10 Strategies to tackle the internal inhibitors of business growth
10 Strategies to tackle the internal inhibitors of business growth
In tough competitive times it’s foolish for companies to believe they can stand still. Hungry competitors operating in a climate of globalised competition stand ready to move into markets previously considered safe from challenge. But many expansion strategies so eagerly and hopefully developed unfortunately fail in their implementation.
Growth is usually an important goal for organisations of all sizes and in all industries. For many businesses expansion may not be an option but a necessity to remain competitive. However, actual growth rates amongst many growth oriented businesses are reported to be lower than might be expected. All too often new initiatives fail to result in sustainable growth of the business. Why?
Two routes to business growth
Your business can increase its size either by using resources more efficiently, thereby increasing productivity, or by introducing new products and services that are well received in the marketplace, a strategy referred to as ‘natural growth’.
Alternatively, the business may use its resources to expand the market by merging with or by acquiring other business, by taking up the space of a deceased competitor, or by forming alliances with other businesses and employing synergies to grow both the market and the business – a strategy known as ‘forced growth’.
Internal growth inhibitors
Failure is often attributed to external factors such as economic recession and the intensity of competition. But it seems that the internal limits on growth can be just as important. Studies regularly conclude the most prominent internal inhibitor is limitations on the management team’s ability to manage further growth.
The administrative framework of a business consists of two tiers:
- entrepreneurial services which generate new markets and product/service ideas;
- managerial activities which administer the routine processes of the business and facilitate the profitable execution of new opportunities.
The problem with the introduction of a push for growth is that, while the business may have the capacity to ramp up its production and distribution capabilities, it may not be able to find the extra managerial services, or ‘managerial capacity’, that is the invariable knock on need from growth.
If a business lacks sufficient managerial services to implement its entrepreneurial ideas, it will either be unable to grow or else it will grow without adequate managerial talent being applied throughout the enterprise.
When managerial resources are diverted from their administrative duties as a result of growth, and have to deal with additional responsibilities created by the entrepreneurial services, you start to see bottlenecks emerging.
The effects of the managerial bottleneck can be increased by many other factors that can arise in even the best-managed enterprise. Growth might be dependent upon recruiting the right kind of new employees who may or may not be available at that time. Ironically, the faster a business grows the less time management has to devote to hiring and supervising new personnel.
Simply hiring new managers to shore up managerial resources rarely works either. It takes time for new management talent to be sourced and become effective. The new manager must become familiar with the culture of the place, acquire business-specific skills and knowledge, and work with other employees long enough to develop trusting relationships. In fact, managerial expertise is often an organisation-specific asset that accumulates over time, and can’t necessarily be rushed.
Cultural problems can also arise that will affect growth abilities. The more rapidly a business grows the more likely it is that new people will be required to fill positions in the enlarged business structure. The new-hires usually do not have the same motivation or dedication as longer-serving personnel and therefore require more supervision and mentoring.
Another concern is that the business ‘rainmakers’ can become so frustrated by the lack of managerial capacity to support their attempts to drive growth that they will simply give up or leave.
10 Strategies to improve your management capabilities for growth
Your growth initiatives must include, from the beginning, recognition of the strain that growth might entail and strategies for dealing with them.
The solution is not a single dramatic masterstroke; it’s an armoury of initiatives from which a business can choose those weapons most appropriate to its own situation. These initiatives range from hiring policies to structuring rewards for management, and all should be considered by any company that has rapid growth as a corporate goal. Here are eight internal strategies and two external strategies that really work.
1. Invest in top management early
Business owners who pursue growth but are reluctant to expand the management team are attempting the impossible. You can stretch yourself only so far before you must attract talented people, committed managers, who will buy into the vision and help grow the business.
2. Appoint a board of directors/advisors
More and more business owners rely on outside boards and professional advisors for valuable input, especially given the complexity of management today, with not simply day-to-day operations and future planning but outsourcing, joint ventures, worker shortages and so on.
3. Provide direction through mission statements
Despite jaded comments by some, a mission statement has been shown to provide clear direction to the employees of a business as well as helping experienced employees mentor new-hires. Rapid-growth businesses emphasise the use of mission statements to a significantly higher degree than normal and slow-growth businesses.
4. Offer incentives
There are two basic forms of incentive – financial and non-financial. Both can be valuable in helping rapid-growth businesses combat managerial capacity problems.
Most important are the growth related financial incentives, including bonus plans, profit sharing, and stock options. These provide quantifiable stimulation to performance and align the interest of employees with those of the business itself. Financial incentives can also be very effective in attracting and retaining the kind of high quality employee needed by rapid-growth enterprises.
5. Motivate managers
The company’s existing management must be motivated towards growing the business. This can be done using a combination of company wide commitment to growth and incentives to individual managers.
6. Ramp up internal communications
Rapid-growth businesses have a higher quality of communication with their employees than slow-growth and normal-growth businesses. Communications work quickly and effectively in both directions, to and from the employees of the business; this has the dual effect of ensuring that everyone in the business has the same information and that it is unambiguous and not subject to erroneous interpretation.
7. Recruit from within the business
Many rapid-growth businesses have a policy of recruitment from within, and commit themselves to the grooming of lower-level employees as candidates for management positions. This means a newly appointed manager will settle in and become more effective faster than one hired from outside; they’re already familiar with the people and the culture of the business.
8. Maintain high standards of recruitment
As the number of employees that a business needs increases, so it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision. Further, new-hires typically do not have the same ownership incentives as the original founders.
So, although there is always a pressure on rapid-growth businesses to speed up recruiting of new talent, it’s important that to maintain high standards during the recruitment and selection process. It will add costs and involve more time, but in the longer term will minimise the risk of expending valuable resources on people who will not contribute to growth, or else will leave the business before there is any return on investment from their hiring/training costs.
9. Form alliances
Managerial capacity can be fast tracked through forming an alliance with another organisation. This is one of the most important practices adopted by rapid-growth companies to counteract the problems of managerial capacity.
Partnering with other organisations enables businesses to effectively co-opt a portion of their partner’s managerial capacity, reducing the need to recruit new managers and incur the costs of training and bringing them up to speed so they can perform their duties.
10. Recruit experienced managers to improve networking
Studies have shown that rapid-growth businesses are more likely to seek out management talent with a good depth of experience in their own industry. This gives the business an advantage in being able to tap into their social and business networks to identify other suitable candidates for positions with the company, and to choose partners for alliances.
If your business wants to build new markets, products, and services then you need to set in place the right strategies to ensure you will have sufficient managerial capability to carry through with the opportunities when they arrive.
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