Consider for a moment a business organization in its formative years (it could be
yours). The early years are usually characterized by a sharp focus on the needs of
a small number of customers, a lack of formal structures, processes and systems,
and extreme informality of management style. Satisfying these customers with the
highest possible level of service is usually of paramount importance. Sales are
generated by the founders forging close relationships with a few key customers.
The founders understand the fragility of competitiveness and are prepared to bend
over backwards to provide high and rising levels of service. For them, nothing is too
much trouble; they see the creative possibilities in any commercial situation; and it
is their vision and drive that turn the germ of an idea into pulsating business reality.
Customer retention is usually particularly high in the early stages of growth, even
when standards slip a little and prices veer out of line with those of competitors.
The psychological and emotional resilience of the relationship between the founder
and the customer is one factor; it is quite another that the customer’s access to the
chief decision maker (the founder) makes it easier to secure a prompt response
when things go awry. The customer’s unrestricted access to this vital resource
is a major criterion of success in the early years, though few founders explicitly
recognize this as a key strength or plan for its perpetuation. Not being able to
‘clone’ the rare customer-satisfying qualities of the founder as the business grows
is a potential barrier to rapid growth, because it requires a high level of customer
retention and continuing development of key accounts.
Another major advantage in the early years is rapid transmission of vital information,
the outcome of short lines of communication. This is usually the result
of a) the absence of a reporting hierarchy; b) the physical proximity of most
staff to each other and to the boss; and c) a culture of consideration, of sharing
things and a willingness to ‘muck in’. Understanding the role of information and
how it oils the inner workings of the organization is necessary to ensure that the
smooth flow of information is actively nurtured in business development plans.
The founders are invariably the repository of all important information – they are
closest to markets, customers, bank managers, suppliers and employees – and to
ensure that ever-increasing quantities of information flow smoothly to key decision
makers other than to the founders (a requirement of effective delegation), the fact
that it might not has to be recognized and a solution found and implemented.
In the early years, systems and processes do not have to be formal. With the
founder in control and at the centre of the organizational ‘spider’s web’ (explained
in Chapter 4), and with all staff within easy proximity and on first-name terms,
informality is an advantage. Formality makes life more difficult because it imposes
costs and disrupts people’s normal relationships and working habits.
Where do the founders go from here? There are distinct advantages in remaining
a small, ‘lifestyle’ business, that is with a total complement of, say, 10 to 12
staff. Research has established that a small group finds it easier to function as an
efficient, coherent unit and that eight people constitute the ‘natural’ span of control
for a single boss. However, a small, ‘lifestyle’ business will not be a satisfactory
achievement for those entrepreneurs who relish the challenge ofmanaging growth.
Success in the formative years can establish a solid platform for development
and, combined with further market opportunities and the drive and management
skills of the founders, can soon lead to a complete transformation of the business as growth takes its course. Customer focus remains one of the keys to making
a successful transition from small and informal to medium-sized and complex.
Conflicts arise because the need to create and build new functions becomes
paramount and can be at variance with the concurrent need to remain strongly
customer oriented.Non-operational functions, e.g. accounts, finance and personnel,
become disproportionately important. The success of the business in negotiating
this transitional phase is dependent on the founders recognizing that the old
ways of doing things are no longer good enough. The area of greatest growth
is in staff numbers and the diversity of operational tasks, and all too soon the
strains begin to tell – they start typically with customer complaints and defections,
breakdown in internal communications, a collapse inmorale in parts of the business,
growing staff disaffection and high staff turnover. The founders might ignore these
problems, believing them to be temporary and leaving people to cope as best
they can; or they might attempt to deal with the symptoms without having the
relevant skills and knowledge to understand the root causes – essentially, problem
solving and decision making have entered a new plain outside their sphere of
experience. Their response might also be to avoid formality and to ‘muddle’ their
way through busy periods, preferring to cope with stress rather than investing
time and money in diagnosing the real causes and setting up new ways of doing
things – incrementally changing the shape of the organization and formalizing
systems, procedures and processes.
The transition from small to medium-sized requires the founding entrepreneurs
to adopt new attitudes, new modes of behaviour and high-level management
skills, without dropping some of their exceptional entrepreneurial attributes. Some
examples are:
• Being a visionary leader.
• Being a business strategist, not merely a tactician.
• Being an information disseminator rather than an information hoarder.
• Devising accessible, reliable management information systems to replace secretive,
partial, ad hoc sources (principally the founders themselves).
• Diagnosing organizational weaknesses and designing new functions.
• Introducing formal recruitment practices, rather than hiring someone’s best
friend through informal networks.
• Developing a nascent management team (who probably don’t have the skills or
knowledge for the job).
• Delegating responsibility for delivering outcomes to trustworthy people.
• Paying serious attention to human processes rather than solely to tasks.
• Putting emphasis on developing employees’ knowledge and skills.
• Being a mentor, coach and people developer.
• Dealing with difficult situations and underperformance.
• Handing over the biggest and best customers to a professional key account
team.
• Negotiating with and influencing people (some of whom you don’t really like).
• Achieving positive outcomes from meetings with key people.
How do the founders adopt new attitudes, behaviour and skills, thus mutating into
professional managers? Is it in fact desirable that they should do so? By making the change, they are bound to sacrifice some of their strengths. Would it not be
better to hire in a professional general manager, or even a new CEO? The ability
to identify weaknesses in their personal armoury of management competences and
set about plugging them with the right amount of skill and knowledge is a key
turning point in the successful transition from small to medium-sized. The founders
must recognize that they cannot ‘go it alone’ because they lack the competences
that will take the business into the next phase of growth.
