Tuesday, July 15, 2008

Is Growth Good?

I am forced to ask this question quite a lot. Mainly because I am something of a `Growth Junkie' - but also lead a complicated organisation that is dealing with the complexities of growth.

The answer is that growth is mostly good but sometimes isn't. It depends on a few things.

So when is it good? Very simply, growth is good when you've got a good thing that works well in one place and has definite potential to go to other places. This week at Investment Committee we backed an organisation that has, to date, won a single contract to do excellent work in one location to go and do it in several more.

If they succeed it will take them to £30 million in five years. But they've cracked the biggest location of its kind in the country and, with the right team in place, their model can easily be transferred. Tens of thousands of people will be better off if they get this right. Good luck to em.

But, as I told them on the day, they are in for a hell of a time. Growth is not always just a simple matter of being ambitious and pressing the accelerator. Growth doesn't always result in the brilliant stuff you do in Place A being conjured up on the ground in Place B. Indeed it is often a pale imitation. If a model hasn't been properly understood, when you just can't bottle the `secret sauce' that makes something really work, it just won't translate. You need managers to replace entrepreneurs and a machine in place that really understands the business of putting new, high quality work on the ground. That's always the big challenge of replication.

Another is having the organisational capacity to grow. I think this is the biggest challenge in third sector organisations. Even when we have bottled the secret sauce we're often not great at growing models to scale.

When I talk about capacity I am mainly talking about financial resources. Undercapitalisation is probably the biggest single problem facing our organisations today. There are still too many funding and finance bodies with too little money. Ideally there would be a handful of bodies controlling significant pots but we're a long way from that yet.

But the other problem I believe is with third sector cultures that can, in themselves, be inimical to growth. People often just don't want to grow their organisations. This is often through fear of dilution or losing something of the essence of the organisation. It is frequently due to quite understandable fear of the strains this will put on people and systems.

And, occasionally, it is because of an over-sentimentalised view of being small, coupled often with dislike of `growth for growth's sake. This is something you just don't get in business. It drives me crazy and has been the bane of my life.

Indeed, `Empire-Builder' is a term of abuse in this sector, as though you are committing some offence by trying to grow and that the good people, those with real integrity keep it small and beautiful. This is proper bullshit - but you hear a lot of it in the sector.

So what are the answers for ambitious social entrepreneurs and third sector leaders? I would point to three things. Things I have learnt through not getting it right myself. The first is to be very realistic about the costs, risks and stains involved in growth. Don't deny them, under-price them or underestimate them. Growing is a painful, risky and costly business. Especially in our sector. Fly too close to the sun and, yes, you will fall.

Second, sell the vision to your top team. Insist that growth is happening but also acknowledge the people in your organisation who have to deliver it. They will often be the ones with the worries. It is tempting to shout these people down but your growth strategy will actually have a stronger chance if you hear people out. This doesn't mean conceding to their worries, it just means taking due account of them because hidden in them, often, are some of the keys to success you will have forgotten about.

Third, make sure everyone right through the organisation understands why growth is happening and why it is good. For the average staff member, growth means disruption, change and more work than business-as-usual. While growing companies create opportunities, they also unsettle people. What isn't often explained is why the growth is necessary. And that standing still will, in all probability, result in a very negative set of changes further down the line.

`Permanent change' has been a fact-of-life for many sectors now for a long time. Its still early days in parts of the third sector. Only when we can get people to realise that the only alternative to Permanent Change is Rapid Decline will we be able to sell growth to our workforces.

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