Barriers to Growth for Potential High Growth Organizations - Research Paper Example

 Barriers to Growth for Potential High Growth Organizations Introduction There has been a growing pattern in laying a lot of emphasis on the growth of organizations. Whetten (1987), points out that it is important to look at organizational growth (or lack of it) in terms of its definition as well as the operational perspective. Organizational growth is the internally initiated increase in operations capacity through use of internal resources and not external financing. A high growth organization can be said to be the enterprise which manages that expansion in a consistent basis and for a good proportion of its average operational outlay. Recklies (2001) enlists several indicators of growth in an organization that include a substantial increase in revenue, subsidiaries, employees, and the organization’s assets. He further adds that growth should be gauged in terms of sustainability, improved value of shares held in the organization, and profitability. There are several barriers and drivers to growth of organizations alike. The following discussion focuses on some of the major growth drivers and the main barriers to growth in relation to high growth enterprises. Drivers to Growth To begin with, drivers to growth are those factors that enhance rapid growth in organizations. They may include the following: Proper Financing A high growth organization is boosted a lot by good finances. This can be in terms of availability, sufficiency, and the rate of interest; otherwise referred to as the costs of financing. When there are cheaper sources of financing that are available to the organization, the organization is able to invest in ventures easily and with speed to be able to take advantage of any opportunity that brings more return to the organization. Since growth is associated with how a firm obtains resources and funds internally, it is therefore pegged on the revenue and how it is properly budgeted for to be able to improve on sectors that need improvement while also balancing the needs of other sectors or departments of the organization. Proper financing is, therefore, an important driving force for the growth of an organization, small or large. Favorable Government Policy The external environment created by government policy and regulations affects growth to some extent depending on its implications to that organization. For instance, the government may decide to restrict importation of commodities related to a particular industry to help growth in that industry. The result is that a first growing organization in that industry will have a favorable environment of expansion in terms of capacity because of the ready market for its product and reduced completion from substitute products. This will in turn add onto its revenue, which can then also be ploughed back to certain agreed proportions despite increasing the value of shares held by its owners. A Larger Unexploited Market Segment or Market Share A larger market indicates a larger proportion of potential customers to the organization. In cases where the organization still has some sort of a large catchment area of customers that have the potential of being the company’s buyers, growth is favored than in a closed market where every consumer has already identified with a brand. The motivation of reaching to the untapped market is massive and, therefore, leads to growth because as the organization reaches out to more and more consumers, and there is an additional turnover or growth in sales that ensures that revenue is boosted. Arrival of new customers in a totally new segment adds onto the profits eventually; hence, it provokes a rapid growth to the organization. Good Information Management Structure Information flow is very essential to any organization. An organization with an effective and efficient management system for information flow; therefore, it is likely to grow at a faster rate (Stalk et al 1992). This is because organizations are likely to have complex structures at every level that also involves personnel. Besides, the organization has an obligation to keep in touch with its stakeholders and address their concerns promptly and effectively. For instance, a good feedback mechanism between the customers and the organization helps the organization in decisions related to product development and hence helps to create customer loyalty, which is very important for the organization’s growth. Ability to Attract and Retain Expertise An organization should be able to attract professional and experts of a particular area related to its operations and retain them. This ensures that there is continuous improvement on its operations regarding the design, planning, and strategies to ensure that the brand image is always enhanced. A large expertise base ensures that the firm is able to produce innovative and quality products and services always (Coffman et al 2002). This in turn helps in attracting and retaining customers to the organization as well. Focus On Core Competencies By focusing on its core competencies, the organization is able to cut cost associated with wastefulness and a large number of employees through outsourcing (Hughes 2008). More customers are attracted when the product is of required standard and with fewer faults. In the long run, growth is realized because of the cost saving from outsourcing. The funds saved and increased customer sales help create another financing pool for further growth of the organization. Collaborations and Associations When the organization is involved in collaborative prospects (like: mergers, licensing, franchising among others), it is able to extend its products to the customers that it may lack the resources to reach. It important that organizations facilitate forms of collaboration that are able to boost production hence benefit from economies of scale (Baily et al 2006). For example, when an organization merges part of its operations or administrative functions with another, it is able to benefit from other resources, which was previously unable to achieve like expertise in a particular function. Other forms of collaborations also ensure that risks and finances are shared creating an enabling environment for both organizations to grow because of the economies of scale they are likely to benefit from (Counts et al 2006). Performance Management System It is necessary that an organization has put in place an appropriate performance management system and scorecard (Liabotis 2007). An organization that is strategically placed to succeed must at all times have targets for all its employees from the top management to the junior employees so that there is continuous evaluation. This will ensure that the organization is achieving its full potential and quality products and services are provided to the final consumer always. This in turn motivates employees and encourages expertise, thereby eliminating the problem of employee turn over. In the long run, the targets help in expanding processes according to schedule hence driving growth. Barriers On the other hand, there are barriers that organizations may encounter in their quest to keep up the growth trend. The main barriers include the following: Inadequate Financing This has been a great barrier to growth for many