Introduction
Many entrepreneurs start their businesses looking for fast growth. They want to go from a one-person operation to a global presence in a matter of months. Unfortunately, this isn't how strong, stable companies are created. Scaling too quickly without the necessary governance to sustain and support that expansion can cause a multitude of problems. Governance is a term that encompasses the systems, rules, and people that guide how an enterprise operates.
Corporations that are well-run balance the excitement and momentum of growth with reliable governance, thereby allowing them to advance without sacrificing their stability.
Why Growth Alone Isn't Enough
Becoming a successful operation means evolving over a stretch of time. Gathering more clients, connecting with more partners, and generating more revenue are all part of building a thriving venture. Growth is critical for any flourishing establishment. But progressing too quickly comes with multiple consequences that only lead to a business's failure arriving sooner rather than later.
Poor Communication
As a startup's team grows, the methods, frequency, and clarity of communication need to grow with it. This takes time and careful coordination on the part of management when a business evolves gradually. But when growth outstrips the technological, social, and logistical infrastructure needed to support it, the business becomes inefficient and chaotic.
A team may work to quickly add staff to its roster in order to facilitate further growth. But without appropriate communication, this can also mean that recruiters and human resources employees may not vet new hires as thoroughly as they otherwise would, since the focus is on speed instead of quality (academic background, work history, etc.). The company then has to deal with a higher number of operational mistakes, increasing turnover rates due to employees feeling overwhelmed and undertrained, leading to higher labor costs overall.
When new systems are introduced, there may not be enough well-versed people on staff to educate others on how to properly use the system if instructions haven't been shared effectively. The team's inability to effectively use the new system leads to errors in internal documentation, interdepartmental messaging, and the timely delivery of products and services to clients and business partners.
Inadequate communication costs money, productivity, and time.
Lack of Direction
If the only concept driving a business is that it gets bigger, becoming an established, sustainable entity in the market will be nearly impossible. Without an understanding of target markets, niche clientele, competitors, and other factors, guiding the company in a specific direction becomes an uphill battle that could have easily been avoided. When the organization is growing too quickly to be monitored well, let alone managed appropriately, the enterprise becomes aimless.
Expanding into new markets haphazardly instead of studying and assessing those choices before acting on them can leave a business flailing in a niche they aren't prepared to be competitive in. For example, focusing on providing low-cost solutions to clients takes a different approach than focusing on providing high-speed solutions to clients. When a company hasn't agreed on a single path to take, the products and services they provide to clients suffer in quality.
These kinds of errors are the result of not having a cohesive, overarching mission to help direct the effort and funding that goes into keeping the business operational.
Financial Mistakes
Poor communication and lack of direction are just two characteristics of a dangerously dilating agency. But with these two issues comes a third problem as a consequence: costly financial errors. Miscommunication in the payroll department can result in staffers being paid too much or too little, either directly costing the business extra money or creating strife within the workforce due to underpayment of wages. Lack of direction in the business can mean spending on equipment, advertising, or staff related to entering a specific market, only to find that the business isn't the right fit for that part of the industry. Even smaller mistakes that can cost a few hundred to a few thousand dollars can add up over time if these failures to manage funds are repeated. In extreme cases, this instability can damage an agency's reputation as well. This can mean missing out on major contracts with potential business partners, losing potential clients, and not being considered a safe place for investors to put their capital.
In order to find success commercially, any business growth has to be paired with sufficient structure, or else the enterprise has a high risk of burning itself out and failing.
What Good Governance Looks Like in a Growing Company
Governance is exactly what provides a business with the support that it needs to grow at a healthy rate and maintain itself as it increases its footprint in the market. This is how a strong foundation for the company is created so that its upward mobility isn't compromised as it expands.
Clear, Open Communication
Governance relies on transparency and regular check-ins across departments. If the IT department needs to do a company-wide software update, management needs to know about that, just like the human resources team or the customer service staff does. When it's time to hire more employees, the workforce needs to be on the same page about what characteristics are most desired for each open role so that promoting and recruiting for open positions yields consistently solid candidates.
Oversight and Accountability
Through stronger communication among the team, businesses can enact effective internal oversight to ensure that all systems and departments are running as smoothly as possible. When something does fall short, the individuals or departments responsible for the deficiency can be tracked and held accountable. Through training and supervision, employees can become stronger in their roles, resulting in fewer mishaps in the future and gradually creating a well-honed workforce for the business. In the long run, a more effective workforce saves the company money and time.
Thoughtful Decisiveness
Effective governance creates a team that can make decisions by applying experience, wisdom, and clear direction as opposed to reactionary decision-making based on emotions like panic or desperation. This cohesiveness within a business keeps the firm growing, but in a way that is steady and reliable.
Finding the Balance Between Flexibility and Structure
While governance can be critical to the long-term health of the business, it can be taken to extremes as well. Support for growth should be provided without stifling the organization. Too much rigidity with policy too early on can lead to smothering the creativity and innovation that can help jumpstart healthy growth. On the other end of the spectrum, not having any form of structure leaves a company at risk of failure. The key is to find a balance that works for the business so that it is allowed to experiment and venture into new spaces without doing so irresponsibly.
In the early stages of development, a startup is still finding its footing. This means a perfect time for brainstorming and exploration in order to gain experience, make industry connections, and collect data. But to make sure the team doesn't go too far off the rails, lightweight systems and policies can serve as preliminary governance measures. This would include things like budgets, project tracking systems, and some experienced team members in management positions. Finding harmony between an entrepreneurial spirit and foundational stability is important.
The Payoff of Balancing Growth and Governance
Organizations that regulate themselves properly grow stronger and outlast their competitors. Steadily growing, healthy companies are better prepared for financial support from investors because they seem to be able to consistently generate revenue. They also expand at a pace that is reassuring because it's not so fast that it's sure to quickly fail, but it's not so slow that it would take an inordinate amount of time to turn a profit. Partners will see a sound collaboration that will support their own interests for decades to come instead of only a few months or a few years. Employees will view the company as a stable workplace that can provide them with job security and reliable opportunities for career advancement. Customers will come to connect the company with dependability and strength, making them more likely to trust, spend with, and recommend the business.
Well-governed businesses are also less likely to take as much damage during market turbulence, world crises, and errors made by leadership or employees. Appropriate governance increases the resilience of the business so that it can become a long-term leader in its industry instead of achieving small levels of short-term success and then shuttering.
Key Takeaways
The most intelligent businesses don't focus on chasing accelerated growth for its own sake. Savvy startups develop the company with solid, reliable systems and smart, flexible rules in place. Being too stringent with governance can stifle innovation and forward thinking. No governance at all makes for a dangerously chaotic venture. Balancing growth and governance allows entrepreneurs to scale their startup without losing control so that they can establish and nurture companies that can thrive for decades.
