The Growing Pains of Rapidly Expanding Businesses (Part 3)

In Parts 1 & 2 of this multi-chaptered blog I looked at four of the Growing Pains associated with rapidly expanding businesses - Changing the Starting Line Up, Building the Business Infrastructure, The Premises Conundrum and The Clique Communications Challenge.  I compared these business Growing Pains to the growing pains experienced by rapidly growing teenagers.  

So to maintain the metaphor in this blog I’m going to now look at Plugging the Process Gap and the Joy of Regulation, the business equivalents of revising for and sitting your exams.  Now, given that we are currently entering summer exam season, many of you will already have started twitching at the thought of studying for and then taking exams, so I won’t draw out this metaphor too far.  

Unfortunately for the heroic entrepreneur Plugging the Process Gaps and the Joy of Regulation are business “must do’s”; rights of passage that will determine whether or not you and your business earn the right to play with the other big businesses or whether you will end up being a happy serial entrepreneur and developer of multiple small businesses.   Suffice to say, like most exams, they are important, they do require serious work and cheating is not an option.

Major entrepreneur’s health warning: Unfortunately most entrepreneurs find very little joy in the engineering/reengineering of business processes and almost no joy at all in complying with the demands of the regulators.   Quite frankly, like a revision timetable on a warm summer’s day, they bore entrepreneurs rigid.  This is the primary reason why these two issues can cause real heartaches and headaches for rapidly expanding businesses.   Hopefully in the course of this blog I can shed a little light and hope on the subjects and suggest reasonable paths of action, that whilst perhaps onerous and challenging, shouldn’t be overwhelming. 

Plugging The Process Gaps

When a business is small but rapidly growing it’s relatively easy for an entrepreneur to maintain control – they can see most things, direct most things and influence their employees. However, as an organisation grows and starts to edge up beyond the 60 employee mark it becomes increasingly difficult for the charismatic entrepreneurial leader to exert and maintain effective control over the specific actions of the people in the business. This is where process comes in. 

Processes act as control mechanisms (risk management), they act as enablers of performance and they act as activity guides for new employees. As the business grows effective processes become more and more important. Without them a business can start to fall apart. The entrepreneur who hasn’t had the humility to introduce processes to their business will become increasingly consumed with fire fighting. Like a teenager who’s failed to revise properly they will run from one last minute piece of revision to the next, hoping the late nights and pro-plus will sustain them through what they believe is a challenge that can be overcome by just the use of their obvious genius, considerable charisma and last minute drive and focus. This is not a recipe for success. 

There is a long list of aspiring businesses that have gone to the wall because they simply couldn’t do the basics of their business well enough. Many had great products but couldn’t control cashflow, or manage the sales pipeline or recruit people effectively etc, etc.

To implement process at the right time requires humility on the part of the entrepreneurial leader. It requires them to give up control and reinvest cash. It is not a natural act for the entrepreneur. However, the wise and the well advised can build process. The really smart entrepreneurs hire a COO to help them do it – and to be honest I have no better advice. Task them with the job of helping the organisation design and build repeatable, effective processes. The good one’s are worth their weight in gold and whilst not necessarily having the same personality traits as the entrepreneur they will help set the business up for a sustainable future.

The Joy of Regulation

As an entrepreneur, if you found the challenge of process insurmountable I’d advise you to stop reading now because you’ll absolutely hate doing what is required to deal with your industries regulators.   As an entrepreneur you have a natural optimism, enthusiasm and belief in your ability to change the world around you.   All good things, until you interact with your regulators.   

Now they may be dressed in suits and pleasant enough people to go for a drink with outside of work, but, in their professional guise they are unbending, unsympathetic, disinterested and powerful.   They are the dementors to your Harry Potter, ring wraiths to your Frodo.  However, unlike dementors and ring wraiths they do actually exist and they will suck the life out of you and your business unless you learn to interact with them effectively.   This requires you to understand a number of things.

1. Their response to you isn’t personal – they’re like that with everyone
2. Their job is to protect your customers (NB – they kind of think that this is something you should be doing without them having to ask)
3. They are really not interested in changing their process or viewpoint merely to accommodate your business – they regulate the whole industry not just you
4. Working effectively with the regulators can improve the long term health and well being of your business
5. If you see them as the enemy then that is what they will become.

