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Understanding Where You Are In Your Organization’s Growth Stage

Feb 25 2014

The logical place to begin our journey is to examine how privately owned businesses and professional practices grow. There is a natural and predictable set of stages into all companies fall… Here we will cover the four major stages of business growth: Entrepreneurial, Personal, Organizational and Beyond.

 The personal goals of the owners drive business decisions and ultimately form the basis of the growth stage where the business will reside. You do not need to attain a certain growth stage nor must you go through all these stages. You may start and indefinitely remain in the entrepreneurial stage. That is your choice and I place no value judgment on your conscious decision. That said, progressing through these stages is the surest and clearest path to greatness.

 This article foreshadows what to expect as you expand your organization and build toward greatness. If you are frustrated or stuck in your growth cycle, this article may help explain why that is and what you can do to move forward to more fun and profits.

 Take special note of the final stage of growth as described in this article. I call this stage, “Beyond.” It’s the growth stage of business perpetuation—an earned right. As you begin to grow into this stage, begin to plan for your exit. Start this process early to give your business and yourself the most options.

 I have shared these stages with hundreds of company owners in seminars. As you read through them, think about your own company and its history. Identify which stages you have experienced and which stage your company is currently experiencing. You may discover that you thought you were in one stage of growth, but actually are functioning in another.

 

Entrepreneurial or Startup Stage: Generally a 1- or 2-Person Show

In this stage, the reason for your business may not be the best reason. Perhaps you started the business to challenge yourself, or because of your dissatisfaction working elsewhere or unfair treatment you received at your previous company. Many entrepreneurs establish their own practice or business because their old company goes out of business; there’s no room for growth; they have a personality conflict; or they desire more dollars. Others in this stage want to prove themselves; can’t work for anyone else; or don’t like their former boss.

The behavior of a company owner who operates in this development stage is easy to spot. You, as the entrepreneur, usually can be described as driven and as having an insatiable appetite for growth. Other common characteristics are: risk taker, skilled survivor, impatient, in need of new challenges, easily bored, demanding in the details he or she wants from others, intuitive, desiring recognition, aggressive, ambitious, innovative, charismatic, creative and energetic. To owners in this stage, loyalty means a lot and is an essential element in promotion decisions. But this can be your Achilles’ heel. I’ll explain why when we discuss the next stage.

 

Personal Stage

Organizations in the personal stage have a founder who has built the first business universe with supplementary talent. Perhaps the company has expanded by adding administrative or sales support employees. In the beginning, communication is good; the owner hires compatible people, trains by imitation, leads by example and makes all decisions. This is fun. The company is charting new ground. Success depends on the entrepreneur. As the entrepreneur goes, so goes the company.

If your organization is well advanced in this personal stage, you’re always looking to expand. You have to add staff rapidly to keep up with business growth. Once the head count or business universe grows to more than 10 or 12 people, the owner is obligated to create a new position—a manager—and turn over some responsibility and start delegating many more duties.

The decision to promote someone into a management role is based on rewarding a top producer who has demonstrated loyalty. Owners in the personal growth stage of their business demand loyalty and reward loyalty. Here’s where this trait can be the company’s Achilles’ heel: The owner assumes this loyal employee is prepared to manage, but when things are not done correctly or the way he would do them, the owner jumps in to do the task himself in this way, the owner intentionally takes back the responsibility and undermines the new manager’s authority.

Imagine a 500-pound parrot (they could really make a mess in their cage couldn’t they?) taking command and undermining the manager by breaking down the chain of command. The beach ball of ownership expands to the point where the owner can hardly get his arms around it.

Choosing the wrong manager and then breaking the chain of command sets off a tragic series of events. A poor management selection decision will result in poor recruiting and selection of new staff. Training will be inadequate. There will be little or no supervision. Employees will sense a weak motivational environment.

At best, a strong economy may be robust enough to carry along an organization in this state. But the company is limited in growth because you—the owner— must make up for your poor management/leadership selection. You have created a sterile hybrid—you cannot reproduce or grow your organization.  

This is very frustrating. In the worst case scenario, the economic climate changes and you do not have the depth of talent to survive the business downturn. At the very best, the business will own you and steal your fun and enjoyment. The personal goals that drove you to start your business and to succeed at first are not being achieved.

 

“Our chief want in life is somebody who will make us do what we can.”—Ralph Waldo Emerson

 

Organizational Stage…Where Both Fun and Profit Co-Exist!

This phase of growth is characterized by the organization’s ability to reproduce significant depth of leadership and management talent. In the organizational stage, there’s a solid, healthy bridge between the owner and all employees. This bridge is the owner’s ability to systematically select, develop and manage people capable of leading.

If your business has reached this stage, then you probably recognize that only one in seven top producers possesses the capacity to be a good manager or leader. In this stage, you will likely reward employee loyalty and job achievement, but not by blindly putting top producers into management roles. The latter is a mistake commonly seen in the Personal Growth Stage.

Your job at this stage is to build a team of autonomous leaders and this is challenging. But you know you can’t make every decision and you value having good leaders, independent thinkers, around you. Your autonomous managers have authority and responsibility over people, production and profit as described in your written company policies and procedures. In the organizational stage, you create more formal business processes and learn how to develop leadership talent. 

 

Beyond…Your Exit Strategy

This stage is not a given. It is an earned right. If you are the owner of a company in the Beyond stage, then you have the ability to transition away from the day to day business. You have a trained and capable team that can run the business profitably with or without you. You can retire or pursue other challenges.

Organizations in the Beyond stage have many business models in place and a depth of leadership talent within the company. Many of the necessary talent development processes your company needs to meet the challenges unique to this stage will be developed in this book.

I have worked with many owners who have successfully achieved the Organizational Stage and are becoming somewhat unchallenged or bored in their own business. In this case, they have worked themselves out of the day-to-day operations or at least are in a position to make this transition. This is the signal to begin to plan your exit plan. The danger in being bored is that many owners like to be their chief problem solver and therefore need to create a problem to become active and needed. 

Another aspect reflective of the current economic period is the shortage of capital, which means the days of cashing out of your business without continued risk and involvement have disappeared. A new view of a privately owned business is one of a retained family asset. This has made the Beyond stage a bit more complicated, requiring owners to build depth in leadership talent and to utilize a team of professionals to help develop and secure their succession plan.

Request how you may evaluate how your organization rates in the characteristics of great organization. These characteristics were developed form polling hundreds company CEOs like you over my 30 plus years of consulting. Email me at bclinton@business-wise.com and request “Characteristics of Great Organizations”.

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