Avoid getting caught in 'The Growth Trap'
Business owners often get caught in ‘The Growth Trap’ as they attempt to scale up and there are five possible root causes.
1. Increasing Complexity, Decreasing Alignment
As your organisation grows it becomes more complex, and so it becomes increasingly difficult to manage. Executing to get it done, no longer as an individual, but as a team, is a challenge that few can actually pull off – because they don’t know how to neutralize the complexity that is a growing business. An inability to create discipline, accountability, and alignment – all requirements for consistent execution – condemns many organisations to mediocrity (or worse).
2. Lousy People Decisions
Getting people decisions wrong creates massive headaches for you and stifles virtually every element that should be generating growth in your organisation. People decisions which include hiring, advancement, role assignment, and who to invest in and develop are just shots in the dark. The lack of robust processes and people decision frameworks prevent optimal leverage of your number one expense item. Getting people decisions right dramatically improves staff quality, engagement, accomplishment, retention and happiness (including yours)! Ask yourself – How many of your employees would you enthusiastically rehire if you could do it all over again?
3. Increasing Competition, Decreasing Margins
Growth and success means the competition will be taking more notice of you and putting you on their radar, which means that you might not be as comfortably differentiated as you once were. At the same time, some of your long-standing clients are beginning to pressure you to lower prices or add more features or services. Both of these are inevitable trends – not to mention your increased overhead due to lousy people decisions and increased complexity – which all lead to decreasing margins.
4. Cash Flow Pressure, Decreasing Profit
Growth consumes cash. Pressure on your margins decreases profit, making matters even worse. Your Cash Conversion Cycle (CCC) is the elapsed time between when your business spends a pound and when it gets that pound back, with profit, in the form of collected revenue. Inattention to the CCC can starve your business of what it needs most to grow! Even worse, insufficient cash flow severely limits your options and provides little cushion against the events that befall even the most successful enterprises. You now need to manage your CCC to provide the cash to fuel your continued growth.
5. Leadership Stagnation
Because of root causes one to four, it is virtually impossible for you and your executive team to do your job, which is to spend enough meaningful time thinking about and focusing on the future. Rather, your time and energy are consumed “fighting fires” from the past and in the present. You and your team must grow for your business to grow. Failing to do so condemns you to remaining stuck with you and your team spending most of its time stuck in the past at the expense of your future. All strengths and weaknesses in your organization can be traced directly back to the leadership team and your levels of trust, competence, discipline, alignment, and respect – each of which requires continual care, planning, and development.
If running your business feels like a frustrating vicious cycle –three steps forward and then two to three steps back again, you are probably stuck in ‘The Growth Trap’. It may also feel like you’re spinning too many plates and it’s only a matter of time before they start to fall with you too exhausted to keep them all going. You know there is a way to make it all work, but you haven’t found it yet.