Several years ago, I worked for a small company that was beginning to grow quickly. Our market started to catch some fire, sales were humming along and the company was trying to find ways to keep up with demand. We wondered if we had the “right people on the bus”.
It soon became clear that the people, who got us to $5 million in sales, might not be the ones to get us to $20 million.
The people who worked there had been there for many years. Everyone knew each other; it was almost like a family. Sales levels were pretty much the same year in and year out and the business hadn’t changed all that much. However, as the growth began to take off, the organization started to show signs of stress. Employees were working hard, but it was obvious that just working harder wasn’t going to cut it.
The company struggled to process more and more orders and other departments had to pitch in to handle the extra volume. It got so busy that the clerks from accounting chipped in to help the shipping department package and ship orders. It was great to see the way the employees pulled together and showed true teamwork, but it wasn’t necessarily the best way to get the work done. You see, the accounting department’s workload had increased too. Throughout the company, similar efforts to jump in to help continued and eventually became the norm. Since more and more people performed tasks that they were not trained to do, quality and efficiency eventually began to suffer.
To correct that, the company started hiring people to help keep up with the growing demand. Up until then the company only hired a few employees in a year, now they were hiring several a month. With no human resources department and only an office manager to handle the hiring and recruiting, the process was slow. The office manager was good, but she already had a full plate of job responsibilities and HR was not her main skill.
Meanwhile, the fast growth in sales increased the number of contracts being negotiated. Previously, the company had several long-term contracts and therefore new contract negotiations were periodic at best. Now, because of all the new customers, a new contract negotiation started every few weeks. When the volume was lower, the director of finance would work with outside attorneys to get help with the negotiations. With the dramatic increase in volume, the director of finance worked many extra hours while consulting with the lawyers more frequently. It was costing a lot of time and legal fees as well as taking the director away from her regular duties.
The examples above are some of the struggles the company faced as it began to grow. What was obvious is that some of the employees were stretched beyond their capabilities and in some cases taking employees away from their primary job function. When a company grows, its employees must grow along with it. In our company the growth created added volume and complexity but also the need for more skills and experience. Sure, we had to grow the number of employees in many areas to meet the new volume of sales orders. But as business owners, leaders and management, we also needed to recognize that we needed new skills and experience that we didn’t have so that we could continue to grow successfully.
Unfortunately, there are times when the people that got you to a certain level in your business, are not experienced or skilled enough to quickly carry you to the next level. The growth itself demands that some people become strategic and less tactical than in the past. Growth can also cause a company to bring in resources that it may not have needed when it was a smaller operation. Loyalty can sometimes cause an owner to follow his heart and not his head and as a result, they fail to bring in the talent and skills to maintain their growth.
Recognizing that your organization may have inherent limitations that are keeping it from realizing its full potential is difficult for many business owners, especially in the beginning. In our example, the office manager had been with the company for many years and the owner struggled with the prospect of taking the HR function away from her. It was not her area of expertise and in this new growth phase, she was not able to keep up without the right knowledge, experience and training. In the end, a dedicated HR person was hired to manage the explosive of growth in hiring, personnel management, training and other HR functions.
In the case of the contracts example, this was an area where someone working part-time with expensive outside lawyers no longer made any sense. Once again, the structure that got the business to $5 million was not able to get to $20 million and beyond. We decided that creating a new contracts manager position would help to manage the new workload. The move saved the company legal costs in the long run since the person was experienced and needed to utilize the attorney for only certain legal issues.
If your company is growing, you may find that what Jim Collins said in his book “Good to Great” resonates with you – As a leader of a company you need to think about “getting the right people on the bus (and the wrong people off the bus) and then figure out where to drive it”. In our case, certain positions were added to ensure that we had the right experience and skills best suited for our situation of fast growth, higher demand and greater business complexity.
In a growing business, it’s critical as owners, leaders and managers to recognize that as you grow, your staff, skills and expertise will have to grow too. Make sure that your business hasn’t outgrown your employees.
It’s common for a business to periodically hit a wall, have to regroup and figure ways to climb over or go around the wall. As companies grow they are continually faced with new problems and challenges that they must face. Growing a business can become a continuous process of remaking and redefining it to fit the ever-evolving circumstances. Usually, you will have to look at your people, processes and systems to match your ever changing company.
With Growth Comes Challenges and Problems
Even though a business may have started with just a few employees, modest sales and expenses and a local concentrated customer base, it will become very different as it grows. A company with 5 employees becomes very different when it later has 25 employees and still different as it becomes a 150 person company. In the same way, a company with 20 customers has different challenges from a company that has 300. While the company grows, the owner must manage through the problems and challenges that go along with it to make sure he is running the business and the business is not running him.
