Is your organization growing or scaling? Here's why you need to tell them apart.
There's a common myth that organizations need more resources to succeed. Naturally, it exists because we think of growth in linear terms: if a company adds new resources (capital, people, or technology), the revenue increase will follow.
While it may sound true, in practice headcount growth doesn't equal success. By contrast, having the ability to find clever ways to overcome difficulties, does.
When people think about scaling and growing their organization, they often assume that the two are the same thing. But they're not!
Growing has more to do with getting bigger—growing larger in terms of size and scope—while scaling has more to do with improving your organization over time with resources you have available.
Growing an organization means that you are adding new members to the team, and these new members will have a different set of skills from the ones already in place.
Scaling is about making sure your organization has enough resources to keep up with demands for its services. This can include adding more people but also involves making changes to your processes, policies, or procedures so that you can continue to provide quality service at an affordable price.
To put your organization to test, ask yourself this question: Is your organization becoming bigger or better?
Here’s a simple (real-life) story — no names, no pointing fingers — to show you the difference between scaling and growing, as well as the dangers the two are beset with.
An ambitious startup gains success in raising investments during a pre-seed round. Inspired by their achievement and eager to make it work, they start going at full throttle.
What’s the best way to scale, they wonder? More heads = more ideas = more growth.
The startup opens one job after another, growing the team day and night.
Seems they are all set now? A well-rounded engineering team (with more experts to come), other departments getting fatter, too.
But startup life being what it is, setting the business for smooth sailing is not as easy as they had hoped it would be. Product-market fit is still not located, product, although relevant and promising, still immature. Sales are not going as fast as expected.
And this is where it gets dangerous — they’re running out of money. Expenses are considerably higher than revenue. So they scale down, let some (or most) of the experts go and try to get resourceful. After all, they’re growing in size, but not actually scaling. And this applies to professional services businesses, too.
Getting more people onboard doesn’t always mean you will get more clients or more projects in your pipeline. Instead, overhiring might add unnecessary hassle and confusion, scheduling conflicts, workplace clutter, you name it.
The bigger is not always the better.
Just because an organization is well-resourced, doesn’t mean it is more competitive. In fact, being well-resourced can be detrimental to company culture and undermine efficiency. Counter-intuitively, being well-resourced could be the start of a slippery slope for service businesses.
Here’s why growing in linear terms is overrated.
They say that at 25 employees, everything breaks. This is where many companies start going downhill.
Adding more people to the company adds complexity, cuts in-depth communication, and creates reporting structure issues. People don’t know what is happening anymore — it is hard to keep up with all the projects, hiccups, and learnings.
More people means more shallow communication and coordination time, which means more meetings to schedule, more emails to send, and more problems to solve. This is why the best organizations are those with just enough people to get the job done.
It's no secret that companies operating efficiently tend to be successful ones.
Efficiency requires focus, discipline, and careful management of resources so that they're used wisely rather than wasted unnecessarily on mundane things like meetings, status updates or pointless tasks.
It's easy to get caught up in all the moving parts of running a business. But if those parts aren't working together efficiently, they might as well not be there at all. That’s why it’s best to make sure everyone knows their role and how their part affects others' roles.
Organizations that are well-resourced take months (or even years) to move a project forward because they have so many stakeholders involved in the decision-making processes that can sometimes be quite cumbersome when it comes down to actual execution on the ground level (i.e., getting things done). Resources are a wonder, but not if it means slowing down progress in order for everyone involved to feel good about things — which happens all too often!
Agile organizations, on the other hand, are able to respond and adapt quickly because they don't have too many resources tied up in one project or initiative. They don't have too many people working on one thing at once; instead, they have smaller teams working on multiple projects simultaneously so that they can quickly shift resources as needed.
This blog post is a part of our ebook. You can download it here:
