The economy may be slumping, but we’ve had quite a run over the last few years.
Companies experienced unprecedented growth during that time. Smaller companies became larger companies and large companies got even bigger.
But was all of this growth good growth? Did the top line growth equate to growth in the bottom line? Did organizations grow with sales or did they remain static or perhaps become dysfunctional? How many companies, after all of this growth, looked like stars on the outside but remained rookies on the inside?
For years, I have seen companies plan or simply experience sales growth while ignoring ways to continue to support those sales. Strategies focused solely on top line growth often create support gaps. These occur when a company’s sales grow beyond the capacity or ability of the organization to support them.
Once support gaps are created in an organization, growth crisis is usually not far behind. The larger the support gaps, the greater the crisis. The greater the crisis, the less the company is able to continue to operate effectively and profitably, continue to satisfy its customers and continue to grow successfully.
When dealing with growing businesses., one basic truth is that support gaps and the growth crises they create cannot exist in an organization for very long. One of two things must happen — either the company increases support levels to match the requirements of its sales, or its sales will decrease to the level that can be supported.
When support gaps occur, a company can no longer provide customers with what they have come to expect. Dissatisfied customers go elsewhere, and sales decrease.
Infrastructure = support
Support comes from the infrastructure of a company. It’s the right combination of management, employees, structure, systems, processes, organizational culture and ownership.
Gaps are created when the sales growth of an organization outgrows the ability or capacity of these components. They are created when twice the number of orders are processed with the same number of people on the same overstressed system.
Gaps are also created when managers who did a good job when sales were at a much lower level are now struggling to manage today’s larger operation. They are created when entrepreneurial owners are still trying to directly manage every aspect of their business, like they did when the company was a fraction of the size it is today.
Gaps can be eliminated, or better yet, avoided, by planning support growth along with sales growth, then investing in people and processes. Sales plans and business growth strategies are not complete unless they include plans for building infrastructure support.
Now is the time
This may seem like a strange time to be writing about the effects of rapid growth and growth crisis, when nearly every business seems to be struggling with the effects of the economy and experiencing declining or stagnant sales.
But now, when things are slower, is when problems created by the company’s growth become more evident. Now is a perfect time to get back to basics.
Now is the time to objectively assess your company’s performance over the last few years and to identify the support gaps and search for symptoms of support gaps throughout your organization.
Were profits where they should have been? How well is the management team performing? Have your systems been outgrown? Ask the questions and then develop and implement infrastructure improvements designed to close those gaps.
The economy will improve. Finding and closing support gaps now, or at the least developing the plan for closing them, will ensure your company is ready for the next round of growth.
Joel Strom ([email protected]) is director of Joel Strom Associates LLC, the growth management practice of C&P Advisors LLC. The firm works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing their profitability and value. Contact him at (216) 831-2663.