Growing Pains – HR Challenges in High Growth Companies

Whether you call it HRM, HCM or simply the people side of work, Human Resources is a challenge in the best of times. Overlay its inherent complexity with a year-over-year growth rate of 30-50% or more and suddenly you’re juggling madly—with knives!

Balboa Park Botanical Building, by Herb Neufeld, Wikimedia Commmons

Whether rapid growth is happening in a small start-up that suddenly gains traction, or in a more established company that’s growing due to acquisition and globalization, there are some common challenges each will face as a result of unbridled success.

HR Challenges in Rapid-Growth Firms

Researchers Donald C. Hambrick and Lynn M. Crozier of Columbia University identified the following four fundamental challenges that confront rapid-growth firms[1].

  1. Instant Size: These firms double and triple in size very quickly. This in turn creates problems of disaffection, inadequate skills, and inadequate systems.
  2. A Sense of Infallibility: By virtue of their success to date, rapid-growth firms often view their strategies and behaviors as infallible. The unfortunate irony is that they become convinced of their wisdom while the environment is turbulent and large competitors are entering.
  3. Internal Turmoil: As a social organism, a firm growing at 50% per year is under great strain. There is a stream of new faces, people who do not know each other and who do not know the company. Decision-making suffers, turf battles abound, and people burn out.
  4. Extraordinary Resource Needs: Rapid-growth firms are typically cash starved. Instead of abundance, they often face a bare-bones existence.

When growth occurs as a result of globalization, things get even more complicated. According to this Ernst and Young survey, 42% of respondents identified talent management as the second most challenging function to manage globally, with four specific areas of difficulty appearing consistently. If the rapid growth in your firm is the result of globalization, you are likely facing these four additional challenges:

  • Cultural differences
  • Conflicting internal perceptions of talent management
  • Difficulties in balancing global and local talent
  • Lack of a reliable leadership pipeline

Successfully Navigating Rapid Growth

With respect to the first set of challenges above, some of the strategies and characteristics Hambrick and Crozier observed in companies who successfully navigated the turbulence of rapid growth include:

  • The chief executive is able to envision and anticipate the firm as a larger entity.
  • The team needed for tomorrow is hired and developed today.
  • The original core vision of the firm is constantly and zealously reinforced.
  • New “big-company” processes are introduced gradually as supplements to, rather than replacements for, existing approaches.
  • Hierarchy is minimized.
  • Employees hold a financial stake in the firm.

When it comes to the challenges of growth due to globalization, Jeff Charriere, Ernst & Young's Canadian managing partner for accounts and markets, suggests:

“…the most effective mobile management teams will demonstrate sensitivity to local markets while being adept at harnessing diverse perspectives, producing better results and making their global mobility strategy more sustainable.”[2]

While companies and managers with these characteristics may emerge intact from a defined period of rapid growth, those who identify sustained high growth as a strategic priority will need to embody some very specific strengths to succeed. One study that analyzed a sample of 50 rapid-growth and 50 slow-growth firms found that the four most important variables for not only achieving, but also maintaining, high growth were[3]:

  1. Founder characteristics: better educated, a more compelling entrepreneurial story or stronger entrepreneurial motivation, a higher incidence of prior industry experience.
  2. Firm attributes: a stronger commitment to growth, more involved in inter-organizational relationships, utilize a growth-oriented mission statement to a greater extent.
  3. Business practices: add more unique value and have a deeper level of customer knowledge.
  4. HRM practices: emphasize training, employee development, financial incentives, and stock options.

HR Best Practices in Times of Rapid Growth

One thing stands out quite clearly across all of these results: rapid growth can wreak havoc on your people and your company. It's critical that additional attention and resources be allocated to Human Resources in high-growth environments. The following list of HR best practices for small, rapid-growth companies[4] provides some practical, actionable ideas, particularly when combined with the observed characteristics mentioned earlier (e.g. start today to hire and develop the team needed for tomorrow.)

Recruiting New Talent

  • Recruit experienced management from other companies to help lead the change.
  • Clearly communicate the mission and vision of the company to inspire them.
  • Connect with local universities to bring in new talent.

Training and Staff Development

  • Use current experts to help train new employees (mentorship).
  • Provide learning and professional development opportunities.
  • Develop leadership from within.
  • Ensure clear communication between top management and all employees.

Incentives and Performance

  • Use meritocratic pay and stock options.
  • Provide employees the opportunity to utilize flexible work schedules.
  • Provide opportunities for cross-department interaction and teamwork.
  • Foster better knowledge sharing to keep employees connected.
  • Encourage creativity through company led programs that allow time for employees to work on side projects that ultimately could be used for future innovations.

The issues facing HR during times of rapid growth are not different; they are just magnified and accelerated to the extent that everyone becomes hyper-extended and the necessary processes can’t be developed quickly enough to meet the changing reality or create a shared understanding of the organization and its culture. In such an environment, it’s more important than ever to select for and cultivate (in yourself as well!) mental agility, openness to change, strong communications, critical thinking and problem solving skills, initiative, flexibility and, above all, the desire to grow.

 

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Photo Credit: by Herb Neufeld. Licensed under the Creative Commons Attribution 2.0 Generic license, Wikimedia Commons.
 
[1] Hambrick, D. C. and Crozier, Lynn M. (1985) Stumblers and stars in the management of rapid growth. Journal of Business Venturing.

[3] Barringer, B.R., Jones, F.F and Neubaum, D.O (2004). A quantitative content analysis of the characteristics of rapid-growth firms and their founders, Department of Management, College of Business Administration, University of Central Florida, Orlando, FL 32816, U.S.

[4] Pillay, A., Satanekar, N. and Simons P. (2010). Human resource practices in small rapid-growth companies. Information School, University of Washington


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