Which SME has not dreamt of an annual growth of 20, 30 or even 40%? However, there are dangers with such a pace, the main one being to misjudge the « growth thresholds » at which the organisational structure, the teams and the daily work processes need to be adapted. Let’s explain:
Whilst nobody wants stagnation or decline in turnover, experiencing accelerated growth is not stress-free either. In fact it’s quite the contrary! An annual increase of 15% – which is rare but not exceptional for SMEs – will lead to a doubling in turnover in five years.
However, you don’t double the size of a company by increasing staff, premises size and services twofold: you have to review everything from A to Z: the organisational chart, the role of services, sub-contracting, allocation of responsibilities etc, without the company resembling a permanent building site, all the while continuing to keep your customers happy!
It’s extremely DIFFICULT to IMAGINe the business IN FIVE YEARS
Many flourishing SMEs fail because they don’t anticipate. Some day the bottlenecks, staff skills limitations and/or a lack of coordination will prevent them from keeping up with the pace of growth. This will quickly threaten their profitability, or in the case of a squeeze in margins, their very survival. A booming business is like a car on the motorway: the faster you drive, the more serious the consequences of any mistakes and the more difficult they are to correct.
Let’s return at this point to two basic rules: from the moment it exists on paper, a new organisation takes 18 months to get up and running (marketing, sales, human resources etc); and the most difficult thing to imagine is this company being twice the size, even before the initial plan has been fully realised. Ask an Owner/Manager in full swing to plot on paper their organisation five years hence: most will struggle with this apparently simple exercise.
REASSURE AND MOTIVATe staff
In which areas should you invest, and at what pace? Not too fast (risking a squeeze in margins) nor too slow (risking loss of market). Should you relocate or expand? What are the « core business » activities over which the company must maintain control? Which staff will be able to rise to new responsibilities and what external recruitment needs must be anticipated?
The second step is to plan these changes over several years. You need to spread the costs, allow staff time to adapt and not disrupt what works by being too hasty.
Contrary to what you might think, the preparation for these growth thresholds will reassure staff: their CEO is expressing a vision and a projection, is demonstrating that they are prepared, is offering opportunities for (personal) growth and training. It feels a lot better than being overwhelmed by emergencies due to a lack of organisation. Not all of this is easy however: You may need to explain to a « senior member of staff » – who has been with you since the business started – that they may have work for a younger and more qualified manager, if the situation requires it.
Get THE boss aWAY FROM THE COALFACE
The Owner/Manager must prepare themselves for a major change in direction. More often than not, their focus is on operational matters. So they have to distance themselves from the day-to-day running of the business to become “the driver” and manager rather than the « super mechanic », which requires that they delegate. Sometimes, it’s appropriate to create a Board of Directors, and involve staff in strategic decisions; once they accept the basic principle, they will soon see its benefits.
Another concession – not easy to make – is some temporary decrease in quality here or there: what is no longer done by the Owner/Manager will no longer be done in a specific way, and they must show detachment and distance vis-à-vis certain details.
Yet those who have gone through this don’t regret it. In « growing up » with their company, they gain a new and exhilarating dimension to their job as Owner/Manager.
SOME BASIC RULES AND QUESTIONS
- Draw up an organisational chart for the business with twice and then three times the staff. What conclusion do you draw from it?
- It takes 18 months to get a new organisation up and running. What are you going to do tomorrow to prepare the organisation for the time beyond this 18-month period?
- Historical employees rarely make the future top management of the company. How will you prepare them to no longer be making decisions at the top of the tree in the future?
- The working capital requirement of a rapidly growing business will increase faster than turnover and profit. What are your plans for financing cashflow needs?
- The one-man show, or the Owner/Manager who can-do-all-and-be-everywhere, is the main obstacle to rapid growth. Are you willing to embrace more delegation?
- A company that grows fast without the full commitment of its employees is heading for disaster. Have you prepared the groundwork for your employees to feel engaged?