Wednesday, 5 February 2014

Billy's Sixteenth Law: The inverse relationship between responsibility and control.

When you start your business, you have total responsibility and total control.  As your business grows, you have more responsibility, but less control.

Think of the early days of most businesses.  They start small.  Think of Hewlett & Packard, Wozinac & Jobs, or Gates & Allen.  In your business, you probably did a great deal of the real work and had your eyes on everything happening in your firm.  As your business grows, more people are doing more tasks of which you are unaware.  This is creates increasing dissonance, especially since most entrepreneurs are control freaks. 

Two factors drive business growth. Sometimes businesses increase capacity.  This simply means that they can do more of what they have always done. Sometimes, they increase their capabilities.  This means that they can provide additional products or services to their customers.  Either way, the owner must step back and allow other people to do work that he or she used to do.

Think of a store.  The owner is usually the store manager, merchandiser and head buyer.  If, however, she opens additional outlets, she must hire for many of these operational functions.  She counts on each store manager to ensure that the stores look good and the customers are well treated.

Think of a professional services firm.  Suppose an electrical engineer wants to add civil engineering to the portfolio.  This means hiring an engineer with a different competency of skills.  The owner must trust the new engineer to perform his or her function in a professional and timely manner.

Some people start businesses because they are good at something.  Being good at something is not the same as being able to manage a business.  Many businesses that work at a smaller size fail when the owner attempts to grow the business.  Sometimes, it is the fact that their business, or business model, is not scalable.  It works well as a small operation, but the things that made the company special or unique are lost when the business grows.  Some businesses are not scalable do to the inadequacies of the founder.  The skills set important for start-up are not the same for growth.  This skill gap becomes evident as a company grows from one person, to five people, to twenty people to fifty people.

Unfortunately even while the owner loses control over the businesses operations, he or she is still the owner and therefore responsible for the results, or lack of results, of the business.  This is frustrating for business founders who have a clear, yet unarticulated vision for what their company is and what it stands for.

Planning for growth is important, however when growing a business be aware that as your business grows, your business environment changes.  Those people who joined you when the company was, "Just like a family", blanche at the idea of the working in a more formal environment.  As a company grows, the change from familial to structured is inevitable. This inevitability means that the unintended consequence of business growth is staff turnover. 

Starting a business is hard.  Growing a business, especially when you grow it rapidly is harder.  Make a conscious decision to grow, plan for growth, and do so with the full understanding that your future firm will be larger and different.

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