Pushing Past the Growth Plateau

It's been five months since my last blog post. I'd like to say that I've been on holiday skiing in the Sierras, but in fact, I've been working overtime to clear away the obstacles keeping my business plateaued and hindering growth. Those of you who have grown businesses know what I mean. This growth plateau results when a successfully growing business outstrips the processes and people needed to service it's existing customers. It's more than just a simple capacity problem; pushing past a growth plateau usually requires a phase change in a company's processes and/or people.

Some of the signs that you've reached a growth plateau:

• You and your team have stopped trying to do anything not critical and urgent. All tasks not critical and urgent, including many which are investments in the future have been sidelined (e.g. like networking and blogging!)  
• You and your team are working over capacity, both in terms of time and energy, for weeks at a stretch. You are in 100% reaction mode; you no longer have time to think.  
• Your cash resources are inadequate to hire more people. But to bring in more cash,you have to add customers, which you can't do because you don't have the people. Catch-22.  
• Worse, if you are able to add people, it actually makes the resource crunch worse because of increased coordination, training, and management time. This is a clear sign you've overloaded your systems.  
• Errors start to rise as your existing systems can no longer cope with the volume of work and the bandwidth of your people to compensate for process deficiencies disappears.

When this happens, you have three options (and maybe only two):

• Stop growing - In other words, stop accepting new business. In our case we put a 60-day moratorium on accepting new clients; not doing so would have compromised service to existing ones. For a service business like ours, this is the kiss of death.
• Hire more people - But this requires money. If the money is not available from cash from operations, then this means external financing, either debt or equity. In our case, debt financing was not readily available and we are committed to self-financed growth. This means no outside investor money.
• Rework processes - This often means changing the fundamental nature of the workflow to strip out unnecessary steps. In our case, this was where we spent most of our efforts because only by doing this were we able to free up the people time needed to change systems and increase work capacity without increasing costs.

A BIG Caveat
I mentioned that you might only have two options available. If you are in what Tony Seba calls a "Winners Takes All" market - characteristic of many high technology and web based businesses - "stop growing" may not be a wise option. If you stop accepting new customers, your competition is likely to capture this market share, possibly permanently if the switching costs are high. In this case, you must hire and scale processes ahead of the growth, which almost always means outside investor money.

In our case, being in professional services, this is not the nature of the business, and provided that we can keep up with the demands of our clients, we are able to pursue a controlled growth strategy.

Pushing Past the Plateau
In order to push past the plateau and break the resource barrier, you need ADD. No, I don't mean Attention Deficit Order (which is how your business will act if you don't take these steps).  In this case, ADD stands for Automate, Diversify, and Delegate.

• Automate - Look at your existing processes and strip out every marginal activity you can. Figure put how to break complex steps into simpler ones. Then automate the simple ones. If you can get software or a SaaS service for this, great. But at the most basic level, automate simply means being able to script a process with enough specificity that a lesser trained person can follow the recipe and get the results. With this in place, you should be able to free up existing personnel time and cost to take the next step which is...
• Diversify - In the beginning, startips by necessity need "T-shaped" people. These are specialists that can act as generalists too. However, the generalist tasks may not be handled particularly well. With a simplified process, you should be able to access a broader and more efficient (i.e. cheaper) pool of specialists to handle the routine. Pull out your "T-shaped" people and redeploy them towards the new and complex tasks that will fuel the next round of growth.
• Delegate - Ideally you want to delegate tasks away from your most "expensive" people to the "cheapest" specialists you can. Keep in mind "cheap" and "expensive" does not just refer to salary but rather the whole job. Using a $100/hour person who takes 2 hours to do a job is cheaper than using a $25/hour person who takes 5 hours. And don't forget opportunity cost; take a look at who your bottlenecks are. Chances are there is a high opportunity cost that can be eliminated in unburdening these people.

