Which company do you work for? The exception (10%) or the rule (75%+)?
The following are five phases of growth with some attributes in each as well as the afflictions and remedies that happen in each phase. Read the fascinating and somewhat technical HBR article here.
Stage 1 – Creativity Phase
- Founders are technically or entrepreneurially oriented
- Communication is informal and frequent
- Roles are general in nature
Creativity got you here but now becomes a problem as you may start to grow uncontrollably and without direction. A different type of leadership is needed.
Stage 2 – Direction Phase
- Increased organizational structure
- More job specialization
- Communication becoming more formal
Strong leadership and control now becomes a bottleneck. Autonomy with measurement needs to be fostered.
Stage 3 – Delegation Phase
- Decentralized decision making emerges
- Formal incentive systems to motivate team
- M&A activity increases
Autonomy can create fiefdoms. Senior management needs to re-assert control in a different and more coordinated fashion.
Stage 4 – Coordination Phase
- Decentralized units merge into product groups
- Formal Planning Processes
- Centralization of certain process begin
Red tape runs rampant and the larger organizations become bloated and inefficient. Team-oriented models across departments and divisions begin to emerge creating innovation and continued growth within the organization fueled by different points of view.
Stage 5 – Collaboration Phase
- Problem solving via cross-functional teams
- Matrix structure evolves
- More centralized management practices and strategic planning
Each of these phases, if not managed well, can lead to stagnation and/or decline. It is also rare for each and every manager to survive through all five phases. Some leaders are phenomenal at one or a few stages but whose strengths are not well suited for one or more stages of the company. However, do not despair, this transitional process can be invigorating as new “blood” can add energy and new innovation leading to explosive growth.
My post related to this topic (30 years, 19 businesses, 16 startups, 3 lessons) from a number of weeks ago shares my personal experience and observations in a simplified, short and hopefully entertaining format.
Scaling a business can be a daunting task and not one to be done without outside guidance, influence and deliberate decisions on all important areas of the business (People, Strategy, Execution and Cash). Surrounding yourself with the best brains that complement you and your team along with executing quickly has been a proven strategy for the small minority of companies that survive over the long term.
If you recognize yourself in any of the aforementioned stages and are unsure if you are managing the team through it in an effective and comprehensive way, I recommend you look at organizations such as Gazelles, EOS/Traction and/or groups such as EO or YPO to find like-minded folks that can help you.