The leader of an organization at this stage has moved beyond the founder stage and is now working with the skills of a professional manager.
The business has expanded well beyond its core geography and product line. Leaders are working on the business and active involvement in business operations is kept to a minimum. Decision-making has been or is being pushed down and out into the organization. Ownership is becoming increasingly distinct from management of the business. Formal leadership training is entrenched at many levels of the organization.
The organization is building and institutionalizing policies and procedures. Communication is formal and systems are becoming more prevalent for carrying out tasks. Key functions have been, or are beginning to be, established. Human resources and management systems are being identified and expanded. Professional services, once rented, are being brought into the company. Succession planning, training and development, and compensation and reward systems are well established. Customer management systems are emerging. Customer segmentation, channel differentiation and competitive analysis and knowledge are increasing. Customer policies have been expanded.
Many new core processes are being developed and introduced. Formalized planning structures are built. Business unit structures are emerging. Strategic planning and resource allocation methodologies are becoming more complex. Manufacturing processes are also being improved. Cost reduction programs such as lean manufacturing become entrenched. Crisis and risk management programs are developed. In the pursuit of growth, the company seeks acquisitions.
The build-up of the more complex organization is also littered with land mines. Business failure can come from a number of areas: Leadership may be inexperienced. The attempt to decentralize may fail or leaders may be unable to effect a change to a more complex, sophisticated culture. As centralized control increases to provide strategic leadership for the units, a counter-culture can take hold, with a commensurate loss of control. In-fighting between the new “central committee” and those outside head office increases. A “we/them” mentality can set in, developing either from the outside or from the inside. Increased complexity can also lead to loss of both focus and competitive inroads.
With employees, the new culture can mean loss of purpose or alignment. “Old” employees are lost and with them, corporate memory. Culture and communication networks can fail. Loss of customers represents a real risk as the organization turns inward. Competition cuts into core product areas; markets can change.