Last Updated Sep 22, 2010 1:08 PM EDT
Finding the right balance and knowing when it's time for a change are two of the biggest challenges every successful entrepreneur and business leader faces.
For example, when companies are small, decisions can be made on-the-fly with minimal concern. A couple of guys chat in the hallway and, voila, a new product feature is born. And that's a good thing. The more flexible and nimble a startup is, the better its chance of making it.
But as companies grow, negative repercussions of ad-hoc decision-making begin to appear. For example, growing companies are often plagued by miscommunication, frequent changes in direction (strategy du jour), or the reverse, analysis paralysis. Decision-making is just an example of a broad range of ad-hoc processes that falter as companies grow.
There inevitably comes a time when leaders must introduce structure and procedures to enable their company to scale. If they overdo it, they run the risk of adding unnecessary bureaucracy. But if they do nothing for fear of losing flexibility or screwing up what already works, the problem only gets worse.
Over the years, I've worked with and observed dozens of companies that hit a wall because they didn't recognize the signs of growing pains or failed to take action to improve the company's scalability. Here's some guidance that will help you navigate the fine line between chaos and bureaucracy:
First, Learn to recognize the signs. Dysfunctional decision making, miscommunication, and goal misalignment are all signs that a company's processes are not keeping pace with its growth. Here are just a handful of examples:
- Persistent and disruptive strategy changes without key stakeholders present.
- Constant debate over critical issues with no real resolution or agreed-upon plan.
- Plans are agreed upon but some groups follow them while others don't.
- Sales says customers want A, marketing requirements say B, product development is designing C, manufacturing is planning for D.
- Product gluts or shortfalls due to inaccurate and unreliable forecasting.
- Miscommunication between management levels, i.e. middle managers are constantly blindsided by "new" information, plans, decisions from above.
- The same as above but in reverse, between geographies, etc.
- Consistent budget misses in either direction.
- Support organizations like HR and IT are constantly overwhelmed.
- Don't fix what isn't broken. If everything's humming along just fine, i.e. you're not seeing the above signs, leave it alone. Take it process by process as opposed to an across-the-board overhaul.
- Make all key stakeholders part of the change process. Don't impose procedures on key stakeholders without giving them a chance to weigh in and approve the change. We're not talking lip-service here; we're talking "integral part of the process."
- Never add procedures because a consultant or some other disinterested party says you should. Always challenge the risks-benefits potential of any change.
- Think evolutionary change versus revolutionary change. If you keep that concept in mind, it will help you improve your processes without losing the entrepreneurial cultural that got your company to where it is in the first place.
- Change is significant; don't outsource it. Entrepreneurs need to understand that change is necessary and significant. Don't be afraid of it and don't outsource it. Instead, embrace it, respect it, get ahead of it and lead. That doesn't mean you shouldn't seek outside expertise, just don't let it get out of control.