High-growth companies must always remain ahead of the curve, and infrastructure may be a key to their long-term success.  Many companies that are in the right place at the right time have exponential growth over the first few years.  A word of caution for those hyper-growth companies… don’t outrun your infrastructure.

A simple example to review:

In this extreme example, if a company starts operations at the beginning of the year, and achieves annual sales of $100 million, company executives may consider the business to be a $50 million company and size the infrastructure appropriately.  That is, they will compare the size of certain functional areas to that of peers with $50 million of sales.  Such an infrastructure will not meet the business needs.

Let’s examine several functional areas in the example:

  • A typical $50 million manufacturing company may have 2 process engineers – one for each operating shift - to respond to line configuration problems… line changeover’s … process improvements.  But in the above case, to have annual sales of $50 million from start-up, the operating run-rates may actually need to be $100 million annually to reach $50 million of sales.  This may require 3 complete shifts, and an additional process engineer. Too few process engineers will unduly stress the manufacturing performance.

  • The sales operations department may suffer from the same failure to understand the operating metrics.  In a stable, or slower growth company, sales operations may be sized for the average year.  In a high growth company, actual operating rates at year-end – in the example for $100 million annual revenue – may be double the number of transactions processed at year-end.  Again, if staffed for the $50 million sales, performance will be substandard

The challenge in a high growth company is to thoroughly understand the impact of growth on the infrastructure, and remain ahead of the demand curve.  It is critical in a high growth company to properly resource the business since an under-resourced operation will likely never catch up with the demand, and as a result deliver substandard customer performance.

If there are ineffective controls, inadequate reporting and poorly defined operating metrics to monitor performance, a well-intentioned organization may begin to take shortcuts.  These shortcuts may either push the company out of control, or ruin the company’s customer service and reputation.

Recovering from an out-of-control process will be excessively expensive, and in a highly competitive business, will no doubt seriously impact market share.

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Managing in High-Growth Companies