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Managing Control at Different Growth Stages

As businesses grow, entrepreneurs must cope with changes in their business model and adapt their management style to changes in the organizational structure.

A good example of this is ‘control’ at the company. In the first stage, it is literally a ‘one-man show,’ i.e., Stage One companies are typified by an entrepreneur who launched the company to promote an idea, product or service. As such, he or she makes all important decisions personally and wants to be involved in every detail. In this role the structure is a ‘top-down,’ with most of the employees reporting directly to the entrepreneur.

As such, for these newly formed companies, there is usually less planning, and the result is a lot of ‘last minute’ action to make something happen. However, this same weakness ‘planning,’ becomes a strength when it comes to being dynamic and flexible in their decisions and actions.

In Stage Two businesses the company has grown, and the entrepreneur is replaced by functional managers, that is ‘Control’ has grown beyond one man. This transformation can be very difficult for some entrepreneurs, since they typically need to and should relinquish decision making responsibilities to these managers so that more work can get done faster.

Stage Three business are typically much larger in sales, personnel and products. Furthermore, they are in more than one type of industry and geographical area. This means that there are multiple divisions with multiple product lines and product mixes. To manage this type of organization, the company centralizes its authority over the other regions or divisions. The headquarters manages the operation using ‘performance’ or ‘results oriented goals.’

At this point, i.e., stage three, the strength of the organization is the amount of resources at its disposal yet allows for more ‘specialization’ in the different departments. At this point decision making responsibilities are assigned to the functional managers. However, it is on the opposite end of the spectrum to the entrepreneur (Stage One) when it comes to complexion and flexibility.

Below is a table showing the business stages and the opportunities at each stage.

Manufacturing and Supply Chain Services

The bottom line is that when entrepreneurs are successful and their companies grow, a business person must adapt their control to the organization. For some business leaders it can be very difficult to relinquish control, let alone even recognize when it may be time to change their method of control. But this can be a very important step to take when it is time if they wish to continue growing.

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