Now there is plenty more that can be said on the subject but this is a relatively short blog.   The question is how best to deal with them.   There is no one right way but I am pretty sure there is a wrong way.  If you leave the relationship with your regulators entirely in the hands of your lawyers it is likely to go very wrong.  Of course you will need legal advice and support but you wouldn’t go to a lawyer for marriage guidance.   Lawyers tend to think in a confrontational right vs wrong kind of way and are great for disputing the finer points of contractual law.  However, regulators are more interested in understanding the impact of the culture and actions of your business on your customers.  

Again you will need to hire, and hire well.  Seek out and employ one of those rare breeds of people who understand the world of regulation and the world of business.  Find someone who can both build a constructive relationship with your regulator and ensure that your organisation is capable of gearing up to respond to the requests and requirements of the regulator.  Once again – if you are an entrepreneur they are unlikely to think and act like you.  This is a good thing.

So there you have it – the challenges of process and regulation – two major pains – exams to be revised for and taken.   The good news is that if you get it right you can enjoy the delights of a fabulous summer.

The Growing Pains of Rapidly Expanding Businesses (Part 2)

In Part 1 of this multi-chaptered blog I looked at two of the Growing Pains associated with rapidly expanding businesses - Changing the Starting Line Up and Building the Business Infrastructure.  I compared these business Growing Pains to the growing pains experienced by rapidly growing teenagers.  So to maintain the metaphor in this blog I’m going to look at The Premises Conundrum and The Clique Communications Challenge the business equivalent of choosing your GCSEs and having to speak in school assembly.

The first of these is the Premises Conundrum.  Or put another way, “How do I manage to make the right choices re property when, on the one hand, the cost of my projected requirements scares the pants clean off me and I’d like to see how things go before making a big, costly decision that could cripple the business whilst, on the other hand, my current premises would make a small sardine uncomfortable and I need to do something to create more space now before people leave?”  Tricky huh and it doesn’t end when you make an initial decision either, but like a teenager overwhelmed by choice when selecting their GCSE options, let’s take one step at a time.  So first things first, how do we resolve the paradox?  Here are a few pieces of advice garnered from the school of hard knocks:

1.  Understand the importance of making a decision.  When you know you have to make a decision – put a time limit on it.  The easiest thing in the world is to procrastinate as you try and avoid getting the decision wrong.  N.B. Not deciding is usually far more damaging and costly than a timely but imperfect decision.

2.  Understand that the decision will be wrong – well not wrong exactly – just that it is unlikely to be perfect and there will be compromises.  Getting a massive space in a desirable area, that is fabulously configurable, that you can have for a peppercorn rent, on a long lease that you can exit at a month’s notice, is as likely as winning the lottery.  It does happen occasionally but I wouldn’t plan for it.

3.  Understand this is not likely to be forever.  Remember you can always move again and again.   Plan for the near future not for the end state.  Be prepared to move in and after a while, move on. 

4.  Understand this is not about finding a home.  Home is where the heart is, this is about finding a space that works for your business for now and the near future.  Stay flexible.  Pay more for the flexibility if you have to.

5.  Understand the real requirements and get the basics right – when it comes to work spaces, power supplies, coffee making facilities and toilets are way more important than the type of carpet or curtain.

Armed with these gems of advice you can now make your decision on where to go and prepare yourselves for the move.  However, that’s only the beginning – the real work starts now.   Ged Brannan, previously Head of Coutts Experience at Coutts and now COO of QuantumBlack, a funky and rapidly expanding data strategy and analytics business, shared with me his tips for managing the move.  Ged is in the process of overseeing such a move for QuantumBlack and so speaks from recent experience.

RF:  So, what are the key things to get right when planning an office move?

GB:  Understand how you want your new building to look and feel.  It is a representation of the business and it’s worth spending time to get it nailed up front.

RF: So how do you go about doing that?

GB: Carve out a small group of people who understand where the company has come from and where you intend to go, find professionals whose job it is to ‘get you’ as a firm and translate that in to your new space.  We needed to meet a few of these firms and spent a good few hours going through examples of their work and eventually approving mood boards / pictures of how we wanted our new space to be.

