Is your business growing as fast and effectively as it could, or is it stuck at the same level it has been at for years? Research (Larry Greiner, 1972) has discovered 5 specific stages of business growth. Most business never grow beyond the second level. At this level, the business is characterised by a small group of owners (if not a sole owner), supported by a small team of people at an operational level. This describes the 90 plus percent of businesses, which have 10 or fewer staff.
Why should it be this way? The Greiner growth model describes 5 levels of growth that are characterised by the type of organisational structure and leadership style at each stage. The model describes a very obvious and practical problem that is evident in all businesses that grow over time. Growth is never simply a smooth transition from small to large. It occurs in a series of jumps from one level to the next. Growth at each level is limited by the structure and leadership style. A business can grow at each level to a certain extent, but after a while, the activity created by growth makes the structure at that level unwieldy and inefficient, limiting the growth, until the next evolution of the business occurs to solve the inefficiencies at the previous level.
The issue is not that these growth crises occur, but that there is a clear solution to these crises which few businesses take the time to discover. I am sure there are some business owners who want to keep their business small for lifestyle reasons, but I am also sure that if most business owners could find a way to grow their business beyond the current level, they would.
Most businesses that are stuck at the level where the owner(s) work in the business full time (or more) and there are a handful of employees, don't do what it takes to overcome the growth crises that are created at the limit of growth at that level. These crises are evident in the issues of control, where the business is dependent on the skills and input of the owners for most of the results and the owners can spend little time away from the business because performance will suffer in their absence. When work increases, the informality of communication and organisation become a liability resulting in errors, delays, poor quality and unsatisfactory service. Costs blow out and profits shrink rather than grow with increased sales volumes. Many owners conclude that it was easier and more profitable running a smaller business and revert to a scaled down operation. Unfortunately, this means the business and the owners never achieve their full potential and end up living a life far below the level that could have been accomplished.
Rather than scale down, the business could continue growing by scaling up. The solution to the growth crisis at this level is very clear and the path to growth is well established by the successful ones who have taken the leap to the next level. The answer is to re-organise the business with the owners delegating more responsibility to the operator level, appointing managers to take responsibility for certain functions, combined with developing systems to assist in maintaining control.
Many businesses increase the problems at this stage when they only increase delegation without increasing control. This is the key to smooth transition through this level. Control tools provide the information to management to ensure the business performs efficiently and profitably, with adequate cash flow. This development is often beyond the skills and experience of business owners who have come from a technical background and have never had training in finance and management areas. It is wise for owners at this stage to seek professional assistance in creating and establishing effective operating systems and control measures. As the business grows, the need for greater professionalism grows as well. Owners are wise to commit to a self education program so that they develop the knowledge and skills to run a business at higher levels.
At the higher levels of growth, the crises are more evident in the leadership areas. With growth, the need for increased management and organisation grows proportionately. Sometimes businesses need to be restructured along functional lines, or sometimes organisation is more determined by geographic elements. Whatever the case, the need for strong leadership and communication with management levels about performance issues, motivation of personnel and strategic elements of the business are of greater concern than the technical issues were at lower levels. Business owners need to develop their own leadership skills as well as develop or employ highly skilled managers.
If you are frustrated that your business has the potential to grow, but can't find the way through the current hurdles you are facing, which create increased stress, over work and performance issues, perhaps it is time you looked at changing the structure of your business and becoming more professional about how you manage it. Unless you make the changes, your business will be forever held back. You will not be capable of further growth until you re-create your business to perform efficiently at the next level. You may be held back because your current situation makes you too busy working in the business that you don't have time to work on it, to develop new systems and controls. It is time to bite the bullet. Unless you free yourself to work on reinventing your business to clear the way for growth, you will continue to bounce up against that invisible ceiling you keep hitting, without ever being able to break through.
(c) 2005 Greg Roworth, Progressive Business Solutions Limited
Greg Roworth is the Managing Director of Progressive Business Solutions Limited, a business development consultancy firm with branches in Wellington and Auckland, New Zealand. Greg has created a unique business development program that assists business owners transform their business from a state of total dependency on them to a state where the business works so well they don't have to.