Learning to push past growth plateaus is a critical skill that must be mastered by anyone seeking to grow their business. The fact is growing business will experience multiple growth plateaus. The ones that can reinvent themselves thrive. The ones that can't stagnate or die.

My business is still making the push off the plateau. I'll be back with another post; I just can't tell you when it might be.

Free Small Business Health Care Seminar

For those of you who are in Silicon Valley, you may be interested in this free seminar being sponsored by the West Valley Enterpreneurship Foundation and West Valley College this week.  The topic is health insurance for small business and the impact of health care reform (as it currently stands).

Health Care for Small Business - Navigating Federal Reform

Thursday, October 27, 2011 @ 6:00pm

West Valley College, Fox Center, Room 120

1400 Fruitvale Ave., Saratoga CA (map)

Presenters:  Dan Ellis & Gina Jarin, IPB Insurance

Link to the Meetup site with information is here.

Picking People

One of the most challenging aspects of running any business is hiring the right people.  In my 20+ year career, I've probably made every mistake in the book.  In the process, I've managed to develop some hiring guidelines that have, at least for me, eliminated the worst of the errors and improved the likelihood of finding the right person for the job.  But even so, there remains a strong element of subjectivity.

Now the first step of any hiring process is to have a good job description so that you know whom you're looking for and what you want them to do for you.  But assuming that you have this, here's what I look for when I hire, what I call the 3A's.

• Attitude - First and foremost, I look for the right attitude.  Right attitude means someone who actually wants the job that I have, is willing to learn the way it's done in your company, is willing to do the dirty work as well as the glamorous stuff that every job entails, and thinks TEAM not just about themselves.  I also look for people who enjoy what they do and aren't in it just for the money.  I still remember one interview for a manufacturing engineer during the height of the dot-com boom.  This one guy walks in the door, leans back in his chair and the first words out of his mouth after hello are "so what's the stock option plan look like?"  Needless to say, he didn't get the job.
• Accomplishment - Next I look for demonstrated proof of the skills listed on the resume as well as proof that the person has been successful applying them.  This is where reference and background checks are important.  M.S. degree in nuclear physics from M.I.T.?  Easy enough to check.  An innovator in graphic design?  A little harder, but let me see the portfolio.  Strong project management skills?  A lot harder but possible to probe by asking specifics.  For example, how do they track projects?  What are the pros/cons of using a waterfall vs. Agile methodology for project management?  How do you handle team members who are chronically late?
• Aptitude - Thirdly, I try to ascertain fit.  This is the soft, squishy personality stuff.  Not only do you want someone who is going to work well within your culture, you also want someone who's natural bent plays to the requirements of the job.  Some key fit parameters:
• Process vs. "product" orientation - see my blog post on this one
• Communication style:  written vs. graphical vs. verbal
• Communication style:  concrete vs. abstract/conceptual
• Detail orientation vs. big picture
• Extrovert vs. introvert
• Collaborative vs. individual problem solving
• Work style:  multi-tasking vs. serial tasking
• Integrated vs. discrete orientation toward work/life balance

(I've run into some absurd situations caused by poor fit.  I still recall one ridiculous meeting between sales and accounting at one company I was at over expense report reimbursements.  On the one hand you've got a bunch of product oriented, verbal, concrete thinking, extroverts continually ducking out of the meeting to take phone calls trying to convince a group of process oriented, "put it in writing", conceptual detail people who had allotted exactly 30 minutes to this meeting that they should be able to be reimbursed just by turning over a stack of credit card receipts....you get the picture.)

Finally, there is one thing I look at beyond the 3A's:  Character. Is this a person that will tell me truth? How certain am I that they won't lie, cheat, or steal?  Does this person have the courage of their convictions?  Do they have the ability to admit to mistakes?  In short, can I trust this person to do the right thing by me?  For me, this is where intuition comes in.  If the answer is no, I don't care how stellar they are on the 3A's, don't hire.  Keep searching.