Managing business growth - identifying, anticipating and solving growth pains

The state and development of our national economy largely depend on the growth and success of the Finnish business sector. Smaller companies also set expectations for themselves, both related to producing economic growth and renewing the economy. From time to time, we hear on financial news that a successful and growing company has come across unexpected problems and even serious crises as a result of excessively rapid and poorly managed growth.

Growth changes the company and the people working in it. As the company grows, its business becomes more complex. In addition to positive impacts, this also results in challenges and growth pains which must be identified, anticipated and managed in order to safeguard the company's vitality and growth. The company’s growth beyond its existing infrastructure, or resources and systems, is one manifestation of growth pains. In order to support its larger and more complex operations, the company must develop and upgrade its systems, processes and structures. Consequently, the key task of corporate management is to manage the growth. When growth is controlled, the risks it creates can be avoided and overcome. This enables the company to remain agile and evolve, and the growth can continue instead of withering.

Companies’ growth pains may also result from failed deployment of new systems and problems in personnel or financial management. Especially at a time of rapid growth, continuous rush and lack of organisation may lead to a failure to monitor costs, which means that the growth in sales is not translated as better profits. In addition, entrepreneurs are not always sufficiently prepared for the changes needed in the management of a growing company. Growth requires investments in such areas as management, competence development, acquisition of resources and funding. In favourable conditions, companies may be successful even if growth is managed poorly, but this also means that they waste opportunities to grow while they struggle with operative problems.

Managing growth is particularly important for companies on a growth track and those seeking growth. In fear of the chaos and risks resulting from rapid growth, the entrepreneur may even step on the brakes, despite the fact that the company has all prerequisites for growing. Consequently, the risk of unmanaged growth may be one of the reasons why the entrepreneur does not seek growth – and this can be an obstacle that stops the company from growing. In this sense, too, competence in growth management is necessary, as we do need growth-seeking companies to maintain the welfare society.

Competence and viewpoints related to growth management can also be useful for micro-entrepreneurs, not only in managing the company but also in anticipating future challenges to growth and preparing for them. In micro-enterprises, the intensity of relative growth is seen in concrete terms: when a company run by a sole trader or a part-time entrepreneur grows into a micro-enterprise employing nine people, it has gone through a number of critical stages of growth and challenges, including becoming an employer. Micro-enterprises tend to have a lower risk bearing capacity than larger companies. And this problem is not made any easier by the fact that in general, small companies pay less attention to risks and growth management than their larger counterparts.

The University of Oulu Kerttu Saalasti Institute, which is based in Nivala, has engaged in both empirical and theoretical research on companies’ growth management for a decade. Research evidence on growth management in a company is shared with entrepreneurs and society, for example at events organised by the Microentrepreneurship Centre of Excellence MicroENTRE and through Open University studies.

Author:

Martti Saarela, Development Manager, Microentrepreneurship Centre of Excellence MicroENTRE

This blog was originally published in the newspaper Keskipohjanmaa on 25 April 2021 as part of an article series by the staff at University of Oulu Kerttu Saalasti Institute.