1. business and industrial

PITFALLS OF RAPID GROWTH
PITFALLS OF RAPID GROWTH
IT LOOKS LIKE GROWTH IS BACK ON THE AGENDA. WE EXPLORE WHAT IT MIGHT DO TO YOU, YOUR CLIENTS
AND YOUR ORGANISATION AS YOU TAKE A TRIP ON ITS ROLLERCOASTER, AND EXPLAIN HOW TO PROTECT
AGAINST ITS MORE NEGATIVE EFFECTS.
Many of the organisations we work with are planning for growth, or have experienced periods of incredibly rapid growth in their
history. They each have a unique story to tell about their journey. Much is positive (new clients, new territories, more capable people, greater profitability); some is less so. There are some common growth hangovers that present across most contexts over time
which can eventually manifest as potential roadblocks to ongoing success.
Nice pitfalls to have…..
Let’s be clear, growth is one of the nicer problems to have. But, left to its own devices it can create some less desirable side-effects;
all of which are manageable if the appropriate focus is placed upon them. The fact is that all systems are prone to entropy and an
organisation is no exception - entropic tendencies of the organisational system can increase through a period of unbridled growth.
ENTROPY - LACK OF ORDER OR PREDICTABILITY; GRADUAL DECLINE INTO DISORDER.
WITHOUT CARE AND ATTENTION EVERYTHING WILL TURN INTO CHAOS.
Growth tends to generate greater complexity and risk. The systems, processes, capabilities and funding required after a period of
growth, and indeed to enable it, are often markedly different from the ones that sufficed at the start of the curve.
Growth typically creates major change across all areas of an organisation and some degree of imbalance is to be expected, and
perhaps welcomed – disruptive change is the bedrock of innovation after all.
Our work with organisations who have experienced high growth reveal 10 common pitfalls. Each organisation is different and
therefore experiences a different combination; some organisations navigate the growth well and emerge with few areas of concern
whilst others encounter potentially disruptive problems.
LEADERSHIP CAPABILITY
Probably the biggest risk factor in a growing organisation is
leadership capability. Its impact is often unclear until part-way
through the growth journey. Existing leaders need to adapt
to a fast-changing environment, learning to lead larger and
less connected teams across new sectors and geographies, to
think strategically and make sound and timely decisions in an
ambiguous environment where there are no ‘right’ answers,
to deal with increased complexity and conflicting data, and
to make the most of the team around them through effective
engagement and delegation. Growth also demands a greater
number of high calibre leaders – the future leader dynamo
needs to be established to ensure the right capacity and capability levels for the future organisation. Growth can be thwarted
where skilled leaders are not readily available and it is often
just when an organisation needs strong leadership most that it
finds it in short supply.
ORGANISATION STRUCTURE
Even planned growth tends to occur in a non-linear way. Strategic plans make way for opportunistic moves and the organisation moulds itself to the decisions made along the way. This
approach works well to a point – that point being when cracks
start to appear in the value chain and the configuration of the
organisation creates unhelpful bottle necks, blockages, silos
and ivory towers. Fast growth can lead to a confused structure
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with a lack of clarity around capabilities, accountabilities and
reporting line.
INFRASTRUCTURE & BUSINESS PROCESSES
The resources required for infrastructure development and
business process capture and re-engineering is underestimated in nearly every organisation, whatever its life-stage.
As a result, the infrastructure and processes that served the
organisation well earlier in its life are left to carry the burden
created by growth and at some point hold the power to bring
it to its knees. It may seem superfluous to map processes and
create more sophisticated infrastructure just at the point where
resources are stretched in every direction; but ignore this area
at the future organisation’s peril. Spreadsheets and manual
data processes for back office systems may cope, to a point,
but they will become unwieldy and highly ineffective and
inefficient over time. The costs involved in the workarounds to
keep them ‘fit for purpose’ typically outweigh the investment
required to re-engineer.
BUSINESS CAPABILITY
Growth often alters the business capabilities that drive an organisation’s success. Growth organically re-configures the value
chain and the Target Operating Model; demanding new capabilities and devaluing others. As business capabilities change
and growth becomes established, enabling capabilities
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become ever more important. Where organisations have
not established the new order of importance of business
capabilities and the enabling capabilities required to support
these, focus can be placed on recruiting for and developing
those with less impact on organisational success.
CULTURAL CONSISTENCY
Growth via acquisition creates some well-recognised cultural
challenges; the pulling together of two relatively established
cultures typically results in the dilution of both or one culture
taking a dominant role. What is less obvious is the impact
on culture of organic growth. Organisations sometimes
naively expect that organic growth into new geographies
and sectors, and the related recruitment of new people, will
have little or no effect on culture. However, in hindsight, this
is often not the case. In periods of fast growth organisations
often have little choice other than to recruit for the capabilities they need. This is particularly true when entering new
territories or sectors as the existing workforce may have
insufficient experience. Imagine opening a new office in
a country where your organisation is not yet represented.
You go to market and find the most respected and capable
person, possibly from a competitor organisation, to lead your
new endeavour. Your new leader needs a team and their first
port of call is often people they have worked with previously.
