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Friday, 24 June 2011

Managing A High Growth Business : Matching Your Organisation to Your Sales

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 Growth Businesses Organisational Stress Points
This is the first in a series of posts concerning the successful management of high growth businesses. One of the most common problems high growth businesses face is how to match organisational growth with sales. 

The Problem 

Simply put sales can grow discretely and tends to be quite smooth as shown as the red curve. Organisations growth, by contrast, tends to be much more lumpy. This is because a certain staffing complement has a finite growth capacity and beyond that point just adding people doesn't help. In fact at some point adding people reduces performance. What is required is an organisational restructure which will create a step change in a companies ability to support its growth. However this is not easy to accomplish because most SME's address this problem too late. This often results in business growth reverting to the typical "lumpy" organisational restructure rather than a smooth increase. The reason for this is that sales now have to wait for the organisation to catch up so you tend to end up with a year of rapid growth followed by a year or even more of no or even negative growth.

Typical Situations

Smaller Businesses tend to rely too heavily on a few key people, this results in a stagnation of performance of the remaining staff who have little or no chance to develop their skills. So when the time comes to reorganise the business owners or management are reluctant to make the step change necessary to reorganise the business because they cant see who, apart from the usual suspects, who will be able to take on additional responsibility.  What this results in is either a re-oganisation which is often half hearted or too late.  To provide a sporting analogy, hammer throwers are always told that they must remain ahead of the hammer. So as they speed up their revolutions in the circle they can properly time an effective throw. Small businesses rather like a novice hammer thrower end up behind the hammer (read sales growth)  losing control and finding out the hammer is in the wrong place.

The Solution

"Stay ahead of the Hammer!" 

Some key actions:

Always! Always Always! Implement a reorganisation ahead of its need. This gives you time to fine tune it is also the only way you can main that rapid growth.

Establish a model for organisational growth. That is how will your business deal will sustained and rapid growth. Your plan must also be able to estimate at what point (size of revenues) will you be needing to consider the next reorganisation.

Reorganisations must have longevity. Typically a major reorganisation should last about 24 months, with interim adjustments taking place yearly.

Recognise that reorganisations get bigger as you get bigger, so have a post reorganisation quality control process.

Let me know what you think

Exigent Consulting provides specialist services for High Growth Business Business Turnaround, and Mentoring to the Small and Medium Business. We help Business Owners improve the profit performance of their business. 

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