Want Growth? Get over the first bump
Many Results clients experience fast growth. In fact, six Results clients made the top 50 Fastest Growing in Alberta this year. During our 17 year history, we have had the privilege of observing many companies journey along the path to growth.
Early stage firms often begin their lives as small, owner-operated companies based on a good idea or skill of the founder. In these start-ups it is the owner/founder who operates the firm, possibly with a handful of team members. The owner/founder touches every part of the business every day – finds customers, delivers service, signs every cheque, and deals with every issue. Statistics Canada classifies these firms as Micro Enterprises, and surprisingly over 50% of Canadian businesses have just 1 – 4 employees.
Some companies remain as small, owner operated firms for the long term, and there is nothing wrong with that. But those with strong value propositions often find themselves incrementally adding more customers and employees as time goes on.
Hitting the first bump
It is along this path we see business leaders hit the first “bump in the road”. It varies by company, but commonly this first bump occurs between 15 – 20 employees. At this stage the the owner/founder begins to face the challenge of complexity as the number of relationships, decisions and activities become too numerous to manage for one person.
Many companies get stuck at this stage. They tell themselves, “Let’s keep doing what has made us successful up until now” to get past the stuck-point. But this approach is flawed and results in further stagnation or even decline.
Companies breakthrough this first barrier realize that transformational change is required. What makes a company successful from 1 to 20 employees is significantly different from what is required to succeed over 20.
Most of the change needed is to do with how the leader operates day-to-day. For the company to grow the leader must remove themselves as the bottleneck and step away from making every decision or undertaking key activity. This can be difficult for leaders who have a very personal attachment to their firms, but delegation of key activities or decisions is a required ingredient for growth.
Delegation is more than simply abdicating responsibility and hoping for the best. Leaders need to delegate with context and information to ensure the choices made would be the right ones. Smart leaders understand that a context must be built in order for employees to operate independently. Some of the key elements of context include:
Explicit and documented core values and purpose defining the unique principles and guidelines for behaviour within the firm.
A vision and strategy that defines where the company is trying to go, what position it has in the competitive landscape, what resources are available, and what key projects or priorities are the focus in both the long and short term.
A definition of the core processes the firm uses to create value, with appropriate documentation to ensure consistency and repeatability.
Established Key Performance Indicators so employees have feedback on how their actions and decisions influence the overall performance of the company.
Without these contextual elements, it is unlikely that the business owner will ever be able to remove themselves as the bottleneck and will continue to be locked into the day-to-day operation of the company.
More bumps ahead
The bumpy ride does not end after getting over the first bump. The next one may be just ahead at 40 to 60 employees, a point where the business owner really must spend most of his or her time working “on the business” and not “in the business”. At this stage the work of the successful leader shifts almost entirely to attracting and leveraging talent.
Further transformational changes will need to occur on the growth path. This may occur for a variety of reasons, some due to deliberate strategic decisions (like expanding to another geographic region or country) while others might be in response to external factors (like a new and aggressive competitor moving into the space). In all cases, change will be required as each new plateau is reached.
Business leaders and owners must recognize that the path to growth is a bumpy road. At each stage it is necessary for the company to change and adjust to the new realities. Most importantly for leaders, they must see when a firm has hit a plateau and execute the changes required to move beyond that plateau and on to the next phase of growth.