Every successful organization goes through predictable stages of growth, regardless of industry, profit, or non-profit. This is because at the foundation an organization is made up of people. The more people, the more complexity.

Stages of growth, therefore, are based on the number of people. Each stage entails a new focus, leadership style, and predictable challenges.

The Stages of Growth Strategic Framework is focused on four themes.

• People           
• Processes      
• Strategy        
• Profitability

The following are Stages 1 – 5.

Stage 1:  

1-10 people

The focus of this stage is profitability. According to the IRS, an organization that is not profitable for at least three of its five years in business is a Hobby.

In this stage, the owner/founder is typically the Visionary and the direct supervisor of all employees. Everyone chips in to make things happen.

The owner’s/founder’s ability to do is critical at this stage.

Systems and controls are minimal to nonexistent.

Primary challenges at Stage 1 are:

• Improving Sales
• Adequate Cash Flow
• Destabilized by Chaos
• Slow Product/Services Development
• Slow Getting Product/Services to Market
• Limited Capital to Grow

 

Stage 2

11-19 people

The focus of Stage 2 continues to be profitability. There is a need for additional quality employees to handle the increase in the volume of sales. Defining processes start to become more important to ensure a proper workflow to bring the products/services to market.

In Stage 2, like Stage 1, the owner/founder is still the Visionary but there is now a need to coach others (particularly the new employees) toward the vision. The owner/founder is still the direct supervisor of all employees.

The owner’s/founder’s ability to do continues to be critical but now includes others.

Systems and controls are minimal.

The primary challenges at Stage 2 are:

• Improving Sales
• Adequate Cash Flow
• Hiring Quality People
• Leadership/Staff Gap
• Limited Capital to Grow

Stage 3

20-34 people

The focus of Stage 3 is people. The organization continues to grow and with that complexity. 

At this point, the owner/founder is unable to effectively manage all employees directly. The need to delegate becomes critical. The owner’s/founder’s role shifts from a dominant style (making all decisions) to facilitative and empowering the management team under them.

The owner’s/founder’s ability to “do” becomes less important, and coaching/facilitating becomes the leadership style needed at this stage. Now it becomes incumbent on the managers to manage the doing. Systems and controls continue to be minimal.

The primary challenges at Stage 3 are:

• Staff Buy-In
• Leadership/Staff Gap
• Weak Profit Design
• Core Values Unclear
• Culture/Resistant to Change

Stage 4

35-57 people

The focus of Stage 4 is processes. At this stage, the next level of management is needed to handle the volume of work. The level under the Owner/Founder/CEO is fully responsible for their departments. They are strategic leaders who lead the next levels down. With this complexity, processes become critical. Handoffs within and between departments are more complex, creating potential drops in communication and frustrations.

The primary challenges at Stage 4 are:

• Weak Project Management
• Difficulty Diagnosing Problems
• Employee Turnover
• Not Getting Systems in Place
• Organization Uninformed About Company Growth

Stage 5

58 – 100 people

The focus of Stage 5 is profit. At this stage, the leadership level has expanded. With processes in place, the need for training at all levels becomes critical. With the additional complexity, forecasting becomes more challenging. There is a need for improving sales to cover the additional overhead and expenses.

The primary challenges at Stage 5 are:

• Improve Sales
• Difficulty Forecasting Problems
• Cost of Lost Expertise
• Weak Profit Design
• Staff Training