Growth challenges and organizational responses

¶ … Growth

The four stages of organizational growth are new venture, expansion, professionalization and consolidation. Arguably, the most difficult of these is professionalization, because it represents such a dramatic change in the outlook and culture of the organization.

The first two stages, new venture and expansion, are both stage where the organization can be expected to operate with an entrepreneurial culture. While starting a new venture is never easy, this stage also sees the organization with few limits. The growth stage is also entrepreneurial in nature, with the business opening up new markets, and new products. Again, the organization is fluid at this point, can change itself, and has a low level of inertia. It also does not find itself in the position of having to replicate past actions, and in many instances a successful venture might have never seen a real challenge. These companies are often too small to catch the attention of their industry's most fierce competitors.

The professionalization stage is therefore the most challenging for two reasons. The first is that at this point the organization needs to have a different outlook. Even companies that wish to maintain a high level of entrepreneurship and innovation are faced with the need to professionalize their business. The business can no longer be run by a single individual or a small team -- there are many managers and leaders. It is difficult if not impossible for one person to exercise control, which means that the organization needs to have professional systems and policies, in order to ensure that it continues to thrive during this stage. This also means that the organization will likely need a change in culture as well, to a more transactional culture -- there is going to be some significant resistance to change as the company goes through this process, up to and including clashes between the founders and the financial backers who have brought them to this point (Quinn & Cameron, 1983).

The other reason that this stage is the greatest challenge is that the organization is going to face more intense competition at this level. Small companies are often ignored by the largest competitors, but by this stage they have begun to face competition in a more direct way. Typically, the competitors are fierce. It is much more difficult to win competitive battles when your competition takes you seriously. At the professionalization stage, the low-hanging fruit of the market has been plucked and the company now has to have the systems in place that will allow it to engage in more vigorous competition.

It is worth pointing out, however, that in some businesses this is also the stage when many large customers begin to take a company seriously, so it is a double-edged sword, especially because those large customers demand a higher level of professionalism (Eisenhardt & Schoonhoven, 1990).