Before long another company’s culture is more established
within the new area of your organisation than your own. In
a growth environment being clear about the critical pillars
of the organisation’s culture is not optional but it often gets
forgotten.
CLIENT EXPERIENCE
The complexity, risk and additional activity created as an
organisation grows often leads to a degree of fire-fighting
and inward looking behaviour. The very people on whom
the growth relies, clients, can be forgotten in amongst this
melee. The critical triangle of Quality, Service and Price
become disaggregated as quality and service suffer and
prices come under pressure due to the funding that growth
often demands. Some organisations look back after a period
of growth to find that they have unconsciously entirely realigned their market position – and not always in a way they
would have liked to or that will support the future success of
the organisation.
MAINTAINING MARGINS
Growth can mean many things to many people but, ultimately, it is a project and needs to be managed as such. One
of the greatest causes attributed to failed projects is a loss
of focus on the business benefits. Growth excites people
and creates a more optimistic approach. Focus tends to be
on the top line, increasing revenue, which is exhilarating for
many people. Inevitably costs rise as the foundations are put in
place and activity is ramped up and, without clarity of purpose,
organisations can find that their headcount grows significantly
reducing the margins achieved through any increases in revenue.
If managed poorly, a growth in revenue can ultimately lead to a
reduction in profitability beyond that which supports the original
business case for growth. Badly managed growth can lead to inefficient organisations that suddenly find themselves in an uphill
battle to re-establish a sensible financial balance that will sustain
them over the longer-term.
COMMUNICATION, TRUST & ENGAGEMENT
As organisations grow and teams disperse, communication
becomes more challenging. Interpretations of communications
start to differ wildly, driving actions and decisions that are perhaps
counter to the desired direction and approach. Messages penetrate the organisation less effectively and take longer to reach
every outpost; the organisation becomes more difficult to control
and therefore less agile towards opportunities, obligations and
risks. Duplication prevails in some areas whilst important activities
fall between the cracks, often only to be caught later when their
impact has been felt by a client. People are busy and trying to ‘do
the right thing’ and so, just when more communication is really
needed, people concentrate on their own specific area even more
intently. As a result, over time, the organisation becomes less
joined-up, silos and ivory towers develop and misunderstandings
abound. Trust and engagement suffer as it becomes more difficult
for people to see how they fit, what they contribute and who the
true leaders are.
RISK
As an organisation grows, investors and other stakeholders will
want assurance that it understands the key risks facing it and that
these are under control. Familiar risks may manifest themselves
in different ways and the organisation may encounter new kinds
of risk for the first time. Organisations who make it through a
growth curve have usually managed their risks effectively, or been
very lucky. Some organisations don’t make it and others become
something they did not anticipate or indeed want to be.
FUNDING
A growth agenda demands investment, often of a greater magnitude than is originally anticipated. At some point in the curve
many organisations need to refinance or re-configure their funding arrangements. Those with a solid plan, robust approach to risk
and detailed budget, all supported with high levels of leadership
capability, will always find funding more readily available and
easier to manage than those who do not.
‘Revenue is vanity, Profit is Sanity, Cashflow is Reality’ really
comes into its own when embarking on a growth journey!
IT’S ALWAYS EASIER TO IDENTIFY POTENTIAL ISSUES WHEN LOOKING BACK IN THE REAR-VIEW MIRROR.
WITH THE BENEFIT OF HINDSIGHT MANY LEADERS AND ORGANISATIONS WOULD HAVE DONE AT LEAST
SOME THINGS DIFFERENTLY. HOWEVER, ALL REALLY SUCCESSFUL ORGANISATIONS HAVE ONE CRITICAL
THING IN COMMON - THEY ARE AGILE TO CHANGE.
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PITFALLS OF RAPID GROWTH
AGILE ORGANISATIONS...
Agility isn’t usually spontaneous in the corporate world – it is planned! Organisations that want to build a sustainable growth
engine have to do so consciously and systemically, building in time to think, debate, decide and agree. Feedback loops from the
external environment, internal environment, clients, suppliers and financial backers need to provide the data to inform decisions
and re-calculate along the way.
‘ IT’S NOT THE STRONGEST OF THE SPECIES THAT SURVIVES, NOR THE MOST INTELLIGENT, BUT THE ONE
MOST RESPONSIVE TO CHANGE’ Charles Darwin
ORGANISATIONS THAT WANT TO GROW A SUSTAINABLE GROWTH ENGINE SHOULD FOCUS ON THE 10
ELEMENTS BELOW...
DESTINATION
(Define It)
EVOLUTION
(Revise It)
OPPORTUNITIES,
OBLIGATIONS &
RISKS
(Identify Them)
PATH
(Map It)
LEADERSHIP
(Model It)
FOCUS
(Make it happen)
PRIORITIES
(Align It)
CULTURE
(Cultivate It)
METRICS
(Measure It)
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CAPABILITY
(Master It)
CAPACITY
(Manage It)
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DESTINATION
DEFINE IT
Be clear about what growth means and what it does not mean in the context of your organisation. At what cost are you willing to pursue growth; what are the non-negotiable
factors and how can you make sure that everyone fully understands where the organisation is heading and how they can help. Clarity of purpose increases the likelihood of a
successful outcome!