organizations. Financing ensures that an organization is able to acquire the necessary resources that may not be available and need to be purchased like raw materials, machinery and equipment and even appropriate human resource. It is necessary that an organization acquires what it needs to operate at the required time and in the right quantities. Therefore, lack of financing is an impediment for growth in organizations. Competition Competition is a great challenge to all organizations that operate in a competitive industry. Competition generates a situation where the consumers are able to manipulate the prices of products because they are able to buy where the price is lower and quality is relatively higher. Competition also brings the tendency of organizations to try to lock others out of the market. This strategy may hinder growth of an organization because of the resultant entry barrier. Companies under intense rivalry tend to focus more on improving their products and reducing costs of production so that the benefit is passed to consumers hence overlooking overall growth. Intense competition is, therefore, a major barrier to growth for a potential high growth organization. Organization To achieve any significant growth, the organization should be able to integrate its functional areas in an effective manner (Feldman and Klofsten 2000). For instance, management, ownership, marketing and production should run harmoniously so that the interests or requirements of each are considered and factored into the normal operations without creating conflicts. It is because of conflicts in the organization of any given firm that processes and plans continue to drag, schedules continue to expire and everyone is not focused to do their role effectively. This results in disorganization that leads to failure and hence impacting greatly on the general growth of the organization even though it may be having the potential and resources to do so. Lack of Expertise and Labor Problems Organizations that lack the experts in certain field will continue to lag behind since there will always be defaults or redundancies. For instance, absence of a good marketing expert will result in poor analysis of the market segments and their respective needs. This will subsequently affect the planning and strategy part of marketing; therefore, the organization will not effectively attract and retain customers, which may result in loss. An organization that has not fully embraced its customers is likely to fail, which translates to lack of growth. An organization should also manage its workforce through the formulation of prudent labor management policies. When there is a void left in the part of labor management by the human resources department, there might be frequent strikes that may bring down production and further destroy the organization’s image. Resistance to Change Change is a very important aspect in any organization. All organizations should always have laid down structures that ensure effective change management so that there is always a smooth transition that does not impact on its processes. Resistance to change in an organization will therefore impact greatly on its growth. For instance, in today’s fast changing technological sector there might be new equipment for an established efficient method of production to be adopted. When there is a lot of resistance to change in the organization, competitors will grab the opportunity to adopt it fast and present the new product to the market, hence gaining more customers by eating into the organization’s market share because it was slow in processing the product. Therefore, it is important that an organization manages change effectively in order to be able to benefit from it. Risk Factors High risk factors in the organization’s internal or external environment may greatly affect the growth of any organization (Gulati 2007). It is essential that a firm is prepared to take measured risks so that it remains a leader in the industry it operates in. However, when there are many risk factors in the operating environment, the organization will find it difficult to expand its processes. A good example is that of an organization that operates in an unstable political environment. Making heavy investment in the region will mean that anytime there are unrests or violent protests, and some of the organization’s assets may be destroyed resulting in heavy loses. Customer Satisfaction This is one of the most important determinants of growth to any organization. The organization exists because of customers, and customers must be always satisfied so that they are retained by the organization (deGeyter 2008). The organization should always strive to get its product specifications right at the first instance so that they continue to gain trust in the market and effectively compete. More dissatisfied customers will lead to lower sales and less profits that cannot provide meaningful investment to the firm’s processes and other required resources thereby creating stagnation. Tackling Barriers Having seen the barriers to effective growth, it is important to mention the ways in which organizations may overcome them to achieve their growth potential. First, top management should be able to formulate policies that ensure that there are structures of evaluation and control of processes so that products are developed in the required standards always. Second, it is important to ensure that production is always looking to develop new products or facilitate product differentiation to cater for changing tastes and preferences of consumers. Another important detail is that of effective communication so that all concerns are put into consideration before they become issues that may stall operations in the organization. This can also be beefed up with good leadership from the top to the junior levels so that there is accountability at all times (Diefenbach 1996). Another important issue is customer feedback implementation. This ensures that there are means to establish and evaluate customer satisfaction at individual level so that production is able to react faster. Lastly, there should be a clearly stated method or plan of obtaining capital for the growth of the organization since growth is determined by the amount of investment funds injected into the business. It is important that an organization is pro-active rather than being re-active for it to achieve any consistent growth. Conclusion Organizations having potential to grow have a huge task of ensuring that they achieve this objective. It requires that there is a delicate balance between general operations, leadership, and other stakeholders so that all functions move together. It is also important to note that since unity of purpose is important for organizations, they should always exploit the available avenues of collaborating with other industry players through mergers, joint ventures, and other forms of association so that they are able to benefit from the resulting economies of scale. It is also important for an organization to identify the stage of life cycle in which it currently operates so that measures are taken to cope. For example, an organization can evade the decline stage through product positioning (Churchill et al 1983). 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