Where Does Growth Hurt First?
Insights from Jamie is a low-frequency newsletter that comes straight to your inbox.
To avoid missing our best content, sign up here:: jflinch.com/newsletter-sign-up/
Where Does Growth Hurt First?
Growing is hard work, whether you’re an organization or a kid. For the parents out there, you’ve dealt with a child going through a growth spurt. They love to be growing, but growth can hurt. Where does it hurt? It hurts at the joints. The injuries of a growth spurt happen where tendon meets bone, because the bones grow faster than the muscles, tendons, and ligaments can adapt. While those growth-spurt injuries are biological and can’t be controlled, the growing pains that organizations go through are quite self-created and manageable. Bain finds that 85% of executives blame internal barriers, not the market, when growth stalls.
Different kinds of growing pains
While most biological growing pains are generic, there are specific kinds. I personally suffered through Osgood-Schlatter in the knees (and still have bad knees, but for “soccer” reasons). Organizational growing pains are not as generic.
Many organizations bring in growth-minded leadership, whether as a CEO, some version of a chief revenue officer, or even a CFO. That leadership, and the progress it brings, is the envy of most organizations, at least until it actually happens and generates the inevitable problems. Struggling to keep up with growth is often more stressful to leaders, in my observation, than the inability to grow. The type of growth you get affects the failure modes differently.
Straight organic growth through sales. Organic growth doesn’t change the trajectory but changes the velocity. It’s a simple equation of not being able to keep up with demand. This creates problems most directly in the order-to-cash sequence, either in breakdowns or simply the inability to keep up.
Strategy changes can also lead to growth, and this fundamentally involves changing who you are as an organization. These breakdowns look like inconsistent decisions, unclear decision rights, and lost decision heuristics.
The third type of growth is inorganic, through mergers and acquisitions. Inorganic growth often breaks down over cultural fracture points, and melding the mindsets of two organizations doesn’t always follow a market-centric best-fit approach; it more often follows momentum and resistance.
Whatever the growth type, the first failures show up at the connections between functions, never inside them.
Where are your growing pains?
When your kid is going through a growth spurt, the injuries happen at the joints. The same is true of an organization. The growing pains are at the joints: handoffs and connections, decisions, and relationships. The difference between real growing pains and organizational ones is that the human body eventually catches up with itself, whereas the organization is at risk of collapsing on itself if left untreated. This is why, to build a scalable organization, you have to pay attention to these failure modes.
And this doesn’t matter if you’re growing from 200 to 500 people, or 2,000 to 5,000. At one point, things can just be completed through relationships and even a subtle nod of knowing. Then all of a sudden it’s not a person but a department, and instead of one pathway there are five ways for work to flow. Growth is a force that drives entropy, and the chaotic devolution of how work is effectively and efficiently conducted must be overcome with new input energy.
Designing, and redesigning, handoffs and connections is key to maintaining speed, quality, and structure while the organization changes through growth, reorganizations, and acquisition integrations. Every customer and supplier should be clearly connected in a way that is simple, effective, and binary, and when that connection breaks, we know it. This is essentially a lean process design rule, which these videos describe in a little more detail.
Connections are often considered the white space between functions, but who’s in charge of that white space? Often no one, which allows broken connections to escalate into finger-pointing and blame. What I refer to as “value stream thinking” ensures a culture where organizations take responsibility not just for their own work, but for that white space between them and their internal customers and suppliers. When two interacting functions both adopt this behavior, there is a much greater chance of successfully designing and operating an effective connection.
Decision making must also change, including the who, when, where, and how. A key principle is to push decision making closest to the point of activity. As an organization grows, that means leaders must often push decision making further and further away from themselves, which isn’t a natural or intuitive step. But that doesn’t mean abdication or ignorance.
Clear decision rights define the who. Clear processes define the where and when. And clear heuristics, or decision rules, help define the how. In a study of more than 125,000 employees, decision rights and information flow beat structural change as predictors of execution. That’s how a leader can maintain an understanding of how decisions will be made even when they aren’t involved. My colleague Jeff Grimshaw and I did an entire podcast series on heuristics, called Happy Heuristics, if you want to learn more about how they work.
You Can’t Buy Your Way Out
When the joints start to ache, the instinctive response is to throw resources at the problem. For a long time, that instinct was cheap. Capital efficiency has been ignored for well over a decade as interest rates were incredibly low and growth was more important than what it cost to get it. But that’s no longer a valid heuristic.
Interest rates are unlikely to return to the world of “free money” that many managers, and boards of directors, learned under through the 2010s. Under a free-money mentality, if an investment has a positive ROI, you proceed to spend the money. That environment is unlikely to return for the duration of those now in decision-making roles.
Of course, as you grow, part of that investment is resources. This is often what starts the problems of growth. If today I needed x resources, then after growth, I need x + n, where n can be any number that people want and is often more than you need. Overhiring during a period of combined revenue increases and difficulty in hiring is a large driving force of today’s layoffs. When you overhire, layoffs may be the smallest of consequences. You start to build activity around those resources, a great deal of which is bureaucracy.
Some of this is done by running your org strategy through ratios and formulas instead of problem statements. What problem are you trying to solve with the next hire? Or are you just growing and assuming you need more people? The latter is where you get your organization into trouble.
Putting it to work
So if you can’t buy your way out, how do you deploy all of this mortar that holds the organization together while you’re putting energy into growing? You need to find the cracks that require mortar, and you need some bricklayers to apply it.
You can’t spend all your energy fixing what isn’t broken. Putting to work effective andon processes, or help chains, helps identify and escalate the cracks as they first appear. The key is to find them while they’re small cracks. You can learn more about andon with this white paper.
But you also need bricklayers to apply that mortar. This is tricky, because it means overcoming what’s referred to as Brooks’ Law: adding people to a late project makes it later. The parts of an organization grow linearly, but the connections between them grow as n(n-1)/2, so six people share 15 lines of communication, twelve share 66, and fifty share 1,225. You hire new people, but they instantly get sucked into servicing the growth rather than fixing what’s broken. New hires need to be trained by those who already know how the work gets done, at least temporarily making the problem even worse. Between role clarity, accountability, and even resource planning, you need to ensure that your resources can find and fix problems lest the problems scale faster than the work itself.
Growth can solve a lot of problems, but it does come at a cost. Pay those organizational debts before they grow, and your growth has the potential to be a reinforcing loop.