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"Entrepreneurship as a state of mind is an essential component of an organization's culture and must be preserved. An organization must always continue to be "entrepreneurial" in the sense of seeking out new opportunities and innovating..." Growing Pains: Transitioning from an Entrepreneurship to a Professionally Managed Firm Eric G. Flamholtz and Yvonne Randle (1)

The spirit of entrepreneurship is what fuels excitement, innovation, and the desire to conquer new opportunities. But as Flamholtz and Randle point out, at some point, entrepreneurship as a business model is no longer sufficient. Then, "the nature of the organization must change." Their research, which has been the foundation of my work for years, details this process and provides essential tools for organizations experiencing growing pains.

The 7 Phases of Growth: 1 and 4-7 Need Not Apply

Flamholtz and Randle have identified seven phases, which are:

  1. New Venture.
  2. Expansion.
  3. Professionalism.
  4. Consolidation.
  5. Diversification.
  6. Integration.
  7. Decline and Revitalization.

My work focuses on companies in phase two and three - so, if your organization is there, you're in the right place! In fact, this is where the vast majority of my Vistage members find themselves. The goal is to help these "entrepreneurial" companies expand and professionalize. Why them? This is the time at which entrepreneurs find themselves stretched both in terms of time and capabilities.

New ventures are often infused with startup and investment capital. By the consolidation phase, organizations may be $100 million+ entities. They have the resources to hire the best executives, the best managers, and consultants to help them with the challenges of these latter phases. The companies suffering from the pangs of expansion and professionalism have vastly different needs. They are dealing with:

  • Limited resources. As the organization grows, complexity increases. These companies, though, are most often underfunded; they can't afford to bring in high-level people to take over critical functions (e.g. a CFO or a COO).
  • Overwhelmed operations and systems. Day-to-day systems can't keep up with the growing needs of these companies. They may have informal structures with loosely defined and/or overlapping responsibilities. Until now, they've depended largely on ad hoc systems.
  • The need for key players to change their skills and capabilities. Before, they may have taken a hands-on approach, doing or overseeing everything. The organization's growth has made their needs more complex, and they requires people who are skilled in administration, planning, organization, motivation, leadership, and control.

These stages are a continual balancing act. As Flumholtz and Randle remind readers, organizations should never lose their entrepreneurial spirit or mindset. That's the "spark" that makes them unique. On the other hand, they have to start to develop the infrastructure and management systems required to facilitate future growth.

Flamholtz and Randle pack a lot of useful and actionable insights into this tome - which can be just as overwhelming as dealing with growing pains! Companies in these phases will benefit from seeking help, whether through Vistage or professional consultancy and coaching, so they can navigate these phases successfully.


Larry Hart

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