Examining Organizational Growth: Challenges When Crossing the Chasm

chasm noun

\ ˈka-zəm  \

1: a deep cleft in the surface of a planet (such as the earth)

2: a marked division, separation, or difference

In 2011, I joined a healthcare company experiencing rapid growth. When I began, we serviced three major Ohio markets, had an annual revenue of around $25 million, and employed over 800 employees. Stagnation and status quo was not an option. Our goal was growth, and grow we did! It was fun. It was challenging. It was maddening at times. Within four years, we doubled in revenue size, expanded into new markets, and employed close to 2,000 employees. During this time, we had to make a seismic leap over a giant “chasm” as we transitioned from being a small business into a corporation. To better understand the terms “small business” and “corporation,” check out my previous blog post entitled "Understanding Organizational Growth: Business Strata.”

Chasms are the challenges organizations face when they move from one business stratum to the next. Moving from a “Small Business” to a “Corporation” ushers in many challenges. These challenges range from who the organization is (culture), what it does and how it does it (operations), how it stays solvent (finance), who does the work (people), what it uses maximize efficiency/effectiveness (infrastructure), and how it stays legally sound (governance/risk management/compliance). 

Some organization will not "cross the chasm" successfully due to giving up or running out of resources. Keep in mind, all businesses face difficult challenges at any stratum size (see “Understanding Organizational Growth: Business Strata”). However, growth necessitates change and change ushers in new challenges. 

Here are a few challenges organizations must manage well to successfully “cross the chasm”:

Cultural Challenges

• Staying true to the organization’s purposes (mission, vision, and values)—The “anchors,” which holds the organization in place, often become mere posters or email tag lines. Keeping these “alive” as key decision-making tools becomes harder and harder when they are not embedded and embraced within every process, practice, and organizational norm.
• Replicating cultural norms in new markets—Each market has its own unique flavor and flare. Keeping an exact culture amongst all of them impossible. Striving for a common culture with unique subcultures is possible. Doing this well, though, requires coordination and intentional “cultural architecting.”
• Combining cultures due to acquisitions and mergers—When organizations combine, there is a clash of cultures. Managing this takes time, intentionality, and crucial conversations.

Operational Challenges

• Process confusion—More complexities require new processes. Without clarity, training, and reinforcement, some people may use outdated processes while other parts of the organization use new ones. Also, it is easy for some people and teams to “add-on” their own versions of processes, which create issues for other teams/people.
• Keeping up with demand—When a product is wanted, some organizations struggle to hire enough qualified people and/or build/acquire the necessary infrastructure to meet demand.
• Missed opportunities—When demand is not met, customers turn to other companies and the potential to lose them as future customers is real.
• Keeping up with the market—As business conditions change, organizations must be able to react accordingly. Without staying in tune with market demands, operational efforts can become obsolete. 

Financial Challenges

• Cash flow—A wise person once said, “Revenue is vanity, profit is sanity, but cash is king.” Growing businesses must find a way to manage its cash flow. Without reigning in costs and collecting on invoices, organizations can quickly run out of money. When this happens, payroll demands may not be met and bills may not be paid. This will close the doors of an organization quickly.

People Challenges

• Hiring specialists to replace generalists—As organizations grow, they need people with specialized skills. The skills gap may be wide in several key positions.
• Finding top talent—Growing companies need great people! Recruiting becomes more and more of a challenge when trying fill open positions.
• Communication breakdowns—Organizational leaders may struggle to deliver a common message to all teams. Decisions made in leadership meetings can become doomed to competing games of “telephone” when improperly cascaded to various teams. When this happens, a lack of continuity can dislodge great plans with disjointed, uncoordinated, and confusing practices.
• Increased turnover—Employees leave for several reasons including a lack of clear communication, poor relationships with managers, losing that “family feel” people once had at the organization, and being passed over by an “outsider” for a job.

Infrastructure Challenges

• Keeping up with necessary infrastructure needs—Without the right-sized office space/setup, technology, and equipment, inefficiency surfaces. As inefficiencies mount, meeting customer demands becomes more and more challenging resulting in decreased revenue and opportunities to invest for future growth.
• Increased cybersecurity risks/attacks—The bigger an organization gets, the more attractive a target it becomes. Cybercriminals are on the lookout for unsuspecting or ill-prepared targets.

Governance, Risk, and Compliance Challenges

• Inconsistent organizational governance—Without a defined and followed management approach throughout the organization, critical management information fails to reach the leadership team, accurate and timely decision-making does not move throughout the entire organization, and the proper controls are not enforced to realize organizational strategies.
• Failing to proactively manage risks—When processes do not exist to identify, analyze, and respond to risks (e.g.—safety), risks can derail the realization of the core business objectives.
• Being out of compliance with laws, regulations, contracts—Being out of compliance adds unnecessary distractions. These distractions take time, money, and focus away from what the organization wants to accomplish.
• Lawsuits—Without specialists, it is easier to overlook key employment laws, so there are growing chances of facing litigation.
• Governmental investigations—With more people, there are more opportunities for people to file complaints with various governmental agencies for reasons such as discrimination, pay, and occupational/safety issues.

Is your head spinning? Growth is difficult; therefore, few people realize success when growing a business. Challenging, yes, BUT it is rewarding! Many business owners and leaders, who succeed in crossing these chasms do more than just bring in more revenue. No! They create jobs, help people realize dreams, add value to the community, and solve problems.