How to Structure Companies for High Growth
Dávila Parra, Antonio; Foster, George
Publisher: Estudios y Ediciones IESE
Original document: How to Structure Companies for High Growth
The old belief that management systems kill the entrepreneurial spirit is wrong. Perhaps when a company has fewer than 100 employees, a business can get by on less. But as the authors point out in this article, companies are actually able to grow faster provided that they have strong internal planning and control systems in place early on. They identify eight main categories that demand managerial attention if companies are ever to achieve high growth: financial planning, financial evaluation, HR planning, HR evaluation, strategic planning, product development management, sales/marketing management and partnership management. Of these, financial and strategic planning are key ones to focus on from the start, and the authors consider these from the standpoint of start-ups to glean insights into how best to adopt these measures over time. Managers, they say, also need to adopt the right mindset and be prepared to acquire the necessary skills or else step aside if they don’t have what it takes. Having the best system or business model in the world counts for nothing if it can’t be properly executed. And it is this ability of execution that is really necessary for generating high growth, sustained performance and continued reinvention over time.
Tools and Frameworks:
> “Benefits and Challenges of High Growth” lists the advantages and commensurate pressures, which must be addressed before gravity brings you down.
> “Adoption of Management Systems” charts the percentage of companies adopting management systems over time. Analysis of entrepreneurial firms reveals that higher priority is given to financial planning early on, probably because resource allocation allows managers to set priorities and plan subsequent activities accordingly.
Relates the general experiences of executives from the high-growth start-ups studied.
Based on a study of 78 high-growth start-ups in the United States that formed part of the Stanford Entrepreneurial Management Systems (SEMAS) project, along with a wealth of teaching, case writing and other research projects the authors have undertaken in this field.
About the Authors:
Antonio Dávila is professor of Entrepreneurship and Accounting & Control at IESE, where he is also head of the Entrepreneurship Department.
George Foster is the Paul L. and Phyllis Wattis Professor of Management and Dhirubhai Ambani Faculty Fellow in Entrepreneurship (2009-10) at Stanford Graduate School of Business.