For a sexually explicit author whose novels were often banned in the U.S., Henry Miller might have made a good living writing business books. Do you ever wonder why growing your business is so difficult? Miller worked it out: “All growth is a leap in the dark, a spontaneous unpremeditated act without benefit of experience.”
Miller’s sentiment surely encapsulates the breathless challenge of business growth: never feeling in full control, and never sure where you’re headed next. Growth presents you with one new challenge after another, because there is no step-by-step guide to riding a rocket.
Hess questions the common notion that all businesses must “grow or die.” Some firms—those that can’t change, run by people who won’t learn—are probably better off staying small.
Until now, that is. Meet Ed Hess, a former lawyer, investment banker and entrepreneur who’s now a prof at the University of Virginia’s Darden School of Business. After studying growth businesses for more than 10 years, he has concluded that growing a company is not a rational management exercise, but a journey of personal learning, pain and growth. “Consistent organic growth is learning-based,” Hess maintains. “Growth requires the right mindsets, systems and processes.” In his 2012 book, Grow to Greatness: Smart Growth for Entrepreneurial Businesses, Hess locates the orderly process in the chaos of growth management, creating a veritable bible for becoming a PROFIT 500 kind of company.
What makes growth so hard? “Individuals are hard-wired to be anti-growth,” notes Hess. People tend to favour predictability, hold on to familiar patterns, and have trouble improvising. And companies were never meant to be engines of change. “They are antithetical to growth,” says Hess. “The reason organizations exist is to produce reliable, predictable, standardized results with low variance and low risks.”
Yet some companies—witness the PROFIT 500—find the route to growth. Hess says these companies don’t normally offer unique products or services, and they’re not the most innovative. They don’t have visionary leaders or the best talent. He finds that consistent growth companies they have nine “not so secret” attributes in common:
- A simple focused strategy. A business model that can be described in a 30-second elevator pitch
- Flexible structures that empower entrepreneurial behavior as the business grows. Hess calls them “small-company souls in a large-company body”
- A higher purpose than mere profit or shareholder value
- A culture of relentless, constant improvement
- High employee engagement. An accountable “family” environment
- Customer-centricity. Customer needs and attitudes are embedded in the company’s DNA
- Humble, passionate, values-based leaders
- A commitment to execution and service, enabled through leading-edge use of technology
- A self-reinforcing internal system that enables, motivates, and rewards desired behaviours
But you can’t just bolt this stuff on to any old organization—each has to find its own way, based on the owners’ personality and objectives, and the requirements of each marketplace. That’s why Hess describes growth as “a dynamic, iterative, ziz-zag feedback-double loop learning process,” a delightfully complex phrase that reflects the creative and personal challenges that come with growth.
In Grow to Greatness, Hess uses a long-term study of 54 privately owned U.S. growth companies to construct detailed models of best growth practices. “Growth is constant improvement and scaling,” he declares. Noting that growth demands more than some people can deliver, Hess questions the common notion that all businesses must “grow or die.” Some firms—those that can’t change, run by people who won’t learn—are probably better off staying small, so long as they continually improve their products and services to keep pace with the competition.
For those who do want to grow, Hess offers templates, case studies, and even homework exercises. But I was most impressed by his insights into the step-by-step challenges of growth. Among them:
- Recognize that as growing businesses become more complex, they demand more layers of management, often at the nine-employee mark, then again at 25 to 30, and again at 90 to 100.
- Get better at planning. You need to solve the dilemma: When do you spend as little as you can in your business, and when should you be investing for the future?
- Know when to outsource, know when to build. Hess found that several growth companies contracted out tasks such as HR, IT and accounting, only to bring those functions back in-house as their capabilities grew.
- Prioritize. As the boss, you have to shed most of the jobs you like to do to focus on the ones you need done. Hess cites one entrepreneur who focused on just three priorities: customers, quality and cash flow. “If an issue did not impact directly and materially on one of these three areas, it could wait.”
- Develop processes to ensure two things: that everyone in the organization always knows what to do, and that the data you need to run the business gets to you as fast as possible.
- Understand that new processes present endless challenges. Many entrepreneurs have no idea what processes to introduce when. Even if they do, Hess says, they find it hard to manage growth and introduce processes at the same time. Others mistakenly assumed that developing processes would be a one-time task, “rather than an ongoing priority that would evolve through the life of the business.”
- Expect growth to be rough, rocky and risky. As one entrepreneur said, “If you are growing, you will make mistakes.”
What do you do when you don’t know what to do? Talk to those who know, says Hess. Join an entrepreneurs’ network, seek help from trade organizations, identify experienced entrepreneurs and ask their advice. No one ever said learning would be easy—but it beats spontaneous leaps in the dark.