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The Risks of Business Growth without Adequate Control

It is common to find people in business circles who believe all business growth is good and that businesses either grow or die. However, nothing can be further from the truth.

Businesses do need to continuously innovate and either they improvise or they die, but they may continue for centuries without perceivable expansion or business growth. On the other hand, there are plenty of real life stories in the market of businesses that grew to become too big to survive, and went bankrupt.

Many companies entirely neglect to conduct risk assessments about business growth strategies, and are happy only to have strategies which support business growth. Professor Edward D. Hess made the point in the 2010 Darden Business Publishing Technical Note while emphasizing "Why Everything You Know About Growth Is Probably Wrong."

Hess points out with illustrations that growth can damage a business, it can stress people, processes, cultures, customer value propositions, and business controls by propelling a business into a competitive space where it has to compete, without adequate preparation, against much more powerful competitors than it ever planned to face.

A realistic view of business growth

In his book, Grow to Greatness: Smart Growth for Entrepreneurial Businesses (Stanford, CA: Stanford Business Books, 2012), Hess stresses that if business growth is not properly managed then it can undermine the core strengths of a business. To have a realistic view of growth, it is necessary to understand this fact, and that whether business growth is good or bad for a business depends upon many factors including people, processes and timing.

Businesses, just like individuals and biological organisms have limited abilities to change. Business growth involves the people who run businesses and people make mistakes and have misunderstandings. Proper and healthy business growth requires the right leadership and right processes. It also needs the right environment both internal and external to the company.

Growth can suffocate a business just as too much food or drink can make a person sick. Without appropriate people, processes and controls in place, unplanned business growth can be messy and make businesses stumble or fail.

To realistically understand business growth, businesses must accept that business growth creates a separate category of business risks that need to be managed proactively.

Whether a business should be allowed to grow at all or not, should be a strategic business decision, and not a response to a half-truth like "either you grow or you die." An assumption that has little concrete evidence.

Before engaging in opportunities of growth, businesses must always justify the rationale for growth, the process of growth, the amount of growth, the speed of growth, the risks of business growth, and the benefits of business growth. Without adequately considering all angles, and without having the needed people, processes and controls in place, business growth can choke a business instead of helping it.