OPPORTUNITIES,
OBLIGATIONS & RISKS
TEST IT
Growth presents new opportunities, obligations and risks. Can you confidently identify
these and make sure that you make the most of opportunities, fully meet obligations
and mitigate risks in the best way possible. Opportunities, obligations and risks manifest
at both the organisational level and the individual level – be sure to tackle both! Where
risks emerge, seek measures to prevent and limit impact, prepare for, respond to and
recover…..
PATH
MAP IT
Create road-maps of the route you expect to take. These will change, but it’s far easier
to change course from charted territory or to find your way back to the path following
an unexpected deviation than it is with a blank sheet. Road-maps encourage discussion
and debate and can be a core tool in driving alignment and engagement – people can
see where they fit, what they contribute and how they can make a real difference!
PRIORITIES
ALIGN IT
Alignment is critical. Where a leadership team demonstrates a lack of alignment the
path is far harder to navigate. With a clear destination and understanding of opportunities, obligations and threats, a charted road-map and agreed priorities, decisions
regarding resources and activities become less complex and easily agreed to. Superficial alignment is not enough – a deep understanding of the journey and a willingness
and ability to engage in regular reviews and re-alignment of priorities make for greater
acceleration…
CAPABILITIES
MASTER IT
Know the business capabilities required for the growth you anticipate and when you
need these to be fully operational. Understand the enabling capabilities (knowledge,
skills, behaviours that will support the business capabilities) and plan for their development. In short, know what you need and when you need it (in terms of people, systems,
infrastructure and products) well before you need to deploy it!
CAPACITY
MANAGE IT
Create space for growth through the generation of capacity. It may seem counter-intuitive but driving efficiencies and pursuing growth simultaneously can create a dynamic
that maintains margins, supports growth funding and also creates greater capacity for
growth at just the time it is needed. Infrastructure, data, processes, critical decisions and
workforce all have a major impact upon the organisation’s capacity for growth….
METRICS
MEASURE IT
CULTURE
CULTIVATE IT
LEADERSHIP
MODEL IT
Identify the Metrics that Matter. Create a system for managing these and a dashboard
that provides you with information relating to the most appropriate leading indicators.
Make sure everyone understands their accountabilities and has the autonomy and capability to alter their course!
Capture the core pillars of the organisation’s culture and agree the elements that must
remain no matter what. Create mechanisms to accelerate the cultural integration of
new people and teams and build recruitment and development activities to strengthen
this. Know what you want to be known for and encourage the right myths, legends and
heroes across the organisation….
Be clear about the demands growth will place upon your leaders in terms of capability,
capacity and behaviour. Define the organisation’s expectations of leaders so that there
is a framework from which to develop existing leaders and identify leaders of the future.
Set up the future leader dynamo to facilitate sustainable growth!
EVOLUTION
REVISE IT
Things change and plans are made to be revised. Make evolution a systemic habit and
drive the constant scanning of the context and situation. Create valuable feedback
loops from the external environment, internal environment, clients, suppliers and financial backers to provide the data to inform decisions and re-calculate along the way. Embed strategic loops and scenario planning exercises into leadership team discussions...
FOCUS
MAKE IT HAPPEN
Make it happen by focusing on the right things and creating space to think, share ideas
and challenge assumptions!
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PITFALLS OF RAPID GROWTH
IT’S NOT EASY BUT IT’S WORTH IT
Growth is a challenging and satisfying journey for most organisations. By creating a conscious FOCUS upon
some core enablers the journey can be all the more enjoyable and rewarding. Looking back you will most likely
find that there are some areas that need attention – that’s to be expected – the sustainable success comes from
identifying them and tackling them.
BELIEF ENABLERS
Focus on creating FOCUS
Clarity of destination, path, priorities and
approach
Alignment behind priorities, decisions and
agreed actions
Penetration of the message across and
through the organisation
Engagement through involvement and space
to think, share ideas and challenge assumptions
TOXIC
Forgetting the outside world - clients, suppliers
and financial backers
Confused messages and lack of clarity
Insufficient planning
Divergent leadership teams and open conflicts
based upon personal agendas
Over-reliance on existing infrastructure, systems
and processes
Shallow leadership pipeline
Empowerment of all to make decisions and
take actions in line with agreed strategy
Unreliable data and poor MI (management
information)
AGILITY through planning
Undefined culture and unconscious cultural
creep
Gallus build sustainable, high performance environments that everybody can believe in. With particular expertise in leadership capability and alignment, organisation design, business transformation and enterprise risk management, Gallus challenge assumptions, cultivate belief and drive positive change by making performance excellence systemic.
An established business with Headquarters in Northampton, UK and offices in London, Manchester and Aberdeen, Gallus
work with ambitious organisations across the world from a wide range of sectors.
Find us at www.gallusconsulting.com or call +44(0)20 3751 6345.
0203 751 6345
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