Managing Rapid Growth Business!!
Date: Wednesday , December 07, 2011
Earlier this year, I came across the NASSCOM’s, "Indian IT-BPO industry – FY2011 Performance & future trends" data. According to this data, the IT services sector exhibited the fastest growth at 22.7 percent and projects a growth of 16-18 percent for software and services exports in 2012. With the benefit of additional market research, we can anticipate similar positive trends in other industry domains such as healthcare, financial services and manufacturing. It is clearly evident that most of the organizations that survived this past decade, have adopted rapid growth models to leverage favorable market conditions.
Interestingly, at the same time I became aware of the NASSCOM’s trend study, I received a call from a good friend of mine wanting to discuss about few business related issues. For starters, he was the CEO for a Healthcare Information Technologies Services firm with headquarters in U.S. and a few offshore facilities. His organization was recognized as one of the fastest growing companies in its market. Needless to say, he could very comfortably own a data point in the NASSCOM’s (positive) trend study mentioned above. During our subsequent meeting, he noted that a few years ago, his organization experienced a steep growth. Its revenues increased from $1.5 million to $8 million in three years; employee based increased from 30 to 115; and the Company opened new offices, so that they could be closer to their clients. The said company was also successful in capturing a few major contracts from well-known hospitals here in U.S. as well as from India.
To meet the increasing business needs, he borrowed against the line-of-credit to open outsourcing facilities in Hyderabad, hired 30 additional employees. Additionally, he set in motion, the process to identify and buyout two competitors in his market space. However, all of a sudden the "growth" ceased to exist and the financial curve took a nose dive. To compensate for the declining profits and as cost-cutting measures, he laid-off 65 percent of this employees, shut down few facilities and pulled the plug on few “promising” projects. Furthermore, employee morale was at its lowest leading to poor quality in client engagements and customer service. Lenders were knocking at his doors and he faced the likely-hood of filing for bankruptcy. As our discussion progressed, it became evident that although the ever-changing market dynamics played a role in his current situation, most of it could be attributed to bad management practices. His case was that of a rapid growth business model that was ill managed. At the end of our two hours meeting, we finally settled on a few actionable items for my friend to consider and to bring his company back into green.
Here are a few take-away points from that conversation that I would like to share with the readers.
Whether your company is a listed or a private enterprise, and especially when faced with a rapid growth model, you must operate with a simple strategy. A "simple strategy" is one that is Sustainable, Manageable, Scalable and simple enough that every employee in the organization can understand how it guides their daily responsibilities.
1. Anticipate Rapid Growth:
When you are not seeing the bigger picture and not thinking big, you do not anticipate a rapid growth for your organization. One way to be prepared for rapid growth is to employ strategic growth initiatives that are proactive in design and are very much under your control. Reactive strategies on the other hand merely respond to market dynamics and leave less time to take corrective measures when faced with unfavorable conditions. Maintain a resource scalability plan and perform periodic market researches to assess your competition.
2. ROI & Control Costs & Matrices:
If you are a small or medium size enterprise with a small space, and wish to scale your resources to meet the needs of the new "big project" - consider shared workspace or virtual offices instead of a bricks and mortar one. Reducing communication infrastructure cost by using services like Skype and teleconferencing when feasible to further reduce your travel budget. In addition, given that ROI is a good indicator of the success of the strategy, it is also important that the formulated strategy is sustainable and support long-term growth. Monitor hard dollar sales and expand the ROI computation beyond the Financial ROI and onto other areas such as Satisfaction ROI, Learning ROI, Impact ROI and Wider Contribution ROI. Design organization specific performance matrices and measurement dashboard and leverage tools such as GAP analysis, Lean Process Improvement, Six Sigma and FMEA.
