The type of leadership necessary for a company to be successful changes with the life cycle of said organisation, according to leading US academic Chris Muller in his book, The Leader of Managers. This lifecycle is made up of six stages: the creator/entrepreneur; the rationaliser/implementer; the systemiser/navigator; the accelerator/builder; the steward/harvester; and, finally, caregiver or rejuvenator/explorer. What stage are you at?
Muller describes creators as “pioneers, experimental, charismatic, often looking for the ‘buzz’ that comes from innovation and adaption”. The focus of the organisation at this stage is typically external, channelled into capturing new customers at the unit level.
He calls stage two, rationaliser/implementer, the time of the construction managers, the people “who bring a ‘rational’ form of the organisation”, a time for the “refiner of the concept”. He says: “These are the creators of an organisational culture on which will be built a new organisation.”
He says: “Both the organisation and the leader at this stage may exhibit the negative attributes of being under-capitalised. The focus of this stage is internal, seeking to find a way to replicate the existing original business. Markets for this stage are finding loyal customers who are already returning and making them more frequent users.”
Muller says the systemiser/navigator stage is where the real work of organisational development begins, “the person who brings order out of chaos”. “Like an engineer they create standards and processes, refine distribution channels, direct the creation of operating manuals and initiate franchise networks and put forward growth plans,” says Muller. “The markets for this stage are now regional and reach across multiple units and across multiple areas.”
Finding ways to fuel growth
Stage four is the time of the accelerator/builder, the grower of larger companies. Muller adds: “These are the true corporate entrepreneurs, building and opening new units and new markets. The focus of the accelerator shifts from internal issues to external ones, as they are consumed by finding avenues to fuel growth.
“The market is now national, seeking to have an increasing number of customers come in more frequently.”
When growth eventually slows down and a business reaches a plateau it is then the time of the steward/harvester, “when, after a period of rapid growth, there needs to be a time of reaping the outcome, of taking stock of what has occurred and creating true wealth”.
Muller says: “Here the key attributes of the leader are competitiveness, consistency, character and personal charisma. The market is now universal, focused on a wide core customer base, basically ‘anyone’ who can use our product.”
Beware of leadership pitfalls
One of two separate leadership styles comes into play in the final stage of the life cycle – caregiver or rejuvenator. The former takes a slowly declining business into its final stages, making sure the pain is minimal and when the time comes, vital pieces are harvested for their value. The latter, often called a turnaround specialist, will focus on re-energising the business from top to bottom. Muller says: “They are the builders on a legacy, using the knowledge of the past to find a new future. These leaders are inquisitive, self-assured, opportunistic and seekers of innovation.”
According to Muller, there is also a special time in the growth of multi-site companies that catches founders and entrepreneurs by surprise, which he believes can either be called the “black hole” of restaurant growth or the “Bermuda Triangle” in the life cycle of a business.
As he points out, in the early stage of development it is taken for granted that new businesses have zero revenues and large opening expenses; this is the risky part of opening a business. “But, if things go well and the marketplace demands growth, revenues begin to increase much faster than expenses, which still continue to increase,” says Muller. “During this point, which for many businesses is the time from two to 10 sites, excitement can run very high, as can pressure to expand quite rapidly.”
It is at this point, Muller argues, that a “confluence of challenging issues come together and may create a metaphorical flood”. One of the first things to happen is that costs begin to grow quickly as the need for investment in infrastructure becomes crucial. Part of this new expense is the need for new employees, many of them to support a growing head-office team.
Muller says: “With each increase in the span of control, around five to eight new units, a new leader of managers must be hired, trained and supported. As territories expand, so does the need to support travel for site visits, training for new managers and owners, as well as new crew members.” On top of this, new systems have to be created and put in place, marketing spend rises, meetings are increasingly held at off-site locations and “sooner, rather than later, a larger space must be acquired for the corporate headquarters”.
“All of this is occurring while the ‘best and the brightest’ from older units, each of which has its own product life cycle of maturity to contend with, are helping to drive the bright new unit openings,” says Muller. “Revenues at existing units become flat from a natural lack of attention, while new units cannot be opened fast enough to increase revenues above opening expenses, and investment in non-revenue-producing infrastructure is happening at break-neck speed.” This is the “black hole” that many emerging or “hot” concept companies rush into, never to be seen again.
Muller says: “If, and this is the ultimate big ‘if’ question, there has been planning well in advance for this time period, with significant capital resources secured beforehand, multi-unit companies may come out on the other side as revenues quickly catch up and then grow faster than expenses. One of the most tragic outcomes of this challenge is that the well-meaning founder of the business will have been completely blind-sided by this experience and will be a casualty of this process.”
As everyone at the R200 awards, or at the MA300 events held this year, can testify, surviving this Bermuda Triangle of growth should be every entrepreneurial company’s ultimate goal. Unfortunately, it is not one that all can achieve.
*Further details regarding Chris Muller’s book, The Leader of Managers, can be found at http://leaderofmanagers.com/Home.html
