10 Most Damaging Growing Pains in a Small Business

Recognize and assess the need for organizational change as you grow.

10 Most Damaging Growing Pains in Small Business

When an organization has not been fully successful in developing the internal systems it needs at a given stage of growth, it begins to experience "growing pains."

Growing pains in a small business are symptoms that an organization needs to make a transition.

Let's examine the most common organizational growing pains and discuss the degree to which different sizes and types of business experience growing pains, based on data collected over the past twenty years.

The Ten Most Common Organizational Growing Pains

As organizations hire more employees and do more business, they often experience a variety of growing pains that signal that something has gone wrong in the process of organizational development.

These are the ten most common organizational growing pains that entrepreneurs must be prepared to deal with in their companies:

1. People feel that "there are not enough hours in the day."
2. People spend too much time "putting out fires."
3. People are not aware of what other people are doing.
4. People lack understanding about where the firm is headed.
5. There are too few good managers.
6. People feel that "I have to do it myself if I want to get it done correctly."
7. Most people feel that meetings are a waste of time.
8. When plans are made, there is very little follow-up, so things just don't get done.
9. Some people feel insecure about their place in the firm.

10. The firm continues to grow in sales but not in profits.

Each of these growing pains is described below.

1. People Feel That "There Are Not Enough Hours in the Day."

One of the most common organizational growing pains is the complaint that there is never enough time. Employees feel that they could work twenty-four hours per day, seven days a week, and still not have sufficient time to get everything done.

They begin to complain about "overload" and excessive stress. Both individuals and departments feel that they are always trying to catch up but never succeeding. The more work they do, the more there seems to be, resulting in a never-ending cycle. People feel as if they are on a treadmill.

The effects of these feelings can be far reaching. First, employees' belief that they are being needlessly overworked may bring on morale problems. Complaints may increase. Second, employees may begin to experience physical illnesses brought on by excessive stress. These psychological and physical problems may lead to increased absenteeism, which can decrease the company's productivity. Finally, employees may simply decide that they can no longer operate under these conditions and may leave the organization. This will result in significant turnover costs and replacement costs related to recruiting, selecting, and training new people.

When many employees have the feeling that there is not enough time in the day, usually no one is suffering more from this feeling than the company's founding entrepreneur. The entrepreneur, feeling ultimately responsible for the firm's success, may work sixteen hours a day, seven days a week in an effort to keep the company operating effectively and help it grow.

As the organization grows, the entrepreneur begins to notice that he or she can no longer exercise complete control over its functioning. This realization can result in a great deal of personal stress.

2. People Spend Too Much Time “Putting Out Fires.”

A second common growing pain shows itself in excessive time spent dealing with short-term crises—“putting out fires.” This problem usually results from a lack of long-range planning, and, typically, the absence of a strategic plan. Individual employees and the organization as a whole live from day to day, never knowing what to expect. The result may be a loss of organizational productivity, effectiveness, and efficiency.

Examples of the “putting out fires” problem are easy to find. In one company, a lack of planning caused orders to be needlessly rushed, resulting in excessive pressure on employees and a dip in workplace productivity. Drivers had to be hired on weekends and evenings to deliver orders, some of which were already overdue. In other companies, lack of planning can produce other short-term crises. For example, lack of planning can result in shortages of salespeople. Because of these shortages, a company may be forced to hire new people and put them to work almost immediately, sometimes without adequate training. This, in turn, can contribute to short-term productivity problems because the new people do not possess the skills necessary to be good salespeople.

Fires were so prevalent at one $50 million manufacturing company that managers began to refer to themselves as “fire fighters,” and senior management rewarded middle management for their skill in handling crises.

When it became apparent that managers who had been effective in “fire prevention” were being ignored, some of them became “arsonists” to get senior management’s attention.

3. People Are Not Aware of What Other People Are Doing.

Another symptom of organizational growing pains is that many people are increasingly unaware of the exact nature of their jobs and how these jobs relate to those of others.

This creates a situation in which people and departments do whatever they want to do and say that the remaining tasks are “not our responsibility.” Constant bickering between people and departments over responsibility may ensue. The organization may become a group of isolated and sometimes waning factions.

These problems typically result from the lack of an organization chart and precise role and responsibility definitions as well as effective team building. Relationships between people and between departments as well as individual responsibilities may be unclear.

The isolation of departments from one another may result in duplication of effort or in tasks that remain incomplete because they are “someone else’s responsibility.” Constant arguments between departments may also occur over territory and organizational resources.

4. People Lack Understanding About Where the Firm Is Headed.

Another typical growing pain is a widespread lack of understanding of where the firm is headed.

Employees may complain that “the company has no identity” and either blame upper management for not providing enough information about the company’s future direction or, worse, believe that not even upper management knows what that direction will be.

Basically, there has been a communication breakdown. This was one of the critical problems at Wang Laboratories that led to the resignation of Frederick Wang, son of company founder An Wang. It appears that the senior management at Wang failed to develop and/or communicate their strategy for maximizing market opportunities. As a result, salespeople became confused about which market Wang wanted to pursue.

When insufficient communication is combined with rapid changes, as is often the case in growing firms, employees may begin to feel anxious. To relieve this anxiety, they may either create their own networks for obtaining the desired information or come to believe that they know the company’s direction even though management has not actually communicated this information. If anxiety increases to the point where it becomes unbearable, employees may begin leaving the firm.

Turnover of this kind can be very costly to a firm.

5. There Are Too Few Good Managers.

Although a firm may have a significant number of people who hold the title of “manager,” it may not have many good managers. Managers may complain that they have responsibility, but no authority. Employees may complain about the lack of direction or feedback that their managers provide. The organization may notice that some of its components have significantly higher or lower productivity than others.