Organizations usually ramp up the communications only when there is a success story to be shared. The opposite is also true, where in Organizations only initiate communications during times of crisis. It is vital to the success of an organization that the senior leadership continues to maintain a balance in its communication-culture. Communicate all the success stories and give credit where it is due, and over- communicate in the times of crisis to bring in much needed clarity and transparency into the situation that lead to the crisis. An organization that fosters open communication, will create a culture based on trust and shared values.
4. Be selective while choosing your clients and implement strategic hiring practices:
Yes! Clients and Customers are important. But you have a choice when it comes to selecting the clients /customers you want to work with. There are numerous instances, where organizations have stretched their resources just to make their client happy; however, they did not see any improvement in their "Return on Effort" or their in their ROI. Just as you would hire quality people, it is equally important that you seek quality workload that will result in positive ROE and ROI; and help provide quality services. Interestingly enough, most prospective clients/customers will actually appreciate your honesty when you express your inability to service their request.
When implementing strategic hiring practices, seek out potential team members who have a history of getting results. In this age of globalization, it is important to hire somebody who exhibits cross-functional knowledge base/skills set and cross-cultural awareness. Take your time to seek out the individual. Look for the one who doesn’t hide behind titles, but is ready to roll-up his/her sleeves and get the work done, especially if it is within his/her scope of “knowledge base” and not necessarily part of his/her job function...and most importantly, having the right “attitude”, decorum and one who has the drive to succeed.
5. Effective Customer Service:
When a company faces rapid growth, it is the customer service that suffers primarily. With the influx of new business, the usual response is an exercise of “handing over of client” from sales team, to account manager and subsequently to project manager in a bid to free-up sales team & account managers so that they can capture new clients. As much as the handing over makes sense, it’s also critical to the success of the organization that the workforce is appropriately trained and has access to tools and follows standard communication protocol to serve the clients.
I have come across numerous “clients” or “customers”, who often complained that, after they had signed the contract with a vendor, they were simply handed over to a project manager who had no clue about the client’s business needs and/or that the sales team did not fully communicate the “promises made during selling process”, resulting in deliverables that were high in cost or vendors failed to meet deadlines or the service rendered were of poor quality. In worst cases, it was a combination of all the above.
6. Recognize Founder’s syndrome and leverage Advisory board:
In organization's that have the Founder performing the role of CEO or President, it is likely that the management team has to deal with Founder’s Syndrome. Founder's passion towards the organization, transforms into an effort on part of the Founder/CEO to seek and maintain disproportionate decision making powers and exhibit influence beyond the initial growth phase. Such an over-reaching influence can lead to loss of trust, involuntarily discrediting the middle-management, give rise to a culture of favoritism and increase blame-game among all layers of workforce. In some cases, it can be the primary factor in high employee turnover rate.
One way to minimize these effects of Founder’s Syndrome is to identify an advisory board (different from Board of Directors) and/or join a peer-advisory group as early as possible and start talking to other more experienced business owners. Advisory Board members are usually well experienced and are subject matter experts in their chosen fields. Peer advisory groups are comprised of “equals” who meet regularly to share ideas; challenges and solutions are solved and provided by like-minded business professionals. A good leader, when needed will seek help from an outside expert to help develop systems, refine strategies, and guide/validate decisions.
7. Change management:
Often organizations employ reactive strategies to meet the market demands and initiate strategic changes, throughout the entire organization in a short period of time. These reactive strategies most times lack an exercise in due diligence, do not have a fully vetted contingency plan and do not provide time to implement workforce training/education. On the other hand, a proactive change management strategy, designed in response to the anticipated positive/negative market dynamics, is preferably initiated in one specific area of the organization before it is prescribed to the entire organization. And as part of due diligence, studies are performed to assess the effectiveness of the change initiatives, problems are identified and corrective measures are taken. A proactive change management strategy, favors workforce buy-in, is supported by relevant training & re-defined communication protocols where needed and enhance or sustain quality of service, while minimizing the risk that an organization could experience, from the uncertainties of the ever changing market dynamics.