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.SPEED KILLS BUSINESS TOO

Robert H. Kent, Ph.D., CMC

Growth is an imperative for the survival of many new, small businesses who must gain market share quickly to attract resources and legitimacy. And success frequently goes to those who grow the fastest. But there are dangers and dilemmas on this road.

In order to grow and survive, it is recommended that small entrepreneurial-lead businesses eventually become "systems dependent" rather than "personality dependent." Many companies, when young and small, have a simple structure and operate by informal hands-on control. The founder assumes multiple roles and makes most decisions.

Growth involves increasing complexity, requiring changes in structure and procedures, and mechanisms for integration across the business. The founder must delegate functions and accountability to others. The formula for success cannot remain a secret inside the founder's head but must be systematized, documented and eventually managed professionally.

But being small can present many hurdles to businesses trying to become more professional - for example difficulties recruiting top class management because of problems meeting high salary requirements; lack of formal management skills; lack of resources for developing new technologies; a disadvantage because of size when negotiating with suppliers or clients; and higher costs of capital.

And if you're planning fast growth, be prepared for the following.

Success Myopia. Too much success can lead a business to believe its infallible and decision making becomes shallow, sloppy and reckless.

Growth Treadmill. A low price strategy to penetrate the market can create a high volume demand which strains production capability and quality drops. Defects and re-makes increase the cost of production which creates more pressure for high volume and market penetration.

Need for Capital. Rapid growth consumes a great deal of capital. This may entice a business to go public which can seriously distract management attention from the real business. Also, this need for cash can cause panic, leading to premature product introduction, quality problems, and other hasty decisions.

Entrepreneur/Management Conflict.Growth necessitates structure, control, coordination and a degree of managerial professionalism which can appear bureaucratic to the founding employees. The ensuing power struggle between the professional managers and the free-spirited founders can undermine morale and productivity.