Are you growing into a ‘Big Dumb Company’?

Think Progress Team

Saturday 28 June 2014

Growth is the goal of most successful businesses: to grow revenue, grow profitability, grow geographically. But as your business grows, are you becoming more or less productive? Watch out for these signs that your business is becoming an inefficient behemoth.

As your customer base grows, so does the need for extra staff and infrastructure to meet increased product orders and service demands. For a textbook case of a company that got the growth equation right, you need look no further than McDonald’s, which has evolved from humble beginnings in 1940 as a solitary family restaurant to a fast food juggernaut with revenue topping $28 billion in 2013.

Unfortunately, there are many more examples of companies that have mishandled their growth – adding departments, processes and layers of middle management and decision-making at a pace that outstrips, and eventually stymies, their ability to deliver on their promises to their customers.

Inevitably, the result is reduced per-employee profits and, as venture capitalist John Greathouse terms it, BDC, or Big Dumb Company syndrome. It’s an amusing moniker, but for the company it can be the path to insolvency – it’s slowly strangled by its own red tape and the debts pile up.

Focus on value through ideas and innovation

When you’re in charge, it’s natural to want to maintain the same level of control over things you had as a lone entrepreneur operating out of your spare room – but that’s just not realistic. Employees are individuals with their own priorities and ideas – and it’s ideas that you should be encouraging, rather than stifling with an ever-increasing number of guidelines, processes and other bureaucratic minutiae.

Essentially, it’s about not losing sight of the reasons you went into business in the first place. Was it to make life easier for a particular type of customer? Help them save money? Or, as the saying goes, to build a better mousetrap? Once the orders – and cash – are coming in, it’s easy to become complacent and spend valuable company time and resources on activities that are incidental to profitability or simply don’t matter at all: the first (mis)step on the way to becoming a BDC.

That’s not to say a growing company doesn’t need processes and guidelines – it does, but only as much as are needed to satisfy corporate regulations, keep spending reined in, and to ensure that employees are clear on their duties and ethical responsibilities. Lean principles, which focus on minimising waste and defining value in terms of the end customer’s needs, offer a good basic summary of where a growing company’s main priorities should lie.

A checklist for growing enterprises

Keep your processes efficient. Before you add a new process or change an existing one, make sure you are approaching things from the right angle. Focus on outcomes, rather than tasks. Wherever suitable, let your employees make the decisions. And streamline your processes so that duplication of tasks is minimised and your top talent are challenged and engaged.

 Don’t abandon the things that work. Bored with your current marketing campaign? Think carefully before re-jigging it, as it could still be a huge profit generator. It’s easy to fall prey to ‘bright shiny object’ syndrome but keep in mind that newer doesn’t always mean better.

 Stay focused on the customer. This is somewhat obvious, but in a broader sense, it’s a reinforcement of the previous point: focus on the things that generate real value for both the customer and the company, and less on winning industry awards or having the nicest looking offices on the block.

 Have fun. This is about not losing sight of why you chose to become an entrepreneur in the first place. Was it to make a positive difference to the world and do stuff you enjoy, or to spend countless hours each week trudging through dreary documents and meaningless administration? Hold on to that sense of play and creativity, and it will flow through to the rest of the organisation.

Every growing organisation needs its leaders, processes and hierarchies. The key to successful growth is to keep things as simple as possible, which means adding complexity only when there is clear value in doing so.