The solution may be to change soft organizational factors
Despite a healthy working capital and a quick ratio measure, what’s is it that’s flying below the radar and preventing your business from reaching its next revenue target? If it’s not money, what is it?
It’s those soft organizational factors that, when bundled together, form the organization’s structure. And it’s one or a combination of these key organizational factors, no matter how solvent and ready the financial statements indicate the company is to grow, that can keep a company from gaining enough steam to actually grow.
Organizational factors include characteristics of the company’s human resources, the method by which an organization communicates, distributes responsibility and adapts to change. Organizational structure is the combination of all the organizational inputs that a CEO must manage if his or her company is to grow effectively and efficiently.
A company’s leaders need to model the business culture and design organizational dimensions that clearly establish the norms and roles that enable companies to grow. Therefore, when growth plans call for doing things that are entirely new, such as expanding into new geographies or adding a product line, it’s well worth the boss’s time to examine existing organizational factors to see if they’re sufficiently developed to support the new initiatives.
Here’s a look at three key structural factors that can quickly constipate a business’ growth potential.
Structure follows strategy. If you don’t know where you are going, no road will get you there.
Maurice Dutrisac, strategic planning and organizational design principal with Mastermind Solutions Inc., a Toronto-based international firm specializing in business growth, states that the first place to diagnose stalled growth is to revisit the business plan. When owners lament that their profits are decreasing, competitors are taking away customers, employees don’t do what they’re told, and clients are difficult to deal with, that’s “prime evidence that the company needs a new strategic plan, a new organizational structure and upgrading of employee skills and even hiring new managers with higher cognitive abilities—managerial and leadership talents—to address the complexity of increased growth.”
The next place an owner needs to look is in the mirror. To gaze directly into the reflection of their own eyes and ask, “Mirror, mirror on the wall, how is my leadership and management style stymieing my company’s growth?”
Failure to delegate
John Holland, specialist in sales, marketing and business development at Plutus Consulting Group in Burlington, ON, states that owners who don’t delegate, actually block organizational growth. “The owner remains too busy and too involved instead of stepping back and saying help is needed.”
In many instances owners are blind to the fact that their management and leadership capabilities don’t match the demand of a larger and more complex organization. Holland notes, “It takes a lot more training to be an effective manager of a larger organization.”
And, according to Doug Robbins, founder of Robbinex Consulting Intermediaries in Hamilton, ON, an international firm that specializes in helping owners of mid-sized companies with business transitions, executives are often blind to the fact that their shortcomings are reflected in the organization’s ability to grow and increase its company’s bank account.
No owner wants to admit that their skillset is holding back their company’s growth. When the demand for a company’s products and services grows, instead of stepping back and hiring help, Holland notes that some owners turn their focus inward. They hunker down and do what they know best: sales and marketing, while other key business activities go unattended, like payroll and interpersonal communication.
Holland, Dutrisac and Robbins concur that the best remedy to correct the near-sightedness of the CEO in an objective and productive way is to convince the boss to invest in assembling an advisory or integration board. That’s a team of professionals who act in the best interests of the company. The board provides an unbiased reality check on the company’s structural elements to meet the new market demands.
Robbins describes an advisory board as consisting of a good business lawyer, a forward-thinking accountant, a supplier that you can trust who maybe was a trusted customer and a friendly competitor.
The board meets in person or virtually on a regular basis, perhaps quarterly. It plans a one-day strategic planning meeting per year, perhaps at the start of the firm’s fiscal year. The focus of the strategic planning meeting is to examine the company’s past and present, and to plan for the immediate (one year), near (five years), and distant future (10 years) performance. Board conversations revolve around discussions of target – what didn’t get done and why, surprises, good and bad news, and objective advice to the owner of what is required for the company to correct deficiencies and attain new targets.
Holland, Dutrisac and Robbins agree that sometime it’s well worth the expense to compensate advisory board members. It can be quid pro quo; you sit on my planning board and I will sit on yours. Robbins adds, “Planning boards are fabulous. I have a number of clients using planning boards and their growth has doubled and tripled over four or five years.”
On the surface, some owners see increasing revenue as a numbers game. If sales are to double, inventory, equipment, production processes, and distribution need to double as well. That’s correct. You can’t sell what you haven’t produced. But you can’t produce what you need if your employees don’t have the cognitive abilities—production skills and knowledge—to work on faster more complex production lines with new technology. The skillsets of the line workers and the organizational skills of the managers have to expand to handle the complexity of more customers and more business models.
Production lines become inefficient and ineffective when the cognitive abilities of the employees are not matched to meet the increased complexity of the production process. When the competencies of middle managers are not matched to meet the business’s needs, you get what Dutrisac calls jam-ups and gaps.
Jam-ups and gaps arise when the cognitive abilities, analytical ability, logical thinking, concept formation, inductive and deductive reasoning, of the employees are mismatched with the production requirements. For example, novice managers who have not developed the higher-level managerial skills of problem analysis, alternative creation, and solution evaluation and synthesis are ineffective in addressing new production problems and leading employees successfully through them.
Leaving novice managers to struggle in the absence of skill development is demoralizing to them and detrimental to the company’s morale. Demotion doesn’t address the problem and termination turns any development funds invested in that manager into a sunk cost that will never have a return on investment.
Lower level managers must be groomed for a company’s growth spurts. Frontline employees must receive training and education to keep their skills honed and prepared for production changes.
Interpreting the advice of Dutrisac, Holland, and Robbins, the misalignment of cognitive abilities is a red flag that points to the importance of regularly visiting the strategic plan. Preparing for growth tomorrow requires planning for tomorrow yesterday.
Insights from the experts
Maurice Dutrisac, principal, Mastermind solutions
If a company doesn’t have a strategic plan, organizational structure won’t cure growth problems. Structure follows strategy.
Jam-ups are created when managers are promoted before the cognitive ability required to address new levels of production complexity is reached.
Seek the assistance of an advisory board to ensure objectivity and to set specific, measurable, attainable, realistic and time-sensitive company targets.
John Holland, specialist, Plutus Consulting Group
Owners are prone to multitasking instead of stepping back and seeing where help is needed.
Never underestimate the importance of understanding what stage your company is in and the stresses that each stage place on your organization’s systems.
Know the quality and quantity of competencies that employees will need to grow the company and provide the training before each stage is reached.
Doug Robbins, founder, Robbinex Consulting Intermediaries
Tips to grow a company: plan your start, plan for growth and plan your exit.
Plan your product, advertising, marketing, and employee training.
Don’t work in a reactive mode. Plan your growth or plan to fail.