too often, these are out of kilter; the business lurches into confusion and, if unchecked, chaos. Once things get seriously out of hand, the response is invariably a clampdown on employee freedom to act, and a new emphasis on controls and procedures. As with everything in life, if the pendulum has swung too far one way, it will swing rapidly in the other.

Coordination. The business that strikes the right balance will enter a new phase of coordination, steering a middle way between a wholly empowered workforce and a relentless bureaucracy. If top management overreacts, however, it is a one-way bet that a crisis of red tape will loom at some point.

Are these phases of growth and crisis inevitable? Not necessarily. Guidance and mentoring are very useful. At the Business Growth and Development Programme (BGP), we help participants understand exactly where their business currently is and help them plan a smooth passage to the place they want to get.
In the next article, we will look at the related topic of how the behavior of the boss fits into the growth and development of the organization.

For more information on BGP and Cranfield's other programs for owner-managers, visit www.som.cranfield.ac.uk/som/groups/enterprise/credo/index.asp.