Are You Prepared for the Change That Comes as Your Company Grows?

When your company grows, it doesn’t just get bigger – it changes. There are ‘inflection points’ where what you did to get to where you are won’t get you to where you want to go. You have to fundamentally change how you run your business, or, your business will run you. A bigger team naturally means more complexity. This phenomenon has been true since the beginning of mankind and is based on the human brain’s limited capacity to manage relationships.

When you start your company, maybe it’s just you, or you and a partner. The complexity of interactions is very low. You deal with yourself and your partner. You have one interaction. If you bring on another person you now have two potential interactions, but your partner also has two, and the new person has two. You went from two interaction points to six. The complexity does not increase linearly. With more interactions, you have many more options, and the downside is that your brain can only handle so much.

Companies will start adding systems as they grow between 5-10 people. Usually the motivation is all about keeping administrative costs down. You can solve your problem by hiring people to keep track of things for you, or you can get systems to do it. We don’t think about that decision too much anymore because systems are so much cheaper it’s a ‘no-brainer’. For example, you could always have an admin person manually input time sheet data from paper slips, but that is an order of magnitude more expensive, and slower, than a decent time sheet application.

But here’s the catch: those systems also have interactions. For each labor saving system you add it can potentially interact with all the other systems. You’re making progress, but you’re also kicking the can down the road, because once you have multiple business systems (spreadsheets all the way to SaaS applications), now your IT complexity is growing non-linearly and getting to a point where you can’t keep track of it. This is a ‘trap’ that, unless you’ve been there before, you don’t see coming. This is where you might begin to feel like a juggler as you juggle multiple systems and a growing number of relationships.

You start fumbling the balls when the company gets to around 20 people. The owner is getting overwhelmed and the organizational complexity is getting out of hand. One solution is to drastically increase your overhead. Another solution is to add more hierarchy to the organization – reducing the complexity by reorganizing things into manageable five-ish person chunks. Those are the old school solutions to this problem.

The information age solution is to build a business network. When the systems are connected, accessible, and easily reported on, you end up with a flat, nimble organization that can make decisions and act on them quickly. Your overhead is minimized and the work people do is more value-add. There will be companies that embrace this new reality and others that will fall by the wayside – it’s inevitable. If you’re not looking ahead and thinking about how you will grow, you will end up stuck in a deep hole with no easy way out.

This article was submitted by Matt Lentzner, CEO of Bizinta