Entire departments may come to suffer from the need to remain isolated in order to protect themselves from being eliminated. This can lead to a certain amount of schizophrenia among employees. They begin to ask, “Am I loyal to my department or to the organization at large?”
The Firm Continues to Grow in Sales But Not in Profits. If all the other growing pains are permitted to exist, one final symptom may emerge. In some instances, sales continue to increase while profits remain flat, so that the company is succeeding only in increasing its workload. In the worst cases, sales increase while overall profits actually decline. As you will see in the chapters that follow, companies may begin to lose money without having any idea why. The business loss can be quite significant, even though sales are up. There are many examples of entrepreneurial companies which have experienced this problem, including Apple Computer, Maxicare, Wang Laboratories, People Express and Osborne Computer.
In a significant number of companies, the decline in profits may be the result of an underlying philosophy that stresses sales. People in such companies may say, “If sales are good, then profit will also be good,” or “Profit will take care of itself.” Profit in these companies is not an explicit goal but merely whatever remains after expenses.
In sales-oriented companies, people often become accustomed to spending whatever they need to in order to make a sale or promote the organization. Organizations may also suffer because of systems that reward employees for achieving sales goals rather than profit goals.
Measuring Organizational Growing Pains
To assist the management of an entrepreneurial company in measuring the organization’s growing pains, we have developed the questionnaire available online at
www.mgtsystems.com/secure/question.htm
This questionnaire presents ten organizational growing pains that have been identified in a wide variety of entrepreneurial companies with annual sales revenues ranging from less than $1 million to over $1 billion.
The growing pains questionnaire and related data are important tools in helping organizations make the transition from entrepreneurship to professional management. They indicate the degree of distress being experienced by an organization and can function as an early warning of serious problems to be encountered.
The questionnaire can be used as part of the first step in the process of transition -- the evaluation of the company’s effectiveness at its current stage of growth. This also serves to “bench mark” growing pains to assess developmental progress at a later stage.
Conclusion
Some people believe that the solution to problems of growth is to avoid growth. Unfortunately, very soon after an organization is founded, it must grow or it will die. Managers can, however, control the rate of growth, but it is unrealistic to try to remain at a given size or stage of development. This means we must learn how to manage growth and the inevitable transitions it requires. Managers of rapidly growing companies of any size or type must learn to recognize organizational growing pains and take steps to alleviate them so that their organizations can continue to operate successfully.
