Has your start-up outgrown it’s processes?

Posted on Tags

A business starts with an idea.   A successful entrepreneur will turn that idea into a way of making money.  This may be used to fund further growth which then may requires bigger premises (virtual and or physical) and more staff to meet increased customer demand (and possibly regulatory controls) and consequently there’s more complexity and more things to control.   More time is required for administration and management, rarely activities that attracted an entrepreneur to setting up the business in the first place.

growth_1

 As the company grows, the controls, systems and processes that worked during the first period of growth may fail to scale up to meet increased demand.   Customers may want more product, different product, faster delivery and more competitive pricing. 

To cope with this increased demand, where more must be done within the limits of available time and resources,  short cuts and workarounds may used to get things done.   Even if new staff are taken on to meet demand, there will be a delay before they are effectively trained and ‘up to speed’

People may end up working all hours available to get deliveries to the customer on time.  Early starts, late evenings and weekend working becomes part of the culture.  Work life balance becomes a memory as the business struggles to stay in control.  But eventually, cracks start to appear and a crisis point is reached.  The organisational leaders can choose to step back, review and improve business operations or continue struggling until they nosedive into failure.

But these stages of crisis, review and growth are a natural part of organisational growth which should be planned for.  This was explained by Larry E. Greiner in Evolution and Revolution as Organisations Grow published by the Harvard Business Review of July–August 1972 (revised 1998)

greiner curve

Graphic from the article Evolution and Revolution as Organisations Grow by Larry E. Greiner  at https://hbr.org/1998/05/evolution-and-revolution-as-organizations-grow 

According to the consultant Alec Sharp of Clariteq, during his presentation Process Modelling and Analysis – Practical Techniques and Frameworks at the BA 2015 Conference this year,  informal organisational processes start to fail  when an organisation reaches around 40 people.   The Dunbar Number suggests that the maximum size of an effective organisation is around 150 people.  The important point is that, once an organisation gets bigger than a hundred or so people, the informal ways that used to work typically fail to keep up with the demands of growth.

Just some of the problems that result are:

  • Products or services are supplied that don’t meet customer expectations.
  • Increased production costs and reduced profits.
  • Customer complaints dealt with poorly (because no one has this responsibility assigned)
  • Reputation is damaged,
  • Reduced sales

An “all hands to the deck”  approach may resolve one crisis until the next one comes along.    What worked in previous crisis may be picked up and reused in the next one.   Eventually, business processes become a tangled and inefficient mess which are a nightmare to sort out.

Note: I also published this on Linkedin Nov 24, 2015