EGOS™ - Stage 5 Company

Integration: 58-95 Employees

Congratulations to Stage 5
of your Organization Growth Journey

You have successfully landed in Stage 5. During Stage 1 (Startup), you developed a business model that works. In Stage 2 (Ramp Up), you ramped up your sales, production/capacity, and staff using your proven business model. During Stage 3 (Delegation), you transformed your business from CEO-centric to Enterprise-centric to allow the business to grow larger.

In Stage 4 (Professional), you became more focused on the operational aspects of your company, overseeing a team of executives who transitioned the company into a professionally run organization. Now in Stage 5, it is time for you to integrate the organization, so it begins to operate as a single unit, not as several independent departments.

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:

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 5 company look like?

A Stage 5 company has 58-95 employees.

Stage 5 has the CEO focus back on profit as the Gate of Focus for a straightforward reason. The company has many more moving parts and requires a consistent source of fuel — sales! In Stage 5, the company must start integrating teams and processes — the divisions must have their own budgets.

With upwards of 95 employees, the CEO has to rely on crucial managers to help direct the business.

Required Leadership Skill Base:

The awareness to set into motion the design of a business plan with detailed budgets.
The ability to manage a competent team of professionals.
The ability to address Human Resources issues concerning the team.
The ability to see the need to manage growth.
The ability to wear just one hat - Chief Executive.

The company has entered a more massive, more competitive arena, and subtle changes can mask more significant problems. For instance, managers hired and trained back in Stage 4 are much more confident, asserting themselves daily and fundamentally making changes to all aspects of the company. It’s critical in Stage 5 that the managers help develop their budgets — they are held responsible for the strategic implementation of that budget. They should understand the impact of not meeting their forecasts, expenses, or budgets.

By Stage 5, a company should also have started to develop more robust financial reporting systems that go along with supporting divisional working budgets. The need for a qualified controller or CFO becomes more urgent. The CEO, if he/she is the one controlling the budget, will have a hard time being a builder one day and the protector the next day.

The divisions or departments, because of the work done in Stage 4, are now working well together. Marketing and sales, if separate divisions, share information regularly, and compare notes to make sure marketing messages align with sales promises. Product development meets regularly with sales and engineering to make sure products meet demand and, more importantly, drive the customers to want more.

Profit / Revenue

People

Process

The CEO’s skills as a leader are more critical than ever as he/she will want to encourage his/ her managers’ autonomy while still making sure he/she protects and maintains the culture and the values the company has developed over the years. The CEO’s presence in the company must take on a more Facilitative modality — the ability to encourage and offer guidance to those managers must be balanced by getting their feedback and listening to their ideas on more significant issues. The CEO should lead by showing value in people’s input and should work to get commitment through participation, not dictation. Having spent the time and energy to build a great team, look to them for guidance and advice in their areas of expertise. Teamwork and collaboration are crucial to lead the team into the future.

A Stage 5 company has 58 – 95 employees. Improving sales is its primary challenge, and its Gate of Focus, not surprisingly, is profit. The CEO must spend 60% of the time as a Manager, 30% is still as a Specialist, and only 10% of his/her time needs to be Visionary. The top leadership style is Democratic. Transparency and empathy are essential competencies for this stage of growth.

The Top Five Challenges in Stage 5

The company went through another Wind Tunnel as it moved from Stage 4 to Stage 5, so letting go of methodologies that no longer work is now the responsibility of the managers. This is a difficult transition to navigate, requiring diligence on the part of the CEO to make certain managers aren’t becoming complacent. The CEO must make sure that managers have identified and are tracking critical indicators for their divisions, so at any time, the CEO knows what is working and what isn’t working. It’s again time to rethink how processes work and uncover areas that are no longer as efficient as they once were. Examining profitability, productivity, and performance from a company-wide perspective must be the job of every manager. Companies enter Stage 5 in a Wind Tunnel, where the level of complexity creates staff confusion.

This will occur as leaders begin to move the company from a departmental focus to a company-wide focus. It is a transition that will initially confuse staff because the leaders previously wanted them to build strong departments.

On the market front, the company is no longer invisible to the outside world. The competition now knows about the business and is beginning to attempt to steal market share. It’s a whole new environment. The business must continue to improve in all facets to continue to move upward along its growth curve.

As CEOs navigate through Stage 5, the primary goal is to integrate and unify their senior executives into a collaborative company-focused team. When entering Stage 5, it’s possible the management team was more focused on their departments than the company as a whole. During Stage 5, the leader needs to broaden each manager’s focus from a single focus to a dual focus. As the teamwork builds, the managers will begin to work together, which will allow them to take the business to a whole new level. This will also prepare the company for Stage 6.

Visionary
( 30% of the time)

Specialist
( 10% of the time)

CEO
( 60% of the time )

There’s a subtle difference now that the company has reached or surpassed the 50-employees level. Teamwork and collaboration are crucial to lead the team into the future. Thus, the CEO’s leadership modality should be Facilitative, while managing is still a significant role (60% of the time). The leader should lead by showing that he/she values people’s input and by getting buy-in through participation and influence, not by dictating. Having spent the time and energy to build a great team, look to them for guidance and advice in their areas of expertise. While managing this dynamic organization is the number one priority, leaders have to begin shifting toward a more Visionary role (30% of the time). Managers should be running the day-to-day operations, while the CEO focuses his/her attention on new opportunities (and makes sure the managers have the support they need). The Specialist role is diminished to insignificance (10% of the time). Still, the leader must continue to understand how well the product or service is meeting the needs of the ever-changing market and continuously evaluating if the products and services are solving customer problems.

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.

Builders

Protectors

In Stage 4, as the company transitioned to being professionally managed, the ideal BPR was 3:2. For Stage 5, the Builder/Protector Ratio is 2:1 — two builders to one protector.

In Stage 5, because there are experienced managers who have built strong departments, the builder mindset is twice the protector mindset. This allows the leader to place more emphasis on expanding the business. However, there needs to be some caution to avoid overconfidence or carelessness, which could give competitors an opening to attack.

Foundation Building Blocks for Stage 5

MANAGEMENT SYSTEMS

Use a performance management system that addresses objectives, goals, measurement, feedback, evaluation, and rewards. There should also be a project management system and templates.

FINANCIAL SYSTEMS

The financial system should include profit plan, financial modeling, cash flow forecast and dashboard.

WORK COMMUNITY

The hiring system should help identify the skills that are needed and then find, recruit, select, and hire great employees. There should be a plan for each employee describing expectations, performance measurements and actions that will be taken to help him/her succeed.

MARKETING/SALES

Utilize a well-defined sales and marketing system that salespeople are using. Implement a customer intelligence system to stay abreast of customers and market data.

SUPPORT

In-house or outsourced COO, CFO, and HR professionals.

The Non-Negotiable Leadership Rules

Integrate management team into an inter-dependent execution-focused leadership unit focused on company goals.
Overhaul the profit design.
Establish a one-year operational business plan.
Establish a fully integrated “living budget” by revenue group and by the department.
Allocate 3% of the employee salaries for training.

Summary

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 5 organization. We have designed programs, services, and tools that are directly tied to the issues faced by Stage 5 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.

VRT Management Group, LLC (VRT) is a Business Transformation Company with a single focus: serving our customers to solve their toughest problems by building people and transforming business processes.

Our unique strength comes from integrating people and processes best practices to address your ever evolving customers’ needs