STAGE 3: Rapid Growth

Created on Tuesday, 13 October 2009 23:15 Last Updated on Friday, 06 May 2011 11:37 Published Date Written by Small Business Can Hits: 2678

Sales and customers reach a critical mass. Employee numbers are now becoming significant. Whereas sales was crucial previously, the imperative now shifts towards developing the company’s brand position in the market and an operational, decentralised infrastructure with the capability to sustain growth as the “hot product” fades and members of the initial founding team moves on.

If you believe your company or business is at this stage you may find some very helpful articles and videos with all sorts of advice in the Rapid Growth section of this site. You may also like to hear from some other entrepeneurs telling their stories or why not have your own say on the lively smallbusinesscan Insightsxchange Forum.

Sales and customers reach a critical mass. Employee numbers are now becoming significant. Whereas sales was crucial during the start up and emerging stages, the imperative now shifts towards developing the company’s brand position in the market and an operational , decentralised infrastructure with the capability to sustain growth as the “hot product” fades and members of the initial founding team moves on.

As the number of clients, employees and transactions increases, along with organizational complexity, the business must focus on operations and, in particular, must understand which processes are critical to the brand and future revenue growth. Functional departments have emerged- finance, marketing, sales, IT, HR and operations/production- along with a crisis in autonomy. Business planning now becomes critical.

The Enterprise begins to develop a decentralized organization structure, to heighten motivation at the lower management levels and leverage their market intelligence.

The business has a decentralized organization structure, operational and market level management responsibilities, profit centers, financial incentives, decision-making based on periodic reviews, top management acts by exception and there are formal communication processes and media.

Yet, eventually, the next crisis begins to evolve as the top managers sense that they are losing control over a highly diversified field operation. Freedom breeds a parochial attitude. The crisis of control often results in a return to centralization, which is now inappropriate and creates resentment and hostility among those who had been given freedom.

Company Growth Drivers

marketing & sales

Extend/diversify product range, market segments and geographical markets

Create a leadership brand position

Organise and structure the business around the brand

management

Build divisional structures -the successful application of a decentralized organizational structure.

Greater empowerment of managers — Greater responsibility given to lower management.

Profit centers and bonuses are used to motivate employees.

Change management

money

Significant cash flow requirement to cover pay-roll, inventory and capital

Financial plan and advisory

motivation

Empowerment of functional and market divisions

Performance

Transformation

Individual bonuses

Eventual Problems

A “Crisis of Control” next manifests itself as divisional/market managers start to run their own shows

The crisis of control often results in a return to centralization, which is now inappropriate and creates resentment and hostility among those who had been given freedom.

The next decision for management is co-ordination.

Once again, managers have difficulty relinquishing authority.