Has your company's growth stalled?

In the 13 years I’ve been an independent business coach and advisor, I’ve seen many companies that grow to a certain point and, despite all their best efforts, can’t seem to grow beyond that.

I’ve also seen companies that do continue to grow but become less and less profitable, and more and more stressful for the CEO.

Turns out this isn’t just my experience.  It’s a common pattern.

Growth isn’t common

Out of the roughly 28 million firms in the US, only about 1.1 million have surpassed a million in revenue. Only 112,000 have gotten past $10 million. And only 17000 have grown beyond $50 million.

The reason is that companies need to operate differently as they grow. Companies that don’t adapt how they operate will tend to grow to the limits of that way of operating. 

CEOs who have had success getting to a certain point often tend to repeat what they know, thinking “well, it got us here.” But, as the title of a book by Marshall Goldsmith goes, “what got us here won’t get us there”.
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​The systems to manage a growing company
The changes needed for a growing company are driven by the added complexity that comes with having more employees.

Think simply of going from having 2 employees to 3 employees. This makes the number of relationships between individuals increase from 3 to 6. Add one more employee, and there are now 10 relationships. This complexity continues exponentially as the company grows from 10 to 25 to 50, 100 and 200 employees.

​To predictably achieve results within this growing complexity, a certain level of order is needed.

Processes, systems and structures create that order in companies. And the systems needed to create order in the complexity of a 200 person organization are different than that of a 100, 50, 25 or 10 person organization.

For example:

• When a company has 1-10 people, the owner can manage everyone. When the company gets to 10 to 15 people, the owner needs to bring on supervisors and managers, as well as some basic people management systems.

 

• When the company gets to about 25 people, it needs more than one leader and the beginnings of a middle management group. The CEO now has to get most of the company’s results through other managers. So effective leadership and management becomes more important. And keeping those leaders and managers all heading in the same direction becomes more challenging. Strategy, goals and priority setting become critical along with meeting rhythms to keep everything on track.

 

• When companies hit 60 employees or so, they’ve already had to implement project management processes to get new systems fully implemented. And now, they often have to revamp their competitive strategy as they are now more visible in the market, and therefore a deliberate target of competitors.

 

• At about 95 employees, another layer of middle management is usually needed, making new employees more disconnected from top level decisions. This then requires new systems to monitor and improve employee buy-in and engagement.

 

• At around 160 employees, the size and complexity of the organization starts to make it more resistant to change and it often becomes less profitable as its costs go up and products start to lag the market. Other systems and processes are needed to speed up getting new and more profitable offerings to market.

Hitting the ceiling, valleys of death

Any company within one stage will usually hit a ceiling if they keep doing things the same ways they have been.

Companies that don’t make the right changes, or aren’t successful in making those changes, will fall into what we call a “valley of death”. 

Valleys of death are where the leadership makes investments, but they don’t work out. So the company doesn’t move beyond that stage. The company can also fall backward in terms of revenue and often profitability because of the failed investments. Worst case, it can lead to company failure.

Growing unprofitably

Some companies grow despite not making the changes needed for the next stage. With sheer grit or dramatic demand growth, they’ll grow. However, these companies often become increasingly inefficient with the increasing complexity and resulting chaos. And so the company’s profitability will decrease, sometimes significantly.

Unless exceptionally well funded, with investors willing to accept short to mid term losses for a longer term windfall, the decreasing profitability and resulting cash flow challenges will eventually prevent the company from investing in the capacity to grow and the systems to grow profitability. And so growth will stall. One can also count on drama, stress and headaches being the overarching theme for the CEO.

So what stops a company from making the right changes and improvements to grow successfully and profitably?

Leadership is the linchpin

We can see early in a company’s life - by about 25 employees - that a CEO has to learn to get results from people THROUGH other managers or leaders, rather than managing everything themselves.

Very often, the leaders, like the CEO, are stuck in the weeds, too focused on the day-to-day. So the projects to move the company forward often don’t get done or aren’t done right.

​Leaders in mid-size companies are often not on the same page about where the company is headed and how to get there. So they, and their people, are often working in silos and at cross purposes. 

These leaders are also often not meeting the CEO’s expectations and aren’t being the kind of leaders they need to be to get and keep their people fully engaged, productive and effective.

And while the CEO may have a vision for the company, they often don’t have a clear strategy for how to attract and keep the best customers. Even if they do, that strategy is often not understood or supported by the leaders who need to make it happen.

The result is the company doesn’t identify or successfully implement the right processes, systems and structures to support growth, in ways that delight customers, retain great employees and do so profitably and sustainably. As a result, customers come and go, as does talent, and the company’s growth is rocky and/or unprofitable.

The shift needed is for the CEO to work WITH top level leaders as a team…a leadership team (or management team, executive team, or whatever you want to call it).
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It’s the CEO’s job to assemble that leadership team, and build a plan together that gets them all going in the same direction, moving in lockstep, making the needed changes and improvements to enable the company to grow AND thrive.

​An evolving leadership team and strategy

The challenge of having an effective leadership team and strategy continues through the life of the company. New leaders come and go. Markets evolve. Systems need to change. And so the capabilities of the leaders and the team, and the strategy and plan, need to evolve as well.

The crucial underlying challenge to growing a thriving company is to build, maintain and continuously improve a great leadership team that is highly capable, thinks strategically, is aligned around a clear strategy and plan, executing and leading effectively and efficiently, strengthening collaboration and engagement across the company. Essentially, working as one unit to move the company forward, because it’s too much for the CEO to do it alone, at least not effectively and sustainably.

In the articles ahead, I’ll cover in detail how to make all this happen.

And so what is the CEO's role in all this? And do you have what it takes?

We'll cover that in our next 5 Minute Growth Tip article.

Watch / Listen to the Video

If you are a prairie CEO who wants to grow a thriving company more quickly, more easily and with less stress and headache, please contact me here.

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