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Twenty years ago, the business was a couple of brothers working out of a pickup truck. Ten years later, with six employees, the business generated $3 million in revenue. Two years ago, the business hit the hockey-stick curve of growth, growing exponentially from $4 million to $8 million, $8 million to $16. The question on everybody’s mind, (and the fear in everybody's heart): can the business sustain the growth?
Like the adolescent who rapidly outgrows his clothes, the revenue of the company grew faster than the infrastructure supporting the sales. The jumps came in the form of a handful of whale-sized contracts, contracts five to ten times the size of a normal contract. These whales dwarfed the regular business, drawing intense attention — and resources — from the normal contracts.
Growth came not just from the whales. The company added product lines. It added service offerings. The owner, wanting others to help grow the sales, added more business development people, opened remote offices, and hired a marketing company to help grow the revenue.
The company owner thought the infrastructure could handle the added load. He was proud of the systems and processes he had put in place, but did not quite recognize how quickly the business had outgrown those systems and processes. As problems emerged, like project cost overruns, project execution delays, and missed deliveries, the owner applied Band-Aids to fix them, attending to the symptoms, not the causes.
After a while, the owner realized that treating the symptoms was not the answer. He needed upgrades.
Where do you start?
The growth of a company follows a life cycle. There is a pattern. Examine the history of any business, and you see the same pattern emerge. This pattern follows another life-cycle pattern, that of the growth of any person. We are born infants, grow into toddlers, then become kids, teenagers, and finally adults. As adults, we are in our prime, working, living, and producing. As we age, our productivity diminishes, and we retire. At some point before death, we are once again in the care of others.
Businesses follow a life cycle. The business starts as an infant, nurtured by the founder, who grows the business until it reaches the toddler stage, at which time the founder is able to hire a few people to help run it. The team grows the business until it reaches adolescent stage, and the growth takes off. The revenue also takes off, as do the expenses. New people join the company, and the old undocumented policy, processes, and procedures break down, either from an inability to support the growth, or due to the ignorance of the new team. Just like pre-teen and teenaged children go through growth spurts, the business rapidly grows. Just as the quick-growing child outgrows the pants and shoes that fit two months ago, the business outgrows the systems and processes that worked just a few months ago. Just as rapidly growing adolescents stumble, uncoordinated and unaccustomed to their new size and strength, and just as teens, blind to the potential mistakes they can make, tend to think that they are ten feet tall and bulletproof, so are young businesses blind to the mistakes they make. That is, until those mistakes come close to killing them.
Most young businesses push for revenue growth. As revenue grows, the top line of the business grows. But if the business leader does not adjust the other controlling levers of the business, the company runs into trouble as the revenue picks up. Internal functions, when pressed past capacity, either fail to process the backlog, or allow unfinished work to pass. In an attempt to keep up, people will skip details, thinking that the details will go unnoticed. Leaders hire more people to help, thinking that the new trainees will have the same capability as the current staff. While that is possible, often the new hire fails to achieve the same level of capability.
In our story of the growing business, the owner saw the issue as a sales process problem. The company needed to support the sales process, and focused the effort on a Customer Relationship Management system. In reality, the accounting system was the logical place to start. Thankfully, in the case of this business, the owner had some really smart people working for him, and some good advisors who got him to face the fact that the accounting system could not support his vision. It was not a difficult sale, and he signed up for a new system.
The company owner, like many entrepreneurs, caught up in the excitement of his plans, talked about many of the systematic changes that he planned for the future of the company. But because his own vision of the future was unclear, his expressed vision became vague. Vague vision leaves many people uncomfortable.
As in most small companies, the people who turned the wheels of the business knew their jobs. They learned their jobs while doing them. Sure, they had skills from past jobs that they brought to the company, but much of what they did — the process — they developed in the actual doing of their jobs. There was no manual, no standard operating procedure. They learned what to do by doing it, based on the never-ending input form the visionary owner.
One of the signs that a company is evolving into adulthood is when the group formally defines the different business processes by the name of the function, and not the name of the person doing the job. When the accounts payable function is called “Ellen,” the company is still immature. Like conjoined twins, functions conjoined with the person doing them have limitations. Functions conjoined with the individual can’t grow, unless you can clone the individual. Hiring a new person to help is easy to do, but hard to make work, because as with the conjoined twins, the person doing the function identifies their image in the company with the function. Asking them to give up some function is like asking a conjoined twin to give up their connection.
In the process, people conjoined with function become fearful. That happens in all companies as they grow. And it happened in this company.
Their fear was legitimate. As they heard about the systems of the future, they didn't see the shining future of the owner’s vision. They saw the problems of today. Seeing those problems, they started to wonder what their role was in the new vision. They wanted to know what their futures would be. They wanted to understand in detail how it would all work. Long on promises but short on details, the more the boss talked about the new systems, the more concerned his loyal followers became.
To bring on these new systems, the boss hired consultants, technicians, and advisors to help with the process. He did his homework, and found smart people from the outside to help put these new systems in place. Mindful of cost, he skipped hiring some consultants, while negotiating hard on price with others. He knew how to work his kind of projects, but the project of changing his internal processes was a different game altogether.
Doctors do not treat themselves. Surgeons don’t operate on themselves. Conjoined twins do not simply pull themselves apart. It takes great courage to put a knife to your own body, and it takes great courage for employees to willingly assist in the separation of a process from themselves.
In this story, the team complied for the most part. While employees are loyal to their paycheck, and thereby loyal to the boss, some employees are not as compliant as others. A few truly assertive employees will enter boldly into the conversation, defining their vision of the current role, and how they want the new role to evolve. Others will sit back, watching how things develop, deciding whether they trust their boss, and whether they trust the people the boss hired.
That was the room I walked into. Eight employees, representing eight different functions. The boss wanted the systems consultant to explain to me what the system was going to do. That was unimportant. Getting the fears of eight different people out on the table was much more important.