It may also be plagued by managers who constantly complain that they do not have time to complete their administrative responsibilities because they are too busy increasing business. When any or all of these events occur, something is wrong with the management function of the organization.

The problem may be that the company has promoted successful “doers” (salespeople, office workers, and so on) to the role of manager, assuming that they will also be successful in this role. These two roles require significantly different skills, however. Thus, without proper training, many “doers” will fail in the manager’s role. Their tendency to continue “doing” will show itself in poor delegation skills and poor coordination of the activities of others. Subordinates may complain that they do not know what they are supposed to do.

Problems like these suggest that the company is not devoting sufficient resources to developing a pool of managerial talent.

It may be relying too much on on-the-job training rather than on formal management development programs. For example, during the days of rapid growth at Ashton-Tate, managers multiplied almost as rapidly as rabbits. One manager stated: “I was hired and then escorted to my department. The escort said: ‘Here’s your department.

Run it.’” Similarly, rapid growth at Apple Computers led Steve Jobs to bring in “professional managers,” including John Sculley, to help manage the firm, because the company had not developed a cadre of managers as it grew.

Management problems may also result from real or perceived organizational constraints that restrict a manager’s authority. The feeling that only upper management has decision-making responsibility is common in firms making the transition to professional management. It is a relic from the days when the founding entrepreneur made all the firm’s decisions.

6. People Feel That “I Have to Do It Myself If I Want to Get It Done Correctly.”

Increasingly, as people become frustrated by the difficulty of getting things done in an organization, they come to feel that “if I want to get something done correctly, I have to do it myself.” This symptom, like lack of coordination, is caused by a lack of clearly defined roles, responsibilities, and linkages between roles.

As was discussed previously, when roles and responsibilities are not clearly defined, individuals or departments tend to act on their own because they do not know whose responsibility a given task is. They may also do the task themselves to avoid confrontation, since the person or department to whom they are trying to delegate a responsibility may refuse it.

Operating under this philosophy, departments become isolated from one another, and teamwork becomes minimal. Each part of the company “does its own thing” without considering the good of the whole. Communication between management and lower levels of the organization and between departments may be minimal because the organization has no formal system through which information can be channeled.

7. Most People Feel That Meetings Are a Waste of Time.

Recognizing that there is a need for better coordination and communication, the growing organization may begin to hold meetings. Unfortunately, at many firms these meetings are nothing more than discussions between people. They have no planned agendas, and often they have no designated leader. As a consequence, the meetings become a free-for-all, tend to drag on interminably, and seldom result in decisions.

People feel frustrated and conclude that “our meetings are a waste of time.”

For example, shortly after John Sculley joined Apple Computer he attended a management meeting at Pajaro Dunes, California, where Apple had many retreats. While Sculley tried to focus on strategic issues, he had relatively little success in controlling the discussion. The traditional operating procedure for this group was for members to say whatever was on their minds, regardless of its factual base or relevance to the particular agenda item.

As a result, it was difficult to accomplish the goals of such meetings in an effective manner.

Other complaints about meetings involve lack of follow-up on decisions that are made. Some companies schedule yearly or monthly planning meetings during which goals are set for individual employees, departments, and the company as a whole. These sessions are a waste of time if people ignore the goals that have been set or fail to monitor their progress toward these goals.

A further example of ineffective use of meeting time may appear in the performance appraisal process. In many organizations that are beginning to make the transition to professional management, performance appraisals are merely discussions between supervisor and subordinate. Objective performance goals may not be set or, if set, may not be monitored by employee or manager. Managers in these firms also tend to avoid providing negative feedback.

Without such feedback, employees cannot learn what they need to do to improve performance. Because little real information is exchanged, performance appraisal meetings are a waste of both supervisor’s and subordinate’s time.

8. When Plans Are Made, There Is Very Little Follow-Up, So Things Just Don’t Get Done.

Another sign of an entrepreneurship with growing pains is a lack of follow-up after plans are made.

Recognizing that the need for planning is greater than in the past, an entrepreneur may introduce a planning process. People go through the motions of preparing business plans, but the things that were planned just do not get done. In one amazing case, there was no follow-up simply because the plan, after being prepared, merely sat in a drawer for the entire year until the next year’s planning process. When asked about the plan, one senior manager stated: “Oh that. It’s in my desk, I never look at it.”

In some cases there is no follow-up because the company has not yet developed systems adequate to monitor its goals. For example, many firms desire to monitor financial goals but have not developed an accounting system that can provide the information needed to do so.

In other cases, follow-up does not occur because personnel have not received proper training in setting, monitoring, and evaluating goals. They set goals that cannot be achieved or cannot be measured, or they do not know how to evaluate and provide useful feedback on goal achievement. These problems tend to appear most often in the performance appraisal process.

9. Some People Feel Insecure About Their Place in the Firm.

As a consequence of other organizational growing pains, employees begin to feel insecure about their places in the firm.

Typically, the entrepreneur has become anxious about problems facing the organization and has therefore hired a “heavyweight” manager from outside. This action may have been accompanied by the termination of one or more current managers. Employees feel anxious partly because they do not understand the reasons for these and other changes. When anxiety becomes too high, it may result in morale problems or excessive turnover.

Employees may also become insecure because they are unable to see the value of their position to the firm. This occurs when roles and responsibilities are not clearly defined and terminations are also occurring. Employees begin to wonder whether they will be the next to “get the axe.” In an attempt to protect themselves, they keep their activities secret and do not “make waves.” This results in isolation and a decrease in teamwork.

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?”

10. 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

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.