The challenges of scaling a successful business
“Plus ça change, plus c'est la même chose.”
(“The more it changes, the more it’s the same thing.”)
Jean-Baptiste Alphonse Karr
Over several decades I’ve worked in and led business schools and before that I worked as a project manager in IT. In that time, I’ve seen businesses of all types and sizes struggle with change. “Big deal!” “No surprise!” “Yeah, yeah, yeah,” I hear you say. We’ve all at some point “been there and done that.” On rare occasions, change projects work well. Mostly they don’t. Why is that?
Just before I started high school, in August 1972, an American Professor, Larry Greiner, wrote what is now regarded as a ‘classic’ Harvard Business Review article. “Evolution and revolution as organisations grow” has since been updated (May-June, 1998). However, it’s unaltered core messages remain amongst the best explanations of business growth and the challenges that go with it.
Evolutions and revolutions: size and age matter
Prof. Greiner identifies phases of growth as evolutions, interrupted by stages of crisis he calls revolutions. These vary with the size and age of organisations. On the challenge of time, Greiner makes the key point that
“Managerial problems and practices are rooted in time. They do not last throughout the life of an organization.”
He also observes
“A company’s problems and solutions tend to change markedly as the number of its employees and its sales volume increase.”
Five phases
Greiner identifies five phases of growth that are each bounded by a crisis:
Creativity bounded by a crisis of leadership. All companies are established through some form of creativity but, as they grow, this becomes the problem. Who will lead the company out of the creative paradox as it grows?
Direction bounded by a crisis of autonomy. The creative paradox of growth is addressed by capable, directive leadership. However, it is difficult for some transformational leaders to give up responsibility having enjoyed success by being directive. And some lower-level managers struggle to take responsibility.
Delegation bounded by control. The crisis of autonomy is addressed through delegation in a decentralised organisation structure. A new period of growth ensues, but freedom eventually breeds parochialism. Some top managers yearn for a return to centralised management, to exercise greater control, which is often illusory given the organisation’s scale.
Coordination bounded by a crisis of red tape. Instead of centralised control, executive management put in formal systems to better coordinate activities at scale. However, as growth continues, more and more systems are introduced with HQ and operations become increasingly disconnected and bureaucratic. Size and complexity defeat formal, rigid systems.
Collaboration bounded by human tolerance. Strong interpersonal collaboration is used to overcome red tape. Social control and self-discipline replace formal systems. Flexibility and emotional intelligence are key to management. The limit to growth here is somewhat speculative. Greiner hints at the ‘human factor.’
From my perspective and observations in the intervening 50 years, especially in the wake of COVID, we still seem to be designing work in production and services from an industrial rather than human perspective. Do we need to be in an office to work effectively? The evidence is mixed, and personal preferences vary. Yet changes are afoot with countries experimenting with four-day work weeks.
Through the crisis? Vive la revolution!
The question is, where is your business on the growth curve? Is it in crisis? How do you know?
Across my working life, much of my time has been spent working on strategy and crisis management with business leaders from a range of sectors and business sizes. I've walked alongside and supported people tackling a range of challenges, many like those identified by Prof. Greiner 50 years ago.
We take a three-step approach over 12 months in which, working together with clients, we:
Assess their business's present position. Where has it evolved to?
Evaluate their business model.
Equip them to increase customer value, optimise costs and improve their business's building blocks (embracing evolution and encouraging appropriate revolution).
If you have a successful business, but suspect you need a small revolution to manage one of Greiner’s crises, drop me a line and we’ll set up a call: clive@clivesmallman.com