The general belief about business growth states that it represents complete success, yet the majority of companies fail because they attempt to grow their operations beyond what their business capabilities will allow. The first real evidence of organizational growth happens when your company achieves growth rates which exceed the current operational capacity of your business.
The “Cash Flow” Crunch
The rapid growth of a business requires high financial expenditures. The extra revenue from your investments will not come until after you complete all of your required expenses, which include purchasing additional inventory and hiring new employees and expanding your office space. The majority of fast-growing companies which experience bankruptcy do so because they exhaust their cash reserves needed for bill payments while waiting for sales to generate revenue.
Operational Overload
The operational systems which function properly for 10 employees will fail to function when treated as 100 employees. The rapid growth of your organization causes all of your organizational processes, which include communication and decision-making and quality control, to become disorganized. The daily crisis problems which leaders must solve, become their main work instead of performing strategic tasks which drive the company’s original success.
Cultural Dilution
The entire team understands both the mission and values of their organization. The company will lose its special sauce when you hire 20 new employees within a month. Employees who join the company during the onboarding process will leave with incomplete knowledge about the company’s fundamental purpose, which results in an office environment that loses its original company culture.
Talent Acquisition Debt
The urgent need for assistance causes you to make hiring decisions based on which people will start working immediately. The practice of hiring unsuitable candidates from the job market leads to an organization that faces performance challenges, which causes employees to leave the company prematurely. The hidden financial cost for replacing a bad hire reaches 1.5 to 2 times the annual salary of the employee, resulting in a total financial loss.
Customer Experience Erosion
The increase in customer volume results in decreased quality for customer service operations. The initial response times show a decrease in speed while the customer experiences which first customers enjoyed disappear from the system. One negative experience leads to a decrease in your Net Promoter Score (NPS), which damages your reputation and requires several years to restore.
The “Tech Debt” Explosion
The process of quick business expansion leads organizations to choose short-term technology solutions for their operational needs. The current temporary system of tools begins to fail when different systems stop working together, which results in the creation of data silos and operational problems. Your business now needs to invest a large sum of money to completely “re-engineer” its entire technology framework while the company continues to operate business activities.
Leadership Bandwidth Crisis
In the process of developing a breakout company, founders experience a growth rate which exceeds the company’s operational growth. The leader who refuses to share responsibilities while lacking essential skills for managing a large organization becomes the main obstacle, which causes all departments to experience delays and which leads top talent to leave the organization.
Quality Slippage
Manufacturers who struggle to meet production targets will face situations where they must choose between production targets and producing high-quality results. The term “good enough” begins to take over “excellence” because software bugs remain undetected while physical products contain minimal flaws. The organization experiences a total loss of quality control, which causes it to lose all market value with its customers.
Strategic Misalignment
When you experience 100% annual growth, all business opportunities will seem like they deserve your acceptance. The organization you create requires multiple new product lines and new market entries before achieving business success with its core products. The lack of focus wastes your business resources, which leads to “sugar growth,” a growth pattern which first generates instant success but ends with a major operational failure.
