Growth is often perceived to be a very positive aspect to any business in any sector.
But as many who have been through it know, it’s not as straightforward as it may seem. I have heard from many business leaders of how, with hindsight, they would have done it differently. However, foresight is not so difficult to achieve, given the right knowledge and a degree of planning…
When it comes to growth, there are 2 ends to the spectrum:
A. Minimise hiring etc. continue to do as much as possible with what you have, only add in more resource etc when you need to
B. Invest, people, equipment etc – the ‘build it and they will come’ approach
Whilst there are pros and cons for both, what often seems to be missing, in my experience, is the plan and the review (elements of the PDCA (Plan – Do – Check – Act) cycle).
The right answer, I usually find, is somewhere in between the two.
So what are the key factors that need to be considered during a growth phase:
- What data is there to support the growth
- Where is it coming from
- What information do I have with regards the longevity of the growth
- What are the constraints in my current organisation
- What flex do I already have that I can capitalise on (changing roles, increased hours of work etc.)
- What is the 5-10 year plan and how does any short term growth reflect in that
The ultimate and ideal solution, involves any organisation taking a lean approach. Recent months and years have shown, in the extreme, how unpredictable that world can be, and any plans based on a linear or steady state will always be sub-optimal.
So what do I mean by lean…? Lean is purely the removal of waste from any process/system. By definition a lean system is flexible and able to adapt quickly to changes…
In scenario A, what may be considered a lean approach (mostly because too many people think lean means slim, i.e. no fat and therefore as few people as possible…..but it doesn’t), the risk is that the current team are over-stretched. Pressure on people is too high causing health or retention issues, or that opportunities are lost (who wants to buy from a company that is clearly struggling to keep up with demand (it’s always obvious as people in the org are hard to get hold of, follow up is not to usual standard etc.))
In scenario B, the speculate to accumulate style, the risk profile is different. Customer experience remains enhanced and the business is ready to take whatever comes. However, in this scenario the risk is on costs….should the increase in workload not come, or not be sustained, then the costs remain, or reducing organisation size to meet the lower volumes themselves will induce costs. Whilst the peak workload is met, the costs may outweigh the benefits, or at the very least, the benefits will not be as great as they could have been.
Lean thinking provides the holy grail of improved financial performance, whilst also improving the quality of delivery. There is no one simple answer, as every business is different, but using tools available to manage variations in volume, and only putting in direct costs, not indirect ones, can enable any business to not only grow the top line, but also the bottom line…and not just proportionally either…yes, you can increase gross margin % too.
I say there is no one size fits all solution because systemisation, use of temps, zero hours, freelancers, outsourcing etc. all have pros and cons, and can be right for a specific business at a certain time, but not for another. What I do know, is that rarely are all options considered properly and evaluated before a decision is made. All too often I have been engaged after the fact and have had to unravel something like a 5% worsening of Gross Profit, and turn that into the 5% improvement in gross profit that should have been had in the first instance….and yes, there are not many businesses that can swallow a 10% negative swing in GP!
So, if you’re lucky enough to be running a business that is seeing growth right now, please do take that extra bit of time out – complete a SWOT analysis, or just a risks and opportunities matrix and make sure you have thought through the various options before you leap.
There are plenty of people out there that can help you, especially if you find the prospect daunting, but don’t just go with your gut, use the data and you may be amazed at how beautiful the picture of growth may look when painted the right way…