Too much growth too fast will be your company’s undoing

I’m a Jim Collins buff. The way he analyses empirical data, rules out outliers and in a very simple way provides scientific research basis for many management concepts just makes me go gaga. It is no surprise that I have voraciously devoured Built to Last, Good to Great and How the Mighty Fall. Last week I just finished his latest Great by Choice: Uncertainty, Chaos, and Luck — Why Some Thrive Despite Them All.I was blown away by “The 20 Mile March” principle, which he introduces in his chapter on fanatic discipline.The long and short of it is that it is better for an organisation to journey a measured amount of distance forward each year than to rush forward and burn out. The measured journey will make much more significant progress in the long-term. We all heard the story of Kweku Adoboli, the rogue trader at Swiss bank UBS’ Global Synthetic Equities Trading team in London.Just sample this — From July 1 to September 7 in 2002, he completed an internship at UBS during his summer holiday, and was then given a job at the bank as a graduate trainee in September 2003. In the same year he graduated in e-commerce and digital business studies.Adoboli became a trader in December 2005, was promoted to associate director in March 2008 and then to director in March 2010.His story is the exact opposite of the 20 Mile March. Are you surprised he is now in jail for seven years?Part of the reason entrepreneurship has developed such a sexy reputation in the past few years is its sheer speed. In contrast to the sluggish world of big-business bureaucracy, young companies that become media darlings — think Facebook and Instagram — are celebrated for the breakneck pace of their growth.Clearly, this approach works for some businesses and some entrepreneur personality types. But not every company should look to this ethos of a headlong race for success. I know many small businesses that have been faced with the “too much, too soon” syndrome, where they grow too quickly and become flushed with early success.Two things happen when you miss out on your 20 mile march.The first is the loss of solid ground on which to base your business growth. The decision to expand is based more on impulse than on sound financial evaluation, market studies or economic analysis. Often, the expansions are a result of the owner’s whim and personal satisfaction rather than a real understanding of the company’s capabilities. As a result, impetuous companies charge ahead and seek to take advantage of market opportunities even if they lack the necessary capital for the project. The undercapitalisation of projects soon becomes their undoing.The second is inability to manage all business processes. Management becomes so involved with trying to administer all of the new operations acquired that it loses track of the essential business functions. A company’s risk of failure also increases given an overly centralised management team that lacks depth. