The Phases and Pains of Business Growth

Most entrepreneurs have thoughts of owning their own business.  They are looking for the freedom of working their own hours, autonomy for doing work they’re passionate about, and ideals of collecting 100% of the revenue they produce.  

What is often overlooked or under-estimated, are the pressures and stresses of building a business. Most entreprenuers go into owning their business thinking about their ability of doing the work while disregarding their capacity for running the business.  And while growth is an exciting adventure when things are going well, it is also a whirlwind of chaos when it’s not. The faster the business grows the more intense and stressful it becomes for the entire team.  For example:

• Workloads increase exponentially so non-production work is often set by the wayside, only to pileup and be left unattended. 
• Office protocols and procedures which have sustained the details of a slower, building business, creates miscommunication and failures as growth occurs.
• Teams get overwhelmed with work, stepping over the specifics needed for client relations and deadlines.
• Previously-effective staff start making mistakes as their coping strategies are tapped and stress takes a biological toll on their critical thinking and decision making.
• Systems that formed the foundations of your business crumble under the weight and pressure of the very success you desire.

What’s more important than the above examples are the impacts they collectively have on the business. Owners that experienced early success now see downward trends in numbers and metrics.  Early, fast-growing businesses seemingly take an equally, fast halt.  The organization has potential to fail because of success.  Stop here and re-read that last sentence because it has more truth in it than you realize.

It doesn’t seem possible or fair that success, when out of the slightest balance with foundational and strategic steps, can quickly slide into failure.  It is, however, a fact and reality for many business owners.  To navigate the stages and pains of growth one can look to The Greiner Curve as an effective way of perceiving growth.  You can’t change what you don’t acknowledge so it is imperative for your continued success to own up and face facts.  Understanding the causes of trends, regardless of direction, is a skill all master business owners possess.  The goal is to be able to identify opportunities and anticipate roadblocks before they occur so you can create fast-acting solutions.

The Greiner Curve Diagram

Larry E. Greiner first published his theory in the Harvard Business Review in the July-August edition of 1972.  In his article “Evolution and Revolution as Organizations Grow” he talks about the five (5) phases of organizational growth: 1) Growth through Creativity; 2) Growth through Direction; 3) Growth through Delegation; 4) Growth through Coordination and Monitoring; 5) Growth through Collaboration.  In 1998 he added a sixth phase called Growth through Extra-Organizational Solutions.  The six phases are described below:

Phase 1: Growth Through Creativity

This phase highlights a person’s efforts to open their business, whether it be scratch or acquired.  Owners focus on creating brand and marketing elements that attract clients of many kinds while unfolding their own beliefs and practicalities for services offered.  Unstructured, informal communication works as there are few team members to rally and motivate.  Profits come easier with a lower breakeven point and rewards come in the form of bonus and incentives.

This phase ends with the need to hire more staff, which stretches the effectiveness of team communication.  The need for professional management is apparent as a Leadership Crisis ensues.  Most entrepreneurs assume the position themselves or rely on more experienced staff to fill the role regardless of anyone’s ability or capacity to do so.  Team turnover is high now due to lack of leadership, strain, stress, and frustration.  Clients notice the palpable tension and new faces; they start to question their choice.

Phase 2: Growth Through Direction

Growth propels leadership to formalize team communication as mounting frustration and gossip can run thick. Client complaints mount which requires more of the owner’s attention. Owners begin to question their career choice and ask themselves, “Is this what entrepreneurship is really about?”  Resentment towards staff and clients brings about a high level of job dissatisfaction. 

Growth continues only in an environment of more formal, strategic processes and systems such as communications, budgets, marketing, client experience, and collections.  

There comes a point when the management, task-lists become so numerous that there are not enough hours in the day for one person to manage them all.  Owners can’t possibly know as much about office processes and systems as individual staff so a struggle of trust and delegation ensues.

This phase ends with an Autonomy Crisis where owners are forced to share responsibilities with others while learning not to micromanage.  

TIP: Greiner also talks about the importance of “crisis” which is “a stage in a sequence of events at which the trend of all future events, especially for better or for worse, is determined; turning point” (Dictionary.com, Websters.com).  The challenge with a crisis is most people view them as negative because of the intense emotional state that typically accompanies them.  When recognized for what it is, a crisis is a moment where an owner can influence all future events either as an upward or downward trend.  This can be a highly pragmatic approach to business growth as there are many metrics a business wants to trend upward as well as down.  

