Home Business Ops Growth That Shrinks

Growth That Shrinks

by Robert E. Hall

United State corporations lose half of their customers in five years, half of their employees in four years, and half of their investors in a matter of months Philip Kotler, Kotler on Marketing

Virtually every CEO is seeking growth.  The challenge is how to grow today in a way that does not undermine tomorrow’s growth?  As organizations grow larger and more complex, expertise deepens, more players and channels are involved in serving customers, and as processes become more bureaucratic – it takes greater attention and focus to sustain revenue-generating relationships.

Dr. Paul Uhlig, a nationally-known thoracic surgeon, recently lamented that challenge:  What do you think is the most frequent question we get from cardiac patients? His answer:  “Don’t you guys ever talk to each other?”  Dr. Uhlig has worked intently the last few years on improving the experience and medical outcomes of cardiac patients.  His particular focus is on daily rounds with doctors and other staff in meeting with patients.   He ticks off the challenges with the traditional processes:  medical staff uses language that is foreign and intimidating, the story keeps changing as an ever-increasing barrage of medical staff meet with the patient, and often the patient feels left-out in key decisions.  These factors affect patient outcomes and the financial viability of hospitals. Why?  As one hospital executive said, improving clinical quality without addressing patient satisfaction is not financially feasible.  Patient communication with doctors and staff is the number one determinant of patient satisfaction – so crucial to growing revenue streams.

Organization growth involves two paradoxical hurdles. The first  is the growth challenge of how to scale.  Can the business replicate its success as a larger entity?  Can it grow beyond the personality of its founder or other specialized talent, local geography and competition, and current production or deliver methods.  Nothing exposes cracks like growth.  For many companies growth is stifled by the lack of processes and infrastructure needed to scale-up and grow larger.

The second hurdle is in growing and scaling-up, can the business avoid acting big, distant and detached from key stakeholders.   Many of the requirements of scaling up – more bureaucracy, greater structure and rules, less flexibility, and more layers of management – strain employee and customer relationships.  The ability to flex quickly and to get things done is cherished both by employees and customers.  As organizations  grow larger, the risk is that relationships with both their employees and customers will weaken – and grow smaller.  The metrics of  diminished customer relationships include less loyalty, fewer referrals, less tolerance for problems, greater price sensitivity, shorter tenures, and less wallet share.   The metrics of lesser  employee relationships also adversely impact loyalty, referrals, tolerance for difficult problems, tenure and sensitivity to compensation issues.  Growing larger often sows the seeds for growing smaller.

Here’s the question:  How can organizations scale-up without starting to act large?  As I look across industries like healthcare, financial services, real estate and retailing, I see three key components.

First, they must embrace relationships with customers and employees as the most precious resource.  That means that every decision and action – financial, IT, marketing, people – must be designed to grow capacity for larger, longer and more productive relationships.  While that sounds like common sense, it is not always common practice.

Second it means designing and refining our processes such as customer management, marketing, manufacturing, production and recruiting to be relationally accretive.  Will it make employees and customers more loyal, committed, tenured, and valuable?  Too often the  processes of scaled-up companies are designed only for efficiency, quality and control – all important things.  However, if they are toxic for relationships – then the diseconomies of relationship destruction will overtake the economies of scale.

Third it means empowering local teams with the flexibility and accountability to tailor common processes.  A top real estate producer recently explained to me that the autonomy afforded local market teams drove their sustained success.  The trick: a common set of questions for each market but an expectation to customize local valued-added answers and actions.  Doing the same thing in every market ensures the wrong thing in over 50 percent of them.  Valued-added empowerment yields a big advantage:  stronger customer and employee commitment.  As Michael Porter of Harvard has famously said, ’A-level’ level commitment to a ‘B’ strategy beats ‘B-level’ commitment to an ‘A’ strategy.

Organizations that place retaining and growing the commitment of employees and customers as a top priority are planting seeds for future growth.    Healthy, productive relationships are a key differentiator between growing larger and growing smaller.

You may also like

Leave a Comment