In business, success is often measured by growth. The more rapid this growth, the more of a runaway success your business can be deemed to be. But rapid growth is not easy. Dealing with it and understanding its consequences on how a business operates, how it is structured and ultimately how it sees itself, represents a significant challenge to the most savvy of business leader.
In this article I want to look at five fundamental and predictable challenges that your business could face as it grows. To do this I want to introduce you to a model of growth that’s been used by management consultants for the last forty years; the Greiner Curve.
The Greiner Curve
First published in 1972, then updated in 1998, Larry Greiner’s seminal paper on business growth predicted five distinct phases that all businesses will inevitably go through as they grow. He predicted that each of these phases would inevitably end in a crisis that the business would have to deal with if it was to continue growing.
Management consultants have been using the so called Greiner Curve ever since, helping businesses navigate the choppy seas of growth and expansion.
The Evolution Revolution Cycle
Greiner’s model predicts that businesses go through cyclical periods of steady growth (or evolution) before entering a period of crisis brought about by the very management practices that were successful at initiating this period of growth. By implementing changes that deal with the crisis, the business will set itself up for another period of relatively stable growth, before that too brings about a crisis.
Greiner referred to this process as the evolution revolution cycle, which could be tracked on a chart with the x axis representing time and the y axis representing the size of the organisation.
Let’s look at Greiner’s five crises in turn:
- The Crisis of Leadership
The first crisis that businesses will encounter will be a crisis of leadership, brought about by the founders or directors of the company becoming torn between their traditional entrepreneurial and creative roles and the increasing burden of day to day administration of the business. The solution to this crisis is to bring in professional management who can offer leadership and more formalised communication.
- The Crisis of Autonomy
Eventually the more formalised structures and systems brought about by new professional management will begin to constrict lower level management as the business grows. As they grow more confident and specialised in their fields, a crisis of autonomy will develop as the hierarchy becomes more centralised by nature. The way out of this crisis is for business leaders to learn the art of monkey management and start delegating more responsibility downwards to individual teams.
- The Crisis of Control
Growth through delegation comes with its own problems though which will manifest as the business continues to grow in size. The inevitable crisis that results is one of control, whereby the leadership team feel they are unable to steer the business anymore. The natural response of many business leaders at this stage is to re-introduce centralisation, but this is a mistake. What’s required is a fundamental review and redesign of the way the business is organised and what its key strategic objectives are. Greiner’s third crisis is a particularly tough challenge for managers and business leaders, so it’s important to recognise the warning signs and know how to deal with it.
- The Crisis of Red Tape
Redesigning the way the business is structured involves bringing about more formalised planning procedures, more control over capital expenditure and rolling decentralised business units into service groups or product lines. This can lead to a watchdog mentality, where bureaucracy and regulation can become stifling to individual innovation and initiative. This is a crisis of red tape and the only way it can truly be dealt with is by changing the business culture and becoming more flexible. Educational programmes, a focus on problem solving and cross team collaboration are all examples of initiatives designed to address this pinch point.
- The Crisis of Identity
When businesses get to a certain size they will discover that there are few if any internal options to deliver the further growth desired. This triggers the last of Greiner’s crises – the crisis of identity. Unlike the preceding crises, this pinch point isn’t so much brought about by changes implemented after the last crisis but more to a natural slowing of growth. At this stage many businesses will look to external means of continuing to grow, whether that be mergers, acquisitions or formal collaborations. This will lead to a sense that the business’s values and ways fo doing things might be challenged – hence a crisis of identity will ensue. The answer lies in due diligence taking into account cultural and people issues, and achieving a smooth transition through effective change management.
An Unpredictable Future
It’s important to understand that the Greiner curve can’t predict every crisis that your business will encounter in its lifetime. Recessions, fashions, technological innovation, trends in consumer spending, takeovers and business acquisitions all have the potential to impact your business.
What Greiner’s model does show us are the predictable internal consequences of continued growth, how to recognise them and how to deal with them. And that to any ambitious business leader or entrepreneur should be invaluable.