Growing for Growth's Sake
Let the buyer beware — especially if you're buying the myth that visible growth is an essential element of success.
By Anthony Noel
For the past eight months, we've been looking at mistakes managers make. Not small mistakes of little consequence, but the biggies. Those which, when made too often or sometimes even once without regard for their potential downsides, will not merely hurt an organization but might well destroy it.
Thus far, we've covered eight such "Fatal Mistakes" across four main operational areas of business: Communications, Costs, Capital Expenditures and Marketing. We've also discussed strategies for avoiding or correcting these errors. This month and for the next two, as we close out this series and the calendar year, we turn our attention to the fifth and final operational area: Overall Management Approach.
We've saved this area for last because doing so provides a great opportunity for further elaboration on (1) the connectedness of all five areas and (2) the ability that sensible, strong management offers for correcting flawed practices in any area before they prove fatal.
"General Management" is a term that often is heard but sometimes hard to quantify. In small companies especially, it can seem silly even to think about the existence of a "general" or overall management approach. After all, when there are just a few people on the payroll to begin with, how difficult can it be to make sure everyone's on the same page?
The difficulty might well surprise you. All that's needed to start that little company on the road to infirmity is a manager or owner who sends the wrong signals - or, what can be far worse, fails to send any signal at all. Let's take a specific example, one that also covers this month's Fatal Mistake: Growing for growth's sake.
In July, as we looked at the operational area of Capital Expenditures, we discussed the role big purchases play in a company's success or failure. We talked about the effects of pride versus prudence and explained how those terms, respectively, could be viewed as synonymous with "desire" and "need." Failure to make prudent, need-based capital purchases in favor of those based on pride and desire, we said, often proves to be a Fatal Mistake.
Now imagine how quickly a company will fail if desire or pride is the driving force not just in one area, but in all of them - and you'll begin to see the importance of adopting an Overall Management Approach that is more driven by prudence and need.
The sad truth is that many owners and managers have been sold on the notion that the outward trappings of "success," most notably those things which imply rapid growth, are engines that can help drive success. Too often they hear catch phrases like "image is everything" and take them as license to create an image that their billable work can't come close to supporting.
At its core, the problem is pretty simple: a failure to see the difference between "growth" and "success." They're two very different, unrelated things.
Just because a business is successful doesn't obligate it to grow. Similarly, just because it has grown doesn't mean it's safe to assume a business is successful.
Owners and managers who embrace the idea that growth is a signal of success are apt to grow their companies prematurely. So eager are they to ensconce their companies in the outward appearances they equate with success they disregard the very real dangers that result from overextending themselves and their companies.
Rather than learn, through careful analysis of the jobs they do, their most profitable and efficient capabilities and rather than market those services to a carefully targeted and qualified clientele, they get caught up in having "the latest." The latest equipment. The latest software. The newest truck. The newest tools. All of which, of course, happen to be the most expensive.
At this point, you may be thinking this is a re-hash of that earlier column on Capital Expenditures, but the point is larger than that. There are two other factors, two other misplaced beliefs that drive the kind of acquisitiveness just discussed, and they're even more dangerous and far-reaching.
The first factor beyond the "image is everything" affliction is one through which owners convince themselves to grow their companies based on the belief that once they do, work will find them. It just doesn't happen that way. Here again is a case where an Overall Management Approach — and a wrongheaded one at that — overtakes common sense.
Marketing, as discussed last month, is a practice that must be consistently undertaken. It's no coincidence that owners who lack a consistent marketing program are often the same ones with big shops loaded with great equipment but little work. It's not enough to have the capacity to produce work. You need the actual work to produce, and, contrary to what many marketing-phobic owners apparently believe, having a shop full of equipment doesn't mean you'll get it.
The other factor that often drives the premature growth mistake — and which can sink both business and personal finances in the blink of an eye — is ego.
Pick up the business section of any major newspaper any day of the week and you're sure to find at least one profile of a "successful businessperson." Such glowing reports of a person's triumphs and innovations can make one feel less than worthy if they are not enjoying similar success, especially if they've been in business for a couple of years or more. What such stories too often leave out are the years of struggle through which virtually every business owner must pass along the road to success.
So what do some do? They overextend themselves again to purchase rewards they've not yet earned. Rather than analyze their businesses in an effort to learn their most efficient path to success, they defer on that and opt to feed their egos; they spend money they don't have, opting to live in — and for — the moment. Which is humorous (in a twisted sort of way), when one considers that the whole point of growth is to help ensure long-term rather than momentary success and prosperity.
Being in business has definite rewards. But try to collect on them prematurely and you hurt yourself, your company and your employees. Going into business for yourself is one thing. Making it successful is another matter entirely.
Next month, we'll look more closely at key Overall Management Approaches that owners and managers of custom shops can institute to help achieve that success.
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