When a crisis is met head on, with the viewpoint of opportunity as our lens, it is merely a turning point in which we transition to our next level of self, work, living.

Phase 3: Growth Through Delegation

Owners often design a hierarchy of staff. Teams go through significant change and require months to settle into their new roles and those of others.  New staff are often hired as seasoned team members find it difficult to adapt to internal promotions or the increased separation from their manager.

When the team is in place, the business is free to grow again. Owners enjoy monitoring staff tasks through checklists and short meetings, only addressing escalated issues. They find themselves able to once again focus on their passion and expanding their skillsets, adding higher producing products and specialty services. 

Per Greiner, many businesses flounder at this stage as owners whose directive approach solved the problems at the end of Phase 1 finds it difficult to let go. New managers struggle with their roles as leaders, rarely gaining the support of all team members, as their skills are merely to complete tasks and not so much in the expertise of team building.

This phase ends with a Control Crisis where a much more sophisticated leader is required to implement the necessary foundations of the business while creating synergy within the team to unite them all.

Phase 4: Growth Through Coordination

Teams function as organized units and the single business runs smoothly as day-to-day operations are mastered.  Phase 4 is typically the time owners begin to think of adding associates, bringing on specialists, or expanding to a second location or service and looks at the overall Return on Investment rather than just profits. Incentives are shared with the team and compensation includes bonuses and benefits.

With the expansion of staff and services, the original business goal drowns out under a borage of bureaucratic and legal requirements. Owners begin to look at the business knowing that their future growth relies heavily on their knowledge, ability to navigate, and execute business strategies. 

This phase ends with a Red-Tape Crisis and the need for a new culture and work-flow structure for effectiveness (and sanity).

Phase 5: Growth Through Collaboration

The micromanagement and control of Phases 2-4 are replaced by interdependency of team collaboration, flexibility, self-direction, and professional ownership.  Sophisticated information systems and team-based financial rewards propel revenue growth while allowing individuals personal growth within their positions.  

Owners maintain work-flow through structured meetings, documented systems, and deep collaboration with all staff.

This phase ends with a crisis of Internal Growth where further growth can only come by developing partnerships with complementary organizations. 

Phase 6: Growth Through Extra-Organizational Solutions

Greiner added a sixth phase (1998) which suggests that growth is dependent on creating extra-organizational alliances whether through mergers, outsourcing, networks, and other solutions involving other companies.  At this phase, a business will need to think of local entities as building blocks for swift expansion and consistently focus on business partnerships.

As partnerships ensue, owners are at risk of losing their identity and culture, which makes it challenging to remind oneself why you started the business and what is all this growth about.

This phase ends with an Identity Crisis and often businesses merging into other organizations.  Owners are now focused totally on ROI and the evolution of owning a business has morphed into capitalizing on buying and selling within the industry.

How to Use This Model:

It’s important to remember, not all businesses will go through these phases and subsequent crises in this order.  The Greiner Growth Model helps you think about the growth for your organization, and therefore, better plan for and cope with the next growth transition.  

To apply the model, use the following steps by thinking about where your organization is now:

Step 1: Think about whether the organization is reaching the end of a stable period or nearing a ‘crisis’ or transition. 

Step 2: Ask yourself what the transition will mean for you personally and your team. Will you have to:

• Take back responsibilities or pile more onto your plate?
• Delegate tasks, duties, and functions to others?
• Expand your services to include specialty procedures?
• Learn how to communicate differently to inspire, build trust, and empower?
• Incentivize and bonus your team differently?
• Build relationships or alliances with colleagues or neighbors?

Step 3: Create a plan specifically based on your current situation that will prepare you to make the transition as smooth as possible for you and your team.

Signs you’re in crisis:

• Staff gossip or complain that there is a lack of support, training, and cohesiveness.
• Staff shares feedback that company procedures are getting in the way of them doing their jobs.
• Staff asks for raises and share that they are not fairly rewarded for the level of responsibility and effort. 
• People seem unhappy and there is a higher staff and/or patient turnover than usual.
• You feel pulled in too many directions, not having enough time in the day to do it all.
• You see key metrics seriously underperforming and don’t know your first step in fixing them.
• You have the ‘dreads’; dread work, the next patient, talking with your staff, doing the next procedure.
• There’s not enough money to pay everyone, including yourself.