We buy these books because we want to stack the odds of success in our favor. We want to learn from the mistakes of others, so we don't have to suffer the same fate.
What if there was a "what to expect" book for firm growth? Is it possible someone actually cracked the code behind business success? Could the code make all the difference between just surviving and thriving in business?
James Fischer's book, Navigating the Growth Curve, lays out (in detail) exactly what a company's issues are going to be as they progress through various stages of growth. He studied over 650 companies, in depth, and documented the challenges and best practices of companies all along the growth curve. His model includes seven stages of growth; each stage based on the number of employees in the organization.
Unlike many other growth models that are based on revenue, Fischer observed that the most common growing pains in business are directly tied to the number of employees. A company with 10 employees will act, and need to be managed, differently than one with 30 employees.
To test Fischer's premise, we applied the growth curve model to an accounting firm. We took the leadership team of a 16-member firm through what is called a Business X-Ray. The X-Ray involves a number of assessments to determine how the company is addressing the 27 Business Challenges that businesses encounter as they grow. The assessment also looks at the non-negotiable rules associated with each stage of growth.
The assessments algorithmically sum up two key numbers:
1) The Builder/Protector Ratio
2) Progress on the Growth Curve
The Builder/Protector (B/P) ratio looks at the balance between a growth and risk-averse mindset. A Builder mindset creates new ideas, takes on new initiatives, finds ways to expand the revenue and profitability of the enterprise. They are risk tolerant and highly supportive of growth. A Protector mindset is cautious and prefers to slow things down. They are risk-averse and highly suspicious of growth. As you would expect start-up companies need to have a pretty high builder-versus-protector ratio.
Fischer contends the ratio needs to 4:1 Builder to Protector. Companies with 30 employees thrive with a Builder/Protector ratio of 1:1. Know when and how to shift the cultural focus of an organization can mean the difference between stalling out and soaring.
The second measure looks at the number of employees against a spectrum of leadership and employee issues. A successful Stage 1 company with 10 employees has a very different management approach from a successful Stage 4 company with 50 employees.
When we conducted the Business X-ray with the Stage 2 accounting firm, we learned very quickly that Fischer's model was right on. More importantly, the managing partner got some independent insight about the challenges the firm is facing now plus some warning about what was coming, and how to prepare for Growth Stages 3 and 4. I'm not prepared to call it a crystal ball, but it came pretty close.
Here's a high-level overview from Fischer's model:
Stage 1 Start-up: 1 to 10 employees, B/P = 4:1
Characteristics: CEO-centric; still trying to figure it out; chaotic; hire for fit. not skill.
1. Generate, track and preserve cash
2. Focus 80 percent of your resources selling two or three offerings
3. Hire, first, for how the person fits with the team: and second for how competent they are.
4. Waste no time trying to stabilize your company, embrace chaos, command the team and inspire the employees.
5. Establish a performance mindset, feedback loop and employee development with regular one-on-one meetings.
Stage 2 Ramp-up: 11 to 19 employees, B/P = 3:1
Characteristics CEO-centric; focus is on growth not survival; moving beyond owner's span of control; starting to delineate responsibilities.
1. Sell absolutely every day.
2. Develop, without fail, three employee leaders to be responsible, accountable and proactive.
3. Create a daily, weekly, and monthly "key indicator" instrument panel/flash sheet.
4. Communicate any and all directions in writing.
5. Drive small action teams to hit goals.
Stage 3 Delegate: 20-34 employees, B/P = 1:1
Characteristics: enterprise-centric; CEO must release control; staff revolution; staff will leave if not given roles and responsibilities.
1. Release control to capable supervisors and then lead them. Create a supervisor team that meets regularly.
2. Create an advanced financial reporting and projection system.
3. Install a team-based mindset throughout the company.
4. Overhaul the business model.
5. Without fail, clarify and strengthen any and all communication with your employees.
Stage 4 Professional: 35-57 employees, B/P = 3:2
Characteristics: Hire professional managers who have been there done that; build confidence in divisions; too big to rely on faulty systems.
1. Hire or effectively train professional department managers who are responsible, accountable, and proactive.
2. Create strong performance-driven department fiefdoms that compete with each other.
3. Allocate 5 percent to 10 percent of gross revenue to identification, acquisition, and implementation of new systems.
4. Identify and set in place with management team the company's core master processes.
5. Establish a strict company project management template.
Stage 5 Integration: 58-95 employees, B/P = 2:1
Characteristics: focus back on company; getting managers to 'play well together'; training is critical for all employees.
1. Integrate the management team into an inter-department execution-focused leadership unit.
2. Overall the business model.
3. Establish one-year operational business plan.
4. Establish a fully integrated 'living budget' by revenue group and by department.
5. Allocate 3 percent of employee salaries for training.
Stage 6 Strategic: 96-160 employees, B/P = 3:1
Characteristics: perspective needs to shift as you are now on radar screen of competitors; emotionally aware leaders do well; culture and core values are key.
1. Without fail, establish a two-or-three-day new staff orientation program.
2. Generate a three-year living business plan mode with budgets for each department and revenue group.
3. Implement an organizational health survey once a year and establish one or two company-wide, one-day unifying events a year.
4. Push financial reporting to another level throughout the company.
5. Without fail, conduct regular one-on-one supervisor/employee meetings.
Stage 7 Visionary: 161-500 employees, B/P = 2:1
Cruise liner not a speed boat; lose sight of target and competitors will eat you for lunch; CEO must ignite fires of inspiration to avoid complacency.
1. Overhaul business model to optimize direction and margins.
2. Get to know a little something about every employee.
3. Sell every day.
4. Create a company-wide leadership succession plan.
5. Generate, track and preserve cash.
Every year, according the IRS, 1.5 million people start a business. They exhaust savings, borrow from friends and family, and mortgage their future to pursue their entrepreneurial dream. In five years, 800,000 of those dreams have been extinguished. Imagine the impact you could have by helping your clients crack the code on business success.
In addition to helping your clients beat the odds; this model is appropriate for firms engaged in the transition from a consensus-dependent partnership to a corporate leadership model; as is the case with the Stage 2 firm that went through the Business X-ray assessment. With the addition of three new employees by year end, this firm will be knocking on the door of Stage 3.
Knowing what to expect in the next stage is giving the managing partner the chance to prepare for that stage right now so he can avoid some growing pains. The model also illuminates issues from the previous stage (s) that may need remedial attention before moving on to the next stage.
If your firm is on the Mergers and Acquisition track, some of the typical cultural clashes that occur might be less about culture and more about being propelled into a new stage without any preparation.
The value of being able to foresee firm challenges is the opportunity it affords to build a stronger foundation BEFORE you're up to your armpit in alligators. If you would like to learn more about the Stages of Growth Model, you can download James Fischer's book (free) at http://www.sustainablebusinessgrowth.com/free-downloads.html Send this link to your clients!!