You’re company is growing so fast you’re starting to imagine private jets and company junkets to the French Rivera. It’s hard even to conceive of a situation that could turn your rapidly growing company into a smoldering pile of ash. The very idea that success might kill your company seems preposterous. Besides, the whole idea of success destroying a company is oxymoronic. Perhaps; except for one thing, unbridled and unmanaged “success” has destroyed more companies than a CEO with a meth problem and million-dollar signature authority.
Here are three ways that traditional measures of success can, in fact, torpedo a company:
Growth can send your company up in flames in two ways: unmanaged growth and dissolution. Unmanaged growth is where the company executives see growth for growth’s sake as not just a good thing, but the only thing. Such buffoons believe that the goal of growth is growth, in and of itself.
You typically see this kind of blow up in companies whose growth strategies are “growth by acquisition.” Growth by acquisition is the practice of buying up smaller companies — and thus acquiring their offices, customers, and revenue — all the time growing, at least on paper. The problem with unmanaged growth is that when you gobble up a smaller firm you also inherit its problems. Even the best due diligence won’t tell you when Al in accounting tends to get a bit over amorous after his third drink at the office holiday party, for example. Add to that the complexities of managing multiple offices, completely different cash flow needs, and having multiple corporate subcultures and you effectively have something like a pyramid scheme. To keep it going, you can only continue building the company, until it collapses in on itself.
The solution is to know when to restructure your company from true entrepreneurship to a professionally managed company. Unfortunately, the transition from entrepreneurial to professionally managed is often painful, so painful in fact, that many organizations wait until the damage to the company is beyond repair. I’ve seen too many companies hit the big time, only to rapidly downsize, running from success like a dog with its tail between its legs.
The second problem with growth is dissolution of your talent. Some of your most loyal customers become fickle and projects that used to get sole-sourced now get put out for bid and you find yourself in the unenviable position of being the third company bid fluffer in the purchasing process. Dissolution works like this, your projects get bigger and bigger, but like any entrepreneur you don’t want to admit that you’re stretched too thin. Project deadlines get blown, the quality of the work — once heralded as a hallmark of your industry — becomes mediocre pabulum for which fewer and fewer companies are prepared to pay, and you spend more time and energy cleaning up messes and repairing relationships than you do focused on your core business.
2. Brain drain.
As you are more and more successful, your rising stars gain confidence, key experience, and may even be responsible of part or all of your key innovations. They are more marketable, that is. They are suddenly worth more money, sometimes more money than you can afford, a lot more. You can try non-compete and non-disclosure agreements but putting golden handcuffs on your brightest and best just breeds resentment and a desire to keep their best ideas to themselves. You have created what one of my colleagues used to call a “velvet sweatshop.”
You may be tempted to throw money and promotions at the most talented, but corporate org charts look like pyramids for a reason: there are only so many chairs in the board room. Eventually you will have to let talented people pursue their own destinies. The result of all of this is dissolution. Your company doesn’t have as many talented people as it did when it was smaller (and what’s worse your competition now has the talented people you used to have). The demands of a larger company tend to result in a less valuable product or service: It’s like pouring hot water in the soup, sure you have more soup but it sure doesn’t taste as good.
3. Aggressive competition.
Nothing breeds enemies like success. Disgruntled employees who leave the company invariably show up working for the competition or, even worse, for key customers. Never under estimate the motivation of an ex-employee to torture and torment you. Consider this: the disgruntled employee knows your strategies and weaknesses, and which employees are worth luring away.
I once worked at a company that deliberately tolerated ineptitude in some long-time employees. The company always tried to “fly underneath the radar” because it feared an aggressive competitor would destroy the business if it knew how much money the company was making. Eventually it stumbled headlong into ruination because it kept slugs on the payroll, essentially so they wouldn’t help the competition by revealing secrets and points of weakness.