(Originally published by Bizcatalyst360.com)
YOU’VE SPENT YEARS slogging through the exciting-yet-terrifying startup stage. Growth has been phenomenal. Key initial funding sources came in with just the right amount of money and resources to keep the lights on and you’ve been able to attract the best and brightest talent to your team. The customer base has grown exponentially and is at an all-time high. The founder, exhausted-but-proud, graciously steps aside and shepherds in a new CEO and leadership team that brings fresh energy, fresh perspectives, and an ambitious agenda for building on an already successful record of growth. What specific challenges await the new team and what is going to be needed of the new leadership team to meet these challenges?
That was the question posed to me recently by the President of a relatively new university in the South Asia region. Born in the wake of years of deadly violence, the university (which I will leave unnamed) experienced explosive growth in the 10 years since it was founded. It is now a shining testament to the power of a vision to serve “as a model for private not-for-profit higher education in the country and the region.” The new President, along with his new leadership team, is trying to forecast what challenges the team faces as they prepare to launch a new slate of projects and initiatives that will keep the university growing. Added to that, he wants to wean the institution from its reliance on start-up funding (grants) and build a sustainable business model.
In a very real sense, this is the issue faced by every emerging business. In “Growing Pains: Building Sustainably Successful Organizations,” authors Eric G. Flamholtz and Yvonne Randle point to companies such as Microsoft, Apple, Starbucks, Countrywide Financial, Southwest Airlines and others as examples of entrepreneurial companies that successfully transitioned to the status of professionally managed firms. The trick, they say, is that “entrepreneurship, as a state of mind and as a component of culture, must continue, regardless of the size of the enterprise.” I will come back to this in a minute.
Flamholtz and Randle say there are seven identifiable stages to company growth:
New Venture
Expansion
Professionalization
Consolidation
Diversification
Institutionalization
Decline
In the first two stages, the focus is on mastering markets, product or services, resources or operational systems. In everyday terms we might call this the “herding cats” stage. It is “all hands on deck” as everybody is doing everything it takes to get the enterprise off the ground and moving toward the entrepreneur’s vision. It is a chaotic time in a company’s history that is both exciting and terrifying; one slip and the whole house of cards comes tumbling down.
Stage three is about transitioning to professional management. Management systems are put in place and processes begin to be institutionalized. In governments, non-governmental organizations, and international organizations, this is often referred to as “capacity-building;” something I became familiar with when I managed the community partner program at an Oregon State agency. My team and I spent the majority of our time building the capacity of non-profit agencies around the state to become self-sufficient and run more “business-like.”
At its most simplistic level capacity-building or professionalization focuses on understanding the obstacles that inhibit the people of the organization, neutralizing those obstacles, and enhancing the ability of the leadership team to achieve measurable and sustainable results. In practical terms, it is about empowerment and servant-leadership. And this is what I advised the President: You can expect to worry about having enough resources, facilities, infrastructure, and money to accomplish the next phase of growth in your university. Those worries and challenges won’t go away and may even worsen depending on the external socio-political environment. But if you focus on hiring the right people, with the right skill sets, putting them in the right seats on the bus (a nod of acknowledgment to Jim Collins and “Good to Great“), and–circling back to my earlier point–maintaining an entrepreneurial culture by building and nurturing the capacity of your leadership team, everything will fall into place.
Leadership guru John Maxwell talks about this in his perpetual best-selling book “The 21 Irrefutable Laws of Leadership.” Focus on your Inner Circle, he says. Lift the leadership lids of those around you and there is no mountain too high to climb. If you will permit me to perpetuate a bland maxim that’s been circulating for decades: “Culture beats strategy.” It was true whenever it was first coined; it’s true today. People are the heart of the organization whether it is in Portland, New York, Mumbai or South Asia. Professional management is about processes and systems. But even the best system is worthless if you don’t build the capacity of the people who work in it.