The growth paradox

I keep hearing, increasingly more often, the desire of CEOs and business owners to properly manage a growing company without destroying the qualities of a small company.

Managers still get nostalgic over the times when, for everyone in the company, the customer was the most important and everyone made impossible things possible for them. At the time, every customer demand seemed like an opportunity to make a profit, and the team found the right solutions for the customer at lightning speed without any fancy tools and IT systems.

So why are we losing capabilities to fulfil our promises to the customer now that the company has grown, is armoured with goals, performance indicators and standards on the walls, and, at first glance, modern management?

Developing holistic organizations, we establish a strong connection with business leaders and their experiences are intertwined with mine ones. So, I often notice that CEOs in the process of rapid growth frequently express the following issues:

I want to control the growth of the company by giving people the freedom to continue to make decisions.

I don’t know how to feel connected to all employees when there are 500 of them rather than 50.

I want an adaptive and fast decision making, minimising bureaucracy, because it destroys the speed.

How to recognise the paradox of growth?

A small business is customer-oriented and has the habit of negotiating with customers on the terms that are right for them.

A large company doesn't consult the customer, it sets its own standards and conditions for the time within which it will deliver the promise to the customer, and measures this by various indicators. For example, a student pilot expects to graduate within two years and find a job at a reputable aviation company. Meanwhile, the company’s focus is to enrol as many students as possible, pack classrooms and fully utilize equipment.

When team members of a small business fulfil a promise to the customer, they call the customer to learn about his experience and gather the feedback to improve the customer journey.

Meanwhile, a large company employs robots to call customers or do NPS twice a year.

In small businesses, strategy is not drawn on the walls or described in catchy slogans, but everyone knows that their job is to create value for the customer.

Meanwhile, the strategic goals of a large company are oriented from the inside out, i.e. towards development, profits, optimisation, etc., but the customer is not interested in those. The customer’s goal is to get the promise made by the company. For example, a customer expects to resolve a problem during the first call, and the goal of a customer service centre is the amount of calls received.

Small businesses do not like bureaucracy and encourage employees to make decisions together with customers.

Meanwhile, large companies develop the front line and the back office. First-class knowledgeable people are sitting far away from the customer because that is cheaper. When a specialist from a small company comes to your place to fix a gutter, he will engage in a dialogue with you and probably inquire more about other aspects of house maintenance. A technician from a large company pulls out a tablet, reads a description of a specific job, does it, and leaves. When asked what he needs to create more value for the customer, he replies, “I want to see the maintenance history of this house on a tablet, but I don't have this information.” It turns out that technicians don't see it because company executives decided that more information about the problems of a particular house and the work done should only be seen by managers. There is a belief that technicians just need to come and fulfil what the system has planned.

Heads of small businesses revel in work with details in the process, while at the same time clearly seeing the strategic direction and sticking to it.

They have the rare ability of instantly turning from zoom in to zoom out and vice versa. Heads of big companies are afraid of getting their hands on the details because they have the "I won't do micro-management" belief, so they are alienated from the real thing and only work on the zoom-out picture. Heads of small businesses understand that it won't be enough to communicate the direction, it will have to be implemented through day-to-day discipline. Heads of a large company plan strategic goals, communicate them, and imagine that implementation is already underway.

Why does this happen?

As the company grows, there is a natural need to manage that growth. To this end, the board, CEO and managers develop strategy, various performance indicators, accountability, organisational structure, processes, etc. This requires time and attention from managers. Gradually, they are increasingly closing themselves in their offices, mapping out strategies at spa hotels, and unwillingly, the company is creating a vacuum between reality and imagined reality. Managing growth by said means is very engaging for managers. After all, they return from the strategic sessions in high spirits, with a clear vision and ideas on how to include their teams in everything.

 

We get so enchanted by this that we forget to ask ourselves, “How does this relate to our customer’s goal?” We start perceiving efficiency as employment because we have to show how much we have done. Then, the Holy Grail for us is not the customer and efficiency, but the budget. Strategic goals, performance indicators, standards, and motivational reward systems conflict with client expectations. But it’s all very hard to notice, because we created it ourselves.

In other words, the initial intent of the company to rein in growth is strongly focused on inside-out rather than outside-in. If a company doesn’t ask itself a critical question for a long time, “How does our strategy, our indicators and standards relate to what the customer wants?”, a silo-based performance is formed. Each function works for itself and understands efficiency in achieving its KPIs. Most KPIs are about function employment, equipment loading, and collection of euros.

How to spot the paradox of growth early enough?

There is another way of managing growth that does not divide the company into separate parts or widen the gap between management’s imagination and reality. I call this method the ability to think in terms of zoom out and zoom in.

#1. Understand the value to the customer yourself.

Together, the management team needs to take the end-to-end customer journey of their service and get close to not only experiencing what the customer is experiencing, but also strategically understanding what is important to the customer now and what will be important in five or more years.

#2. Critically assess the existing performance management.

That is, ask questions how the current strategic goals, performance indicators, motivational system and focus of our managers meet the customer’s goals? What leaders’ beliefs have created a gap between our imagined situation and reality? At this stage, a change in thinking takes place, and managers realise that they managed the company in separate parts without understanding its entirety.

#3. Make holistic decisions seeing a business service stream or streams as a whole.

For example, when you find a gap between a customer’s expectations and an existing motivational system in one function or another, make a decision from the customer’s position, outside-in. You are likely to abandon your existing motivational system and budget for each function. Or you will decide that a certain customer segment is not yours and you don’t have to conquer them all. If several of your services share the same resources, make decisions as you go through the end-to-end customer journey of all services.

#4. Visualise the existing discipline of strategy implementation.

That is, how do the teams performing each function understand the customer’s and their own goals? How do they measure that, how do they solve problems, how often do they discuss their activities, how do they improve processes, etc. This will help you to see very clearly the discipline gap between where you want to be and where you are.

#5. Formulate strategic goals and create an implementation discipline uniting the company.

Choose from one to three strategic goals for each service and decide how to implement them. Use tactics that will substantially increase your effectiveness in relation to the customer. If we can improve and measure everything, we don’t necessarily have to do it. Choose function-unifying performance indicators that focus on the customer. Visualise the desired discipline of strategy implementation and start with top management.

Every company as a system has its limitations. Although we do not have Harry Potter’s wand and cannot predict the future of the company, understanding how the company functions as a whole and why it does so, allows us to make the right decisions that will keep what we have already created rather than destroy it.

Don’t miss another blog post!

Subscribe to our newsletter and get updated when we make another post.

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest articles

Short on time this quarter? Get out best stuff to not fall behind deliver straight into Your inbox once a month.

© 2020 Holistic Enterprise | All Rights Reserved

Why don't we keep in touch?

LEts connect on linkedin

Do you agree with our privacy polity & cookie policy?