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The Overlooked Challenges of Scaling Up

Pamela P Jan 09, 2020
The Overlooked Challenges of Scaling Up

Perform an online search for “How to Scale Up a Business.” Most of the results recommend you create a plan. Wasn't that what a business plan was for? Isn't that the entire goal of a business - to grow? What is it that makes a scaling-up plan different from a business plan?

Scaling a business means setting the stage to enable and support growth. It means having the ability to grow without being hampered. Typical plans talk about capabilities and capacities. Where will the funding come from? How quickly can a company scale up its technology, infrastructure, and processes to sustain growth? As companies grow, they become more complex, making it difficult to sustain the culture that enabled growth. That’s why it is crucial to plan for scaling up the culture as well as the business.

Corporate Culture

Culture is sustained patterns of behavior supported by an organization's shared experiences, values, and beliefs. Culture can drive results if aligned with an organization’s business strategy. It can also inhibit growth and undermine attempts to change.

When a company is made up of a few employees who work together every day, maintaining a corporate culture isn’t hard. As an organization grows, a conscious and cohesive plan needs to exist for how the corporate culture is going to be sustained. Before you work on scaling up production, define how your company will retain the culture that helped it grow.

If you don’t, you may find yourself in a position similar to Webasto. Webasto is the American subsidiary of the German-owned Webasto Group. At the beginning of the 21st century, the company was floundering. When the financial crisis of 2008 hit, they were ill-prepared. There were layoffs, management became a revolving door, and fear was in the air. Even when business picked up, employees were still angry, and the culture was toxic. Webasto began a turnaround in 2014 fueled by a focus on culture, engagement, training, and development. But the inability to maintain a positive culture set the company back at least ten years.

People

Part of scaling up means hiring more people. The problem is finding the right talent. According to McKinsey, high performing employees are 400% more productive than the average employee. When the roles become more complex, the productivity jumps to 800%. Steve Jobs expressed a similar sentiment, "A small team of A+ players can run circles around a giant team of B and C players." That’s why it is essential to set high standards for your recruits.

When scaling up, take the caliber of your employees into account. If unprepared for growth, companies tend to hire fast and compromise standards. If you hire the right people from the beginning, they will help carry the standards and culture forward.

Structure

Is your company structured to grow? Not just in capacity, but in leadership. The one or two people who were responsible for all decisions can no longer keep up. They are becoming a bottleneck and impeding growth. If the company has not been developing employees to take on leadership roles, how will those positions be filled?

A comprehensive training program is crucial if a company is to scale up its staffing needs successfully. Organizations with a robust onboarding process improve new hire retention by 82 percent and productivity by over 70 percent. If employees stay, the potential pool for managerial positions increases. Implementing a quality managerial training program ensures a qualified supply of leaders. A successful company not only has skilled leaders, but also employees who are a part of the corporate culture that needs to scale up as well.

For example, DeVry Education Group onboards upward of 120 new employees every month in various institutions around the world. It uses technology to automate parts of the process, but the overall onboarding program takes one year to complete. A far cry from the industry average of one week. Pixar is another organization that develops its managers through in-house training programs. Its program helps individuals develop the soft skills of empathy and active listening, so they are better prepared to lead.

Technology

In today’s market, no successful scaling happens without technology. It is also the growth area where a company needs to evaluate its plan for scaling up carefully.

  • How fast can or should a company grow?
  • How much technical debt should a company accrue?

Many companies operate on the assumption that a business should grow as fast as humanly possible. But is that the best option? How fast a company scales up should depend on how well the company has prepared its culture, people, and structure to handle the growth. If those foundational pieces are not in place, a company jeopardizes its growth. Companies often forget that the intangibles of an organization have to scale as well as the tangibles if they are going to scale successfully.

Most companies tend to put off technology upgrades. As long as the current equipment is working or the software is functioning, why spend the time and money on something else? Eventually, the failure to maintain or upgrade technology creates a debt that has to be paid. A company cannot scale up with out-of-date technology that cannot support its business demands. And by the way - your competitors have made the investment earlier on and are now ahead of you in the game.

At the same time, organizations tend to overspend on technology when they do decide to upgrade. Instead of accruing technology debt and then rushing to erase it, businesses need to pay the debt in meaningful increments as they scale.

Financing

Scaling up costs money. Finding the resources to finance growth isn't just about finding the right lender or investor. It also involves day-to-day operational decisions, such as:

  • Should a company continue to use a third-party supplier?
  • Should an organization consider bringing its IT in-house?
  • Is it time to let employees work remotely?
  • How much additional office space is needed?

Financial decisions need to align a company’s financial strategy with its growth plan. Would a slight change in the growth rate mean sales revenue could cover the cost of added personnel? Or, does accelerating growth offset the costs of external financing?

Scaling

Scaling up requires planning. But that planning is more than the traditional:

  • Find funding
  • Secure sales
  • Invest in technology
  • Determine staffing

Successful scaling requires a plan that ensures that a company's culture scales too. In a rush to expand, many organizations overlook the factors that inspired the growth. Only when companies begin to struggle do they realize that their cultures have changed.

Gutenberg Technology understands the importance of a knowledge-based culture that can scale up to match an organization's growth. Need help regaining control of the scaling curve?

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