The Harmful Effects Of Business Growth

As the pace of their growth increases, companies often begin to make errors and accumulate debris that ultimately will kill them. Nowhere is this more apparent than with hiring. As successful insurgents attempt to manage their own burgeoning complexity, they make staffing errors. At the top level, they hire professionals with large-company expertise who make dramatic, disruptive changes to the founding culture. Throughout the company, they staff up with great speed, and in doing so, they often sacrifice employee quality for quantity. Soon employees lose touch with the company’s original mission and principles, they turn their gaze inward and lose focus on the front lines, and they become thinkers more than doers.

Many executives seem bewildered by the painful slowdown that comes with incumbency. But they have no trouble describing the symptoms:

We’ve lost touch with customers. We’ve become too bureaucratic. We’re drowning in process and PowerPoint presentations. We have the resources and no shortage of opportunities, but somehow we’ve lost the ability or the will to make the most of them. Everything’s complicated, and everybody’s tired. Competitors seem faster than they used to be, and we can’t make decisions or mobilize quickly enough. A good day at the office used to involve making decisions and taking action, but now it means attending a big meeting of department heads, whose focus might be “creating alignment around strategy” or achieving a quarter-point increase return on average weighted capital.

Running the business—once such a personal, high-energy ride—now feels like flying a huge, sluggish airliner. We’ve lost touch with what got us into the business in the first place, and we no longer know where we’re going beyond the annual budget, nor do we know where new growth will come from.

These effects create internal complexity, they weaken and slow down decision making, they depersonalize the customer experience, and they erode or obscure the core mission, which leads to employees’ disillusionment and lack of engagement.

Together, these forces can transform the power of incumbency into the vulnerability of bureaucracy, and they sap the life out of a company and the energy out of its people. They threaten to make it stall out.

The Complexity Reduction Mandate

Complexity, a central villain in business, is obviously not homogeneous. It differs within and among organizations, and needs to be attacked at a variety of different levels. But here’s the point: to survive these forces, companies need to make complexity reduction a way of life.

Companies that do this have flatter organizations that put leadership closer to the customers, better maintain the founder’s mentality, and achieve more sustained profitability. Steve Jobs recognized this. That’s why, on his return to rejuvenate Apple, he focused first on the reduction of complexity in organization (he consolidated some departments), in product line (he eliminated 70 percent), in research (reduced to a handful of projects), in design (simplicity became a mantra again), and in the supply base (the number of suppliers was cut from a hundred to twenty-four). “People think being focused means saying yes to a thing that you have to focus on,” he said in 1997, at the Worldwide Developers Conference held annually by Apple. “But that’s not what it means at all. It means saying no to the hundred other good ideas that are out there. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things we’ve done.”

Contributed to Branding Strategy Insider by: Chris Zook with the permission of Harvard Business Review Press. Excerpted and adapted from The Founder’s Mentality: How to Overcome the Predictable Crises of Growth.

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