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Over the past 5 years the importance of the “High Growth Business” and how this relatively small group of businesses disproportionally impa...

Thursday 23 August 2012

The Stresses and Challenges of Managing a High Growth Business

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Choosing to follow a path of high growth is not always a conscious decision. I have met many businesses who find themselves in a phase of high growth and whose owners are looking around wondering how they got there. However in order to continue to achieve high growth they must get to grips with the business and understand why they are successful. This can be stressful in its own right because, if they don’t know why they are successful, they won’t know what to do to rectify the situation if things suddenly start to go wrong.

Operating in a high growth environment is living with relentless pressure, as high growth will seek out any weakness in a business and magnify its defects until resolved. The pressure for all high growth businesses owners is akin to that of patrolling the perimeter of a large defensive position, where one is constantly on the lookout for breaches and attempting to repair them as quickly as possible to prevent further problems later.

One of the most common causes of stress is where the owner is not in full control of the business. I often recognise this when the owner comes out with statements like “I feel the business is running me” or “I’m running through treacle, the harder I work the less progress I make”. As decisions and issues pile up, the business owner starts to become more and more reactive and as such, loses the ability to direct the business. Sadly this situation, if left unchecked, has only one result. There will come a point where the backlog of issues create a tipping point and the wheels come off; often in the most spectacular way, with growth hitting a virtual brick wall resulting in little, none or even negative growth in the following 12-18 months.

Another common reason for stress in high growth businesses is that the underlying rate of growth in the business tends to towards a similar rate of change as new positions, recruitment, and management structures are implemented to support the underlying growth. This means a lot of decisions have to be made to drive the business forward and the business owner will, without doubt, make some bad decisions. This in itself creates the need to take more decisions to correct mistakes. Many business owners need to realise that it is more important to make a decision even though it might be wrong, than to sit on it and hope the problem goes away. It never does, and like many things in life, consciously doing nothing only makes the situation worse.

The key challenge for any high growth business is for the management to be able to look forward and foresee potential issues and problems. In order to do this effectively a number of things need to be in place, the business needs sufficiently detailed information to understand and monitor the key linkages in its business and that this information is available in a timely manner. By that, I mean very quickly. In the business I worked in, for example, we had what we called a flash (rough cut) sales figure for the previous month available on 1st of the following month. Detailed management accounts were available by the end of the first week of the following month.  For many businesses this might either been seen as the Holy Grail or unnecessary, but it is fundamental to the success of a high growth businesses.

One of the less obvious but nonetheless significant challenges to assist management to look forward and make the appropriate decisions is one of culture. A healthy culture is absolutely fundamental to a successful high growth strategy, as individuals and teams need to grow rapidly to support and continue to promote the strategy of business growth. Staff and management will be in an almost continuous state of learning and development – that means more mistakes. In order to learn and develop, the culture must promote a team approach and not condemn people for getting things wrong. In a recent article I explained at last that there were hard numbers which reinforce what we always suspected; that healthy cultures deliver better business performance.

This article might have given you the impression that you would have to be slightly mad to want to choose a high growth strategy. There is no doubt that a high growth environment is a challenging place to be, it does however have its rewards for those who successfully master the conditions. Those who succeed in a high growth environment represent the best of business leaders and managers and whilst successful high growth businesses represent only 6% of all businesses in the UK, they contribute 45% of UK employment growth. Such companies are a vital resource, that need to be supported and encouraged and whilst difficulties are many the potential rewards are much greater.

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