A business model is registering success on the market — good news! Now the thriving business has to manage its success, and convert it into healthy growth. According processes are necessary for stable scaling; structures and clear responsibilities have to be put in place, and new staff resources rendered accessible in order to strap the noticeably growing workload onto more shoulders.
For several years now, I have been advising start-ups and other businesses during such phases of fast growth. Growth always means change: strategic repositioning, change in everyday work, increase and development of staff, changed communication needs, spatial and technological challenges, as well as new aspects of culture and self-conception.
Organizations, People, Processes: The Forgotten Side of Scaling
When we speak of scalability, we first and foremost mean the scaling of a business model. How do you help provide formidable growth for a business via increased market and customer knowledge, an optimized market strategy, leaner processes, and strong sales initiatives? What can the market yield, how is it changing in its several dimensions? How do products have to be refined, enhanced, differentiated, diversified? What is the competition up to?
I have been supervising all of these areas operatively and strategically, and have gained many insights into businesses of various sizes and capacities in the process. In doing so, I have made two observations:
Regardless of any differences between markets and products, there are considerable constants in terms of problems during the development of organizations, people, and processes. Especially fast-growing (and therefore successful) businesses often have to simultaneously (and surprisingly) face problems in the exact same areas that should be expected to be well-known.
This side of scaling, meaning that of organizations, people, and processes, is often being neglected in favor of the strategic part of scalability. In practice, however, problems on both sides prevent successful and sustainable growth.
Growth Pain Matrix: growing pains in five different organization sizes
The Growth Pain Matrix describes the typical growing pains of organizations. Characteristic, empirically proven problems in six dimensions (strategy, workload, communication, HR, infrastructure, mindset) are allocated to five different organization sizes.
In principle, this matrix can be extended arbitrarily, and could hold up a mirror to bigger organizations beyond 100 employees, as well as be supplemented with dimensions of content (e.g. leadership, finance, technology).
The other side of the pain matrix is the “Growth Fix Matrix”, which points to solution approaches that can hold the key to any identified problematic situation. Such a key can simply be a sharpened problem-awareness, leading to an increased focus on a specific area, a redistribution of a resource, or a repositioning of part of the organization. The application of such a key is usually preceded by a workshop or a strategic advisory project. In any case, change is necessary.
Let us now have a look at the five mentioned business sizes.
1. Quick & dirty — the doers
The core of a business is a small team of usually two to three people with a good idea and the will to succeed. Such a founding team does not bother itself with strategic aspects, but first and foremost focuses on execution. People act fast, spontaneously, and very energetically. High workloads are an everyday phenomenon, preferably, people would duplicate themselves. Recruiting usually takes place within one’s own network. There are hardly any problems in communication, the restricted spatial conditions as well as low functional segmentation create maximum transparency — everyone always knows everything. Infrastructural challenges are overcome with one’s own technical skills, own work tools, and cables one has installed oneself. Self-awareness is shaped by high self-confidence, and a strong belief in one’s own product and competence.
2. Cheap & willing — the small team
Once the start-up has left founding mode and extended the team by permanently employed staff, this usually brings about the first painful experiences: workforce can very rarely (except for with extremely standardized work processes) be scaled in a linear manner. The desired relief through new staff largely fails to materialize. Additionally, during this phase, the core team is often busy speaking with banks and investors because although the business model has already been proven to function, further investments are necessary to generate real results.
In order to create transparency within the communication of a small team, basic techniques and mostly informal rules are already necessary. Not uncommonly, however, the first serious problems already start to arise during this phase. Subsequently, the solidarity of the team is being invoked in order to bridge over the first signs of communicative differences and inequalities between founders and employees. On closer inspection, not everyone knows everything anymore, and not everyone is equal. Yet every employee is sufficiently aware that at this point, everyone benefits more from successful business development than from failure.
During this phase, recruiting mainly has to be cheap and simple, which entails that mostly young, inexperienced staff and interns are coming on board. Expansion and infrastructure are handled with similar cost sensitivity, repeatedly stretching them to their limits.
