Congratulations to Stage 4 of your
Organization Growth Journey
You have transitioned to a Stage 4 company. During Stage 1, you developed a business model that works. In Stage 2, you ramped up your sales, production/ capacity, and staff using your proven business model. In Stage 3, you transformed your business from CEO-centric to Enterprise-centric to allow the business to grow larger. Now in Stage 4, it is time for you to become more focused on the operational needs of your company, overseeing a team of executives who will transition the company into a professionally run organization.
This information is based on our proprietary and highly effective EGOS – Stages of Growth business model,
developed by James Fischer. Fischer created the 7 Stages of Growth business model based on extensive research of entrepreneurial companies.
His research demonstrates that as companies add more people, the complexity level of the organization increases. You are reading critical information from the research that will help you:
Predict how growth will impact you
Adapt your leadership skills, knowledge, and insights to your specific stage of growth
Focus on the right things at the right time
Every business is unique, and these insights may have some information that may not suit you and your business, but most of them it will. We hope you find the takeaways helpful. VRT Management Group, LLC aims to help you “navigate the growth curve” as you move forward, offer you an infusion of hope (what you are experiencing is not unusual), and give you some pointers on what you can do to move to the next level of success.
After you read this information, feel free to set up a complimentary call with our advisor to discuss your
unique situation. Our advisors have over 30+ years of experience and have worked with over 110+ small and medium businesses in the past few years.
What does a Stage 4 company look like?
Stage 4 is all about internal focus and internal processes, whereas Stage 3 was all about delegation and the CEO letting go. The necessity of that lesson will become painfully clear if the leader heads into Stage 4 still micromanaging — he/she has to let go.
Why is one of the challenges in Stage 4 employee turnover? If the company hasn’t begun advancing strong, experienced managers, employees will leave. People stay at a company because they respect their manager. If a leader can begin to provide employees with managers who know how to manage the work of the company, as well as manage the people, employees will feel less frustrated, more productive, and receive reliable input on their performance regularly.
Stage 4 is also about helping all managers feel confident about their team, their work, and their identity as individual teams. The leader’s job is to help the managers gain that confidence.
Don’t worry about integrating these managers across the company just yet. Help them find their way with their team and work with them to be accountable as their team evolves and matures. The organization will avoid a lot of blaming others and department disputes if the CEO lets each manager build a stronghold and develop his/her sense of commitment and team synergy.
This isn’t just about training qualified people to move up in the organization. Yes, that can be done; however, experience proves that it’s generally just an easy way for CEOs to avoid doing the more laborious work — finding experienced, already trained people hardwired to help them grow their business. Successful CEOs surround themselves with knowledgeable, experienced people — they want to be challenged on decisions, knowing that the more diversity of ideas and even attitudes they bring on board, the more depth they create in their organization.
Required Leadership Skill Base:
The awareness to recognize a need for managerial sophistication
The ability to release control to competent managers
The willingness to commit to new management systems and to manage growth
The ability to see personal management deficiencies and train for them while still delegating and macro-managing
In Stage 1, team selection is all about how a staff member ‘fits’ the culture and the ability to do whatever it takes to get the job done (specialized skills and experience are secondary.) The CEO’s staff needs to help facilitate how work gets done and how quickly it gets done.
The staff also needs to be flexible and willing to embrace change because there are so many unknowns, and things can change quickly as the leader frequently makes adjustments to find what works best. Of the three Gates of Focus, The People Gate, The Process Gate, and The Profit/Revenue Gate, the latter is the main gate of focus for Stage 1. It’s all about proving the business concept and getting traction by generating revenue.
The second gate of focus is The People Gate because the company has experienced adding new people, bringing with them a whole new set of challenges for the leader.
Profit / Revenue
Required Leadership Skill Base:
The ability to identify one or more market opportunities
The ability to construct a skeletal business plan
The ability to raise sufficient capital
The ability to provide a product or service
The ability to see what needs to be done and then do it
As the company moved from Stage 3 to Stage 4, it went through another Flood Zone: an increase in the level of activity. The leader is teetering on shifting significant control of the company over to experienced managers, he/she should remember to focus on critical processes, which are vital systems that will provide foundational building blocks to manage that shift. In Stage 4, the company is much more complex. With upwards of 57 employees, there is no way the company can rely on the CEO to micromanage.
