Every successful business owner and executive knows intuitively what it takes to achieve dynamic growth: a solid business model with a clear and engaging value proposition (people want what you have to offer, and you can make money at it); a well conceived and implemented strategy (doing the right things); and great execution (doing things right).
Some of us have had the experience of being there when "all the planets aligned." Success appeared inevitable. But did it last? For a year, maybe two, the trajectory seemed almost vertical. It might not have been easy or effortless—long days, cancelled vacations, the call of "all hands on deck" to handle the workload. In fact, people became so busy making it happen that it was easy to overlook the signs of things to come: softening orders, quality and delivery issues, margin pressures, a restive workforce and a lengthening cash cycle. We used to do so many things right. Where did we go wrong?
It's the great paradox of business management : growth can inhibit your ability to grow. In a recent survey of Canada's Fastest-Growing Companies conducted by PROFIT and FOCUS Management, the management consultancy in which I am a partner, 56% of respondents worried about their ability to sustain the growth they had experienced. In two-thirds of those cases, their growth rates already had declined due to their inability to effectively manage the increased size and complexity of their businesses.
At FOCUS, we see this a lot among successful companies. And the cause is usually what we call "organizational misalignment": the scenario in which a company's assets are not arranged and directed in a way that allows the company to meet changing market demands in an efficient manner. The worse the organizational misalignment becomes, the more a company wobbles—making it harder to maintain an ascent. Some companies level off; others slow down and descend; and some crash.
The shift in strategy at one company prompted its staff to break into competing factions
But while some degree of misalignment is evident in just about all businesses except for startups, it can be managed and minimized. Companies that learn how to meet the demands of the day while reassembling their parts and correcting course can not only avoid growth-sapping misalignment—they can achieve a substantial competitive advantage. And as some of Canada's Fastest-Growing Companies demonstrate, wobble can be overcome with focus and action.
Here are some of the hallmarks of misaligned enterprises:
- Compensation models that drive the wrong behaviours and put different functions, teams and individuals on opposing sides, rather than incenting collaboration and "win-win" thinking and behaviour;
- Organizational structures that inhibit, rather than encourage, frequent and helpful communication on what is happening in the business and how to improve those things that should be improved;
- Business goals that are vague and subject to interpretation, and individual roles, responsibilities and goals that aren't clearly defined and don't connect into and support the focus and strategy of the business.
It's easy to see how high-growth firms are especially vulnerable to organizational misalignment. It happened at Leeza Distribution, a Montreal-based distributor of premium surfaces for countertops and floors that ranked on PROFIT's list of Canada's Fastest-Growing Companies in each of the past four years. Not satisfied with fighting for business in a crowded marketplace, Leeza president Mark Hanna made significant changes to the firm's strategy, including focusing on fashion- and image-conscious buyers.