Greg is also the author of "The 7 Keys to Unlock Your Business Profit Potential," which descibes the fundamental keys a business needs to achieve this transformation. Find out more, get 2 free chapters, or buy the book online at http://www.small-business-success.ws
Growing your own small business can be one of the... Read More
A menu is the foundation of any restaurant; Guests will... Read More
We have been spending many hours surveying the market for... Read More
No matter what business you plan to start in your... Read More
Many companies are reluctant to dive into outsourcing ocean because... Read More
Last week we talked about a few of the ways... Read More
Richard L. Daft one of the country's recognized academic leadership... Read More
Most companies that are worthy of raising venture capital have... Read More
Want to become more strategic? Add these traits to your... Read More
Let us look at a few of the big distribution... Read More
Is your business growing as fast and effectively as it... Read More
Business rises and falls on leadership. According to business guru,... Read More
Ask Yourself three simple questions that affect your strategy planning...... Read More
Writing a business plan can be tricky when all the... Read More
If you're a solo professional like I am, you know... Read More
When in doubt, cut that out! Yeah, yea, doubting Thomas... Read More
It's easy to lose sight of what needs to be... Read More
Remember reading "Alice in Wonderland?"She asks the Cheshire Cat, "which... Read More
Note to Northwest Airlines ? It's not about fuel costsFor... Read More
The trick is to determine what uniquely identifies your best... Read More
Obviously, there will never be an actual water shortage since... Read More
No "meme" isn't a typo and Got Milk, the more... Read More
One of the quintessential parts to any business is your... Read More
One of the key challenges for any business is to... Read More
Whether you are seeking capital for your company or are... Read More
Writing a business plan is no easy task, sure you... Read More
Growth through acquisition should not be considered an option reserved... Read More
Succession planning requires the owner of a small or medium-sized... Read More
Every new business owner knows that a business plan is... Read More
Writing a business plan is an essential part of the... Read More
1. Largest Selection -One way that you can make your... Read More
Business planning is widely acknowledged as one of the keys... Read More
You have heard that there is extra money on the... Read More
What do Mark Victor Hansen, Robert Allen, Anthony Robbins, Andrew... Read More
The format of a Business Plan is something that has... Read More
How you finance the expansion of your business is important.... Read More
Remember Chux? The disposable diaper that took the market by... Read More
Regroup?is this a new management trend? Not a chance! Regroup... Read More
As a business owner, you've likely created a hurricane plan... Read More
I recently took an organizational behavior class where my professor... Read More
When you start your program to purchase your "ideal" company,... Read More
I'm not talking about posting the HBO schedule on your... Read More
David E. Gumpert, author of Burn Your Business Plan, often... Read More
Cassy was an employee of a nonprofit who had been... Read More
A significant advantage of some business ideas is that the... Read More
When in doubt, cut that out! Yeah, yea, doubting Thomas... Read More
A strategic alliance is when two or more businesses join... Read More
The boom of the dot-com era in 1999 brought the... Read More
"Bozo" ? A clown with a forlorn look, always finding... Read More
Can you imagine going on a road trip without knowing... Read More
As a franchisor it is imperative that you seek, find... Read More
Private equity firms have raised so much capital over the... Read More
Entrepreneurs often give little if any consideration to their computer... Read More
One of the most important initiatives in the domain of... Read More
These may sound like no brainers, but you'd be surprised.... Read More
Franchised companies often require what some believe to be excessive... Read More
1. Attempt Succession Planning Without Other Strategic Plans. Succession plans... Read More
People often ask "What makes a good business plan? Or,... Read More
Human beings are rational agents. Rationality endorses one to take... Read More
Here's a really simple way to make sure your plans... Read More
Building a dynamic small business is a constantly evolving, increasingly... Read More
Twice a year, Bill Gates goes to a remote island... Read More
"Begin with the end in mind," says Stephen Covey in... Read More
Mobile auto detailing equipment becomes very inexpensive around March each... Read More
You have invested a lot of time and energy on... Read More
Strategic planning and consulting is the strategy roadmap to manage... Read More
Strategic Planning |