The Top Five Challenges in Stage 4
Weak Project Management
Difficulty Diagnosing Problems
Not Getting Systems in Place
Organization Uninformed About Company Growth
The level of activity has become very difficult for one person to manage. CEOs will be tempted to throw more employees at the activity. Resist that temptation by focusing on making the systems more effective and efficient.
The staff will look to the leader for direction, and even though the leader expects people to be capable of pulling their weight, it doesn’t mean expectations or performance plans aren’t important in this early stage of growth.
( 10% of the time)
(20% of the time)
( 70% of the time )
The CEO should primarily wear the hat of Visionary (50% of the time) and Specialist (40% of the time). As the Visionary, it is the CEO’s passion, energy, and vision that will keep the business moving forward.
As the Specialist, it is the leader’s expertise that creates and improves the new or better products/services and their delivery to the market. With a self-motivated team that is able to get things done, managing should not be a time-consuming task, taking up only 10% of the CEO’s time.
Builder / Protector Ratio
The Builder/Protector Ratio (BPR) is a measurement of “confidence vs. caution.” It is critical tool to gauge the business’ ability to accept change, respond with confidence to change, and successfully navigate the change.
Thrive on risk
Are always looking for new opportunities
Don’t back down from the everyday challenges
Thrive on caution
Prefer to apply the brakes (and should be encouraged to do so when appropriate)
In Stage 4, because experienced managers have been hired and the CEO is delegating more and more decision-making to them, the protector mindset is slightly less than the builder mindset.
In Stage 3, as the company shifted from CEO-centric to enterprise-centric, the ideal BPR was 1:1. For Stage 4, the Builder/Protector Ratio is 3:2 — three builders to two protectors.
As the leader works hard to allow new managers to step up and manage their operations, it is essential to let go and let these experienced employees utilize their knowledge. But, even experienced managers must learn how the company works, how problems are dealt with, how issues are resolved, and how decisions are made. Thus, the leader needs to maintain a certain amount of caution when monitoring progress. This will require that management systems are in place to catch mistakes before they cause significant problems. The goal for managers is to build their department to a level where their department is operating effectively as its own entity. With a strong team, confident in what they provide the company, and how they deliver upon their promises. The departments are focused on understanding, developing, and delivering a set of goals and objectives for their respective department. Of course, these goals and objectives need to line up behind the company’s goals, but the focus right now is building strong, stand-alone departments with capable management.
Processes are very critical when a company has outgrown the CEO’s ability to keep his/her fingers in all aspects of the company. The company has outgrown the ability of anyone person to manage it. The leader is no longer able to (a) catch all problems before they occur, and (b) make all the decisions. Thus, processes must become a leader’s best friend as the company grows. Consequently, during Stage 4, it’s critical to review all processes to determine if they still provide value and the control needed to prevent or catch errors quickly.
Foundation Building Blocks for Stage 4
MARKETING AND SALES
Develop a well-defined sales and marketing system that all salespeople use. It is time for a significant upgrade of the sales system and probably the CRM system. There should be a customer intelligence system to stay abreast of customers and the marketplace.
Utilize a performance management system that addresses objectives, goals, measurement, feedback, evaluation, and rewards. There should also be a project management system and templates.
Use a hiring system that identifies the skills that are needed and then helps find, recruit, select, and hire great employees. Have a plan for each employee describing expectations, performance measurements and actions that will be taken to help him/her succeed.
The financial system should include a profit plan, financial modeling, cash flow forecast and dashboard.
The Non-Negotiable Leadership Rules
Hire or effectively train professional managers for each department who have demonstrated the ability to be responsible, accountable, and proactive
Create strong performance-driven departments that compete with each other
Allocate 5 -10% of gross revenue to identification, acquisition, and implementation of new systems
Identify and set in place, with the management team, the company’s master processes
Establish a strict company project management template
VRT Management Group LLC created a custom program called Entrepreneur Growth Operating System™ (EGOS™) to help companies just like yours navigate the challenges that are typical for a Stage 4 organization. We have designed programs, services, and tools that are directly tied to the issues faced by Stage 4 leaders and their businesses.
We always welcome an opportunity to have a 45-minute conversation with CEOs, Entrepreneurs, and Business owners to understand their current challenges and share a couple of best practices to help them navigate through their challenges.
We strongly encourage you to avail of this complimentary opportunity. Over 151 of your peers have received tremendous value through these Zoom sessions.