You’re not alone…
- Expanding your bandwidth.
- Business and entrepreneurs react differently to growth.
- Will I still have a job here?
- Achieve a balance: Hummingbirds and woodpeckers.
- Get ready… to leave for a month: Delegate, measure…with incentives for the rest.
- Push outcomes – not just activity: Guarantees and principles.
Leading growth: Why is leading so hard? …am I helping? …and why don’t my old ways translate into a profitable, growing business for small firms?
You’re not alone: Surveys of entrepreneurs leading growing companies show that 91% felt unprepared for the impact and challenges of rapid growth on their small companies – that means only 9% felt ready to handle growth when it hit. The other 91% were trying to catch up – month after month. It’s like trying to change tires on a moving car – but a lot more complicated. But why do stress and change from rapid growth create risks for entrepreneurial leaders?
For all its rewards, leading growth often feels like you’re running a daily gauntlet of business demands inside and out – many unexpected ones too. Entrepreneurs often find the sudden success of their companies to be among the most risky times for the business. The figure below shows the most important challenges reported by entrepreneurs who led their companies through rapid growth in a survey by Inc. magazine.
What’s wrong? ‘Old ways die hard.’ Too many entrepreneurs use the same old start up approaches despite three times the responsibilities, five times the customers and ten times the volume. But what’s wrong with old, comfortable and creative approaches to leading your business? Aren’t successful entrepreneurs known for doing things differently? Yes – but only the things that need to be done differently. Too many entrepreneurs – like most of us – cling to past, comfortable ways until forced to change.
Managing growth using old ways is like dramatically increasing online bandwidth with a dial-up connection. Performance suffers plus it’s frustrating and costly. We wouldn’t accept this from our internet provider, why accept it in our businesses? And why does it happen to so many smart entrepreneurs?
Four reasons for leadership failures despite bright futures
- Expanding Bandwidth: More – and more complex – priorities.
- Different reactions: The entrepreneur leader and the growing business react in different ways to growth.
- Will I still have a job here? Taking on new roles.
- Internal performance drivers not measured and evaluated…or rewarded.
Expanding bandwidth: At start-up most entrepreneurs have to worry about two major priorities: First, what do I have to do today to keep things moving forward and grow the business? Routine tasks like filling customer orders, making sales contacts, ordering parts and materials and paying the bills fill the day. The second major priority is having enough cash to keep going until the business catches on and growth takes hold.
But look what happens when business success hits (see the red box in the Bandwidth figure): The number of major priorities triples. That’s tough enough but the real impact is the complexity of the new priorities. Most entrepreneurs weren’t trained to handle the new responsibilities of managing people, delegating critical jobs to others, developing long-term strategies or implementing business systems and performance measures. These are integrated systems and measures that cover everything from order taking to purchasing, quality assurance and accounts receivable. Because the challenges are complex, new types of expertise are required. And the time needed to make it all work well fundamentally changes how entrepreneur leaders spend their days.
Businesses and entrepreneurs react differently: Expanding bandwidth creates conflict between business needs and the entrepreneur’s interests and capabilities, between efficient routines and creative interests. As leader you can’t be part of every activity, every day. Even if you had all the expertise the business needs, there just isn’t the time.
Achieving the efficient, routine and mistake-proof processes for growth requires integrated business operations and management approaches. But managing seamless business routines is not how many creative entrepreneurs like to operate and lead. Conflicts quickly develop between the entrepreneur’s creative needs for new adventures vs. the business’ needs for efficient and reliable operations.
Conflicting needs encourage flavor-of-the-week leadership and management from the entrepreneur: One week the priority is efficient business operations to meet customer deadlines, generate new sales, implement cost controls and get new employees on board and productive. But next week that priority is pushed aside. Now it’s back to the workshop or lab to work on their latest ideas for new designs and innovations. Flavor-of-the-week leadership means business needs don’t get the consistent attention they deserve. Progress on the business systems necessary for profitable growth flounders.
Will I still have a job here? …it’s a common if unspoken bit of uncertainty and insecurity that many entrepreneurs experience. Changing roles in your thriving company is unsettling but necessary. The questions are not about whether you’ll have a job, it’s what job are you ready for and what job do you really want?
Strategies for leadership success
Achieve a balance: Hummingbirds and woodpeckers. Did your success result from creativity and innovation in developing new designs and technologies or new applications for existing technologies? Is that why you started the business? If so you may not be the best person to lead growth – unless you can change your management style. Creating new products or technology demands a different set of capabilities and interests than leading growth. If you really enjoy the laboratory or workbench, or you strongly prefer the artist’s studio to flow charts then it’s tough to force yourself to worry about things you just don’t care much about – even when you know you should. Great creativity and outstanding management skills rarely come in the same human package.
But this doesn’t mean that as a great scientist, engineer, software genius or artist there is no hope for you as leader of the business. It does mean spending the great majority of your time doing things that are very different from the design, scientific or artistic work that got you started in the business. You need to ask: Is spending my time in those different areas really the best thing for me and the business? As an example, one successful entrepreneur told me that he stopped teetering on the edge of bankruptcy and his business started to flourish when his wife who was trained as an accountant joined the company first as CFO and later as CEO. He described their partnership as being like the hummingbird and the woodpecker. As Ethan described himself, he is the hummingbird who flits from flower to flower (idea to idea) always coming up with new innovative designs and applications, some of which have recently become extremely profitable. He described his wife Carol as the woodpecker, who forces him to keep his “nose to the grindstone and finish the job.” She’s a business partner who insists as Ethan said with a respectful laugh, “that I finish up on the ideas we agreed to focus on last month before she will even listen to any new ideas.” Ethan believes that his wife’s management has been the most important factor in the company’s successful growth as a world-leader in technologies and designs for renewable energy products.
