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Success Secrets | Managing size? Focus on growth

Success Secrets | Managing size? Focus on growth
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First Published: Mon, Mar 24 2008. 06 33 AM IST

Updated: Sun, May 25 2008. 05 49 PM IST
We're a small software company—250 people—with a growing problem. After 20 years, some of our long-term employees, though they work hard and hold important client and application knowledge, can't seem to handle the increased complexity of our business and are getting expensive compared with what they’re producing. We don’t want to counsel them out, but I sense we're investing more in coaching them than is warranted. What's the right way to handle this?
—Name withheld, California
You say you have a growing problem; we’d say you have a growth problem. Aside from the layoffs you are trying to avoid, and stepping up the intensity of the coaching that doesn’t seem to be working particularly well, a rapid and meaningful expansion of your business is the only solution to the painfully common—and precarious—situation you face.
Indeed, if you don’t start growing soon, you and your old-timers could end up going down with the ship together. Not to sound alarmed—but we are, in your case. Countless perfectly healthy companies of every type and size, comfortably sailing along for years or decades or even more, have been sunk by the “enemy” you now face: It is a very natural inclination to try to manage away a competitiveness problem with a tweak here and a tweak there, a cost-cutting programme here, an efficiency project there.
The American automotive and telecom industries in the 1980s are perfect examples. They tried every typical management tool, device and process. Little worked. And that’s because managing your size is not the solution to mounting competitive pressure. Growth is. It is the magic elixir that cures almost every business ill. No other kind of fix comes close to its transformative power.
Think about it. Right now, you can try to increase the capabilities of your long-time employees, but that process is costly, time-consuming and seems to have reaped little benefit so far.
You could also let your long-time employees go humanely, with generous exit packages and extended out-placement counselling.
But, even with their relatively low productivity, the expensive people in your ranks appear to have valuable, and perhaps even irreplaceable, client and application knowledge. When they walk, who knows what business would walk with them?
Which leaves just one option, getting bigger in order to generate new revenues to support your original team and benefit from their skills and contributions to your culture. Now, your approach to growth can be organic, expanding your product and service offerings and the markets in which you operate. But don’t take “organic” to mean evolutionary. You’re going to have to take some real risks right now, moving faster and farther afield from your comfort zone than you might initially like. Better yet, don’t dismiss a bolder move, buying your growth. Small, private companies such as yours are often reluctant to jump into the acquisition game.
But, with your tight-knit company’s shared culture and limited product line, you’re perfectly positioned to buy another small company and complete a speedy integration.
The current economic situation may also work in your favour, as many small and mid-sized companies facing slower growth could be more receptive than usual to an interested buyer. We certainly don’t mean to suggest that your problem is easy. It’s tough, and its solution takes the courage to change.
But, if you focus on growing out of your problem instead of managing your size, there’s a strong chance of a very happy ending. Not just for you, but for your people, old and new.
As companies go more global, do you still think it is possible to give candid performance appraisals and rank employee in cultures where such practices seem to cause undesirable reactions?
—J. Jones, Minneapolis
It’s all a matter of throttle.
Some foreign cultures, particularly those in Asia, seem to, well, freak out when American managers arrive and start practising differentiation, especially the ranking of employees into performance categories, such as the top 20%, middle 70 and bottom 10.
Then again, some foreign cultures, also in Asia, have welcomed the practice, enthusiastically. Indeed, we’ve seen companies in Chicago and Atlanta resist differentiation just as often as we’ve seen companies in China and Europe embrace it.
Our conclusion: Differentiation works everywhere when managers introduce it with clarity, communicate its benefits and practise it with fairness and consistency. Sure, some cultures have deep traditions of politeness that require differentiation be throttled in at a slower pace.
But, ultimately, there is no culture in the world in which people don’t long to know where they stand at work. People are people everywhere.When it comes to accepting change, only their speed limits differ.
©2008/BY NYT syndicate
Write to Jack & Suzy
Jack and Suzy are eager to hear about your career dilemmas and challenges at work, and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, Winning Campaign readers can email them questions at winning@livemint.com. Please include your name, occupation and city. Only select questions will be answered.
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First Published: Mon, Mar 24 2008. 06 33 AM IST