3. The moment of truth
In the next phase (somewhere around a workforce size of 18), several problems, which previously have only softly been in the offing, are now accumulating. This can be so severe and challenging, that organizations and leaders founder on it.
The call for a concrete strategy, so far repeatedly ignored in view of daily operative challenges, now becomes unmistakable. On the one hand, a clear strategy creates the foundation for sustainable success. On the other hand, clarity determines an extremely important framework, not least internally, towards which every employee can orient him or herself. Why are we doing all this? Where are we headed? And what is my role in the process?
Lived pro-activity, meaning doing everything at the same time in an attempt to not miss any chances, maximizes workload, causes stress and a feeling of overload. Simultaneously, rumors and incomplete information add a sense of a permanent lack of communication. If insufficient technological and spatial infrastructures now arrive on the scene as well, tensions can impair work and collaboration quality.
At the same time, HR (assuming its existence as a functional unit, otherwise this job remains squarely on the shoulders of the founding team) has to increasingly devote itself to topics like appreciation and differentiating, as requests for a raise and evocative titles are now being put forward with surprisingly high frequency.
Despite all problems, an unequivocal commitment of staff to the brand exists in this phase, which occasionally can even assume sect-like traits.
4. The small big business
The 40-man phase of a small business is characterized by an unclean transfer of strategic consideration into operative practice, by a lack of focus, and unclear prioritization. Many things are tackled simultaneously, without pulling together. An important cause for this is the creation of self-contained departments and individual spheres of responsibility, which always also constitute an antithesis to overall shared responsibility. This makes it easy to simply shake one’s head and accuse others of failure.
Additional to the departments, groups have formed amongst staff, and quite often an “inner circle” disallows the establishment of a welcoming culture towards new employees. Outwardly, however, the business demonstrates coherence, and at corporate events, congratulates itself on being savvier and more successful than the competition.
5. On the way to anonymity
Long gone is the big picture, barely anyone is still familiar with core processes and strategic brand positioning. Instead, everyone joins in the unitary lament over slowness, sparse resources, and lack of coordination.
An average working day now consists in large part of meetings that leave much to be desired in terms of efficiency. The complaint that all those meetings barely leave any time for actual work, indicates the perceived low value of this so important and irreplaceable opportunity for communication. Especially employees who have not yet quite arrived in their leading roles, or for whom the switch from an operative to a leading position was not a good choice, find it difficult to provide enough space for the informing, coordinating, and delegating aspects of their role.
Differences between employees regarding professional and personal skills, as well as motivation and goals become increasingly visible. A good HR department has to learn to become increasingly better at recruiting, navigating, and developing.
The infrastructure has long ceased to cause any real problems, as they can now be passed on to “professionals”. Whining only ever takes place at top level. At the same time, the sentiment towards one’s own company has changed because fluctuation, first setbacks, and the constant search for one’s own role enforce the longing for the “good old times” rather than make change become accepted.
Why don’t we learn from others’ mistakes?
Why do most of the described problems occur in almost every business in similar ways? Why do we keep walking right into the same traps, although thousands of companies have already lived through the same challenges which therefore could be avoided? We cannot help but notice parallels to the several phases of adolescence — a process experienced similarly by every generation, but throughout which every presentation of a problem seems to be a novelty for those living through it.
Experience teaches us that we cannot learn from experience. Nothing replaces getting our own hand burnt on the stove.
Alert markers and ways out of the pain trap
Is it really true that growth cannot be guided in a prudent and prescient way? After all, companies are not toddlers or hormone-ridden teenagers (you would think). Through consequent monitoring and knowledge about the times that call for action, prescient coaching may not be able to entirely avoid all symptoms, but can minimize their effects and prevent their chronification.
The alert markers highlighted in the Growth Pain Matrix signal a need for action, whereas the corresponding cells of the Growth Fix Matrix make suggestions as to how to find a way out of the pain trap.
Behind every cell stands an established coaching package that minimizes pains, and thereby makes a company, its organization, processes, and employees permanently successful.