Everything does not need to be 100% for day one.  Similar to moving in to a new house, you need to be able to function in your new space and you should be prepared to learn how it will work / needs to work in reality once you have moved in.  Have the guts to leave some questions about the space outstanding until you find your working rhythmn in the new space and save some budget to spend on your new space after you have been in a few months.

RF: What else should I be focused on?

GB: Be really clear about who is leading on making the move happen and how decisions are being made.  In addition to the big look and feel design decisions there are a vast number of practical decisions that need to be made at speed, everything from selecting an agent through to procuring security passes.   Now whilst it may seem like a good idea to use the move and the selection of new space as an opportunity to bond the organization, it is the equivalent of trying to move house with 30 people, all with their own unique perspectives on what they want, so be careful how you set it all up and manage people’s expectations

RF:  Do you have any favourite tips?

GB: Managing staff expectations is crucial.  Consider pulling a small group together to get their ideas and input prior to the move.  Those people can be the ones that continue to gather feedback on what is and is not working so well once you have moved in – it is inevitable that things will need to change in the way you use and manage the space

RF:  What should we be worrying about?

GB:  In start ups there tend to be lots of creative people.  Now some of them are commercial, but a lot of them are not so focused on this.  So be prepared if you are leading the move for requests for the most beautiful designs in everything from desks, to chairs to coffee machines and coat hooks – with little sanity on the commercial impact of these being thought through by the requesters.  It can feel a bit like everyone else thinks it is Christmas and you are going to have to be the Grinch at some points along the way.  However, the costs of everything can increase massively if you are not careful.  Things that look relatively cheap to procure rarely are.  Compromise is essential to maintain cost control.

So there you have it – the Premises Conundrum made simple.  Best of luck.

Secondly I want to explore the Clique Comms Challenge.  So here’s the thing.  Start ups, being start ups, are of necessity an all hands to the pump experience.  Everyone who is part of the business is “on the team” and pretty much everyone gets involved in making the decisions or at the very least having an opinion on them.  Communications are carried out over the desktops and communication is natural and organic.  

Of course as the enterprise expands the lines of communication get stretched and the ease of communication disappears.  Communication needs to be formally managed (both the channels and the content), people will inevitably start complaining that they don’t know what’s going on – for the leaders of the business communicating just got grown up and boring – “why can’t it be like it used to be – why don’t people just get it?”.   It’s like having to constantly talk in school assembly to explain to everyone your latest achievements.  It’s a bit embarassing and a bit of a chore and probably uncool.  There must be another way.  So, as the complaints level rises the natural reaction of the leadership team is to get together and have a things aren’t the way they used to be around here away day.  Over drinks in the bar lots of promises are made to each other about trying harder, role modelling and keeping each other in the loop.  Everyone leaves the session feeling slightly hungover but generally much better about themselves.  However, rather than making communications better for all, the leadership team have actually only perpetuated a very serious problem.   Rather than understanding and accepting that “things can’t be as they used to be around here” and going on to figure out how best to communicate to all the business in a mature way they have actually reinforced the leadership clique and effectively guaranteed that decision making and communication will stay centralised.  This in turn leads to more work for the few and disengagement for the many – not usually a good thing.

So how should the leadership team deal with the challenge?

I wish there was an answer that didn’t sound quite so much like “grow up” and wasn’t as dull as suggesting putting a communications plan and structure in place, but if there is I haven’t found it yet.   As a business leader in a rapidly growing business one of the key challenges is to change yourself as the business grows.  This means getting involved in less of the detailed design, marketing, sales etc and spending more time in sharing vision, communicating values and generally making an effort to be visible throughout the business.  Whether you like it or not you have done well and the rest of the school needs to hear about it – you do need to stand up in “school assembly” and share.  If you don’t you will start to throttle the business as it becomes more and more reliant on a small group of key people.  Never a good idea if growth is your aim.

That’s all for now – many thanks to Ged Brannan for his contribution.  I’ll be publishing Part 3 shortly in the meantime have fun innovating and enjoy the rollercoaster of growth.