Whatever you are best at it, do it. And having recognized your strengths and weaknesses, find others to handle the other responsibilities. Grow your best employees or bring in people to provide the talent needed to fill the gaps. People who insist on handling responsibilities that they are not good at or not interested in create the greatest risk of all during rapid growth. The following approaches target the development of leadership for growth.
If I left for a month… Delegate, measure and reward: Imagine your company operating without you. Let’s hope that never happens for very long. But there’s a real advantage for you as the leader to imagine and structure your business to be able to handle routine operations without you being directly involved in everything, every day. Again, we’re talking about routine operations like filling orders, billing and post-sale customer services. Not new products, strategic alliances or attempts to enter new markets – just the routine activities that create day-to-day value.
Imagine your company operating without you. Let’s hope that never happens for very long. But there’s a real advantage for you as the leader to imagine and structure your business to be able to handle routine operations without you being directly involved in everything, every day. Again, we’re talking about routine operations like filling orders, billing and post-sale customer services. Not new products, strategic alliances or attempts to enter new markets – just the routine activities that create day-to-day value.
Suppose you packed up and went on vacation for a month? Let’s follow that dream and ask: What would have to happen on a day-to-day basis to keep your business running smoothly and profitably without your direct involvement? What are the critical, value creating processes that have to operate efficiently and consistently while you’re gone?
Then ask, what could you do to make it work without you? One possibility is to leave gigabytes of instructions for every activity and for everything that could go wrong with each one. This is not a workable solution. Instead pursue a new goal of structuring the business and your people in ways that guide and encourage them to do the right things every day without your direct involvement – even when the unexpected happens.
Conduct the orchestra. The critical leadership question during rapid growth is: How can you get others to do things as well – or maybe better – than you would when you can’t be there to supervise every order and activity? As your business’ bandwidth expands, you need to lead less like a shop floor foreman (or woman) and much more like an orchestra conductor. But how does an orchestra conductor conduct the players in a growing entrepreneurial business? How can you get your employee ‘musicians’ to stop playing notes and start playing a symphony? Here are three techniques:
1) Implement Operating Principles to guide everyone: We know that policies and consistent methods of operation are needed to handle routine activities like purchasing, billing and credit, approving vacation time, scheduling service calls and handling payroll. Yet most companies don’t have policies or procedures for how people will work together. Policies that make clear how their people will communicate, coordinate and especially, how they’ll prevent or resolve the inevitable overloads and stresses that develop in all growing firms. Operating principles show employees that you put the same effort into processes for handling “people challenges” as for sending invoices. The principles also help employees understand what is really expected of them beyond just completing assigned work tasks – especially when the pressure is on or when unexpected challenges develop. Four examples of operating policies are shown in the table below.
2) Push outcomes over activity: Guarantees. Every successful company recognizes the importance of getting it right with external customers …and ‘fixing it right’ when things go amiss. But what about on the inside? Your employees need to see each other as customers with legitimate needs that must be met effectively and on-time, all the time. Developing specific internal guarantees among your internal business operations for what they can reasonably expect as the “customers” of other business functions is a vital step. Some examples of internal guarantees for a customized manufacturing business could include the following:
- Sales people guarantee to provide complete, accurate customer order information to design and manufacturing at the time of order scheduling. No exceptions like: “Go ahead and get it started and I’ll get you the remaining order info on color and materials next week…” Instead promise to get it complete and right the first time.
- Production scheduling staff guarantee to provide the complete bill of materials required for an order to purchasing for review and to wait for a “can-do” confirmation before scheduling the order for production. No more scheduling jobs we aren’t ready to build because the right parts didn’t come in…or were never ordered.
- Design engineering guarantees to respond to questions from sales about whether we can make a design change for a specific order within four work hours. If a yes/no decision is not feasible within four hours, engineering will at least respond with a specific time by which the decision will be made. No more deafening silence from inside when the outside customer is waiting for a response to a big potential order.
3) Early warning performance indicators. The key to managing growth is the ability to know what needs fixing while there’s still time to make changes – and before failures happen. That means that instead of measuring what has happened, you need measures that indicate what will happen. Measures for sales, expenses and profits are important but there is a fundamental problem with relying on these types of measures alone: these measures look backwards rather than forward. You need to measure the performance drivers in your business. Performance measures that alert you to potential problems in time to make changes. The figure below illustrates some examples of useful, early warning performance indicators for growing companies.
Coping with growth using the old ways from start up creates major operating risks for the business’ success. It’s not easy to change your leadership style. But your leadership success will build on itself. The positive results of these strategies and approaches won’t just reduce risk and deliver sustainable success for the business, they’ll make your days so much easier in the long run. You’ll have more freedom to do what you do best as an entrepreneur. Isn’t that why you started this business in the first place?
Looking for more ideas and techniques for improving leadership and reducing operating risks? Just go to the home page and click on: “Strategies and solutions for Risk in growing entrepreneurial firms.” You’ll find more ideas for reducing the risks of rapid growth and workable approaches for how to make it happen.
 Inc. magazine Survey of 500 Fastest Growing Companies.