Sometimes it’s a good idea to step back from the day to day and review your business to see if you are on track and your business is healthy. By reviewing different areas of your business, you can determine where you are versus where you want to be. For example, if your company values customer service as an important area that differentiates you from the competition, but you do don’t have to right policies and processes to support that goal, or you are getting bad feedback from customers then, you may not be where you want to be.
One way to look at your business is to look at the functional areas that work together and are made up of people, processes and systems. This combination of elements will ensure that the business operates for its intended purpose and does so in a way that serves its customers, provides a good living for its employees and creates a profitable result for its owners. While there have been variations of the following concept, it is important that a business owner understands he needs the right people, doing the right things with the right tools in order to be successful.
The people that make up the business, the owners and employees, are key components for the organization’s success. The owner and management provide the leadership and strategy to drive the company’s purpose and set goals for the business. The employees and the team work that they use provide the effort toward the common goals that were set by the leadership of the company. The people part of the equation answers the questions do you have the right people and are they in right positions.
The process part of the equation answers whether your people are doing the right things. In describing process, we are considering process in the traditional sense – the interconnected activities that transform inputs to outputs. More specifically it is the procedures a company uses to develop, market, sell, produce and ship to and service its customers. In addition, the policies that the company follows to support that are also part of the process equation. Whether its policies on how the company deals with customers, employees and vendors or how the company conducts and records its business transactions, the policies support the process and procedures to ensure that employees are doing the right things.
Finally, systems are the last part of the equation. The systems that support the business can be viewed in two parts: (1) the high level organizational levels such as sales, marketing, operations, and finance and (2) the actual tools that these organizations use such as sales management and compensation methods, marketing and promotional techniques, operational plans and budgets and accounting and reporting systems. All of the systems used to support the business answer the third part having the right tools.
Many problems that a business faces can be tracked back asking this question. Do we the right people, doing the right things with the right tools. Stepping back, looking at the bigger picture and analyzing the people, processes and systems in your business can help you target the problems, analyze the challenges and make the necessary improvements to grow a healthy business.
Has your company been dealing with an industry downturn, a recession or a disruptive innovation that is hurting performance? Many of these things can cause a business change and if its big enough, the business may have to change permanently.
To manage through it, companies sometimes need to shift and adapt. The reasons may be many but occasionally it is due to things that may be out of our control such as an industry downturn, a recession or innovations that make your products or services less valuable. You can’t stick your head in the sand and hope that the problem goes away. You can’t sit around and hope that the good old days return if you just wait it out. However, you may be looking down the barrel of a new business reality and you must take action.
I was involved in a change in a company’s business reality during an industry downturn. We had to deal with these unexpected business changes and they had to be addressed quickly. Keep these tips in mind if you ever find your company in this position.
1) Recognize Your New Reality
In our case, after years of tremendous growth, we hit a brick wall and we hit it hard. The first thing we had to do was recognize what was happening. Over a few short months, sales dropped off dramatically. We had to recognize quickly that the company was in a different place. The past growth wasn’t going to return any time soon. Some of the company’s leadership team went through a period of denial. They hoped that the company’s sales levels would return, but the reality was the whole industry was being beaten down. This was our new reality and we had to recognize that fact.
2) Live in the Now
Once we recognized that our sales were trending down and were staying at those levels, we had to act. Our current expense levels didn’t support the amount of sales that we were achieving. Some people spent time mourning the past and hoping that things would return to “normal”, not recognizing that this was our new normal. In our case, we had to take costs down to a reasonable level based on our current and projected sales levels. Unfortunately, that meant cutting expenses and cutting employees.
3) Shift Gears
Now we had to shift gears, recognize our business change and begin to act in this new environment. The Company’s president wrestled with the idea of tearing down what we, as a company, had built. The lesson was that while it was a challenge to grow, as we had in the past, we had to recognize that we had to shift gears. Making these cuts in costs was eventually viewed as simply a new challenge that we had to face. And face quickly.
4) Adjust to Your New Reality
As you shift gears, you are now beginning the process of adjusting to your new reality. It was difficult to cut expenses. It was even more painful to cut several of the employees but it had to be done to survive as a company. As we adjusted to our new reality, we helped those we laid off to adjust with programs and packages to help them get back on their feet with new employment. We also tried to help the surviving employees adjust and begin to move forward as a company.
5) Move Forward
Finally, you need to set a path and create strategies to move forward in this new business reality. Goals and objectives must be reset to reflect what the company must achieve in this new environment. By focusing on the future, you can begin build new excitement and passion in the organization while setting a new vision for the future.
Don’t ignore the signs. If you experience a dramatic shift in your business reality, it may be a new business change that must be addressed. Try these tips to help you get back on track and begin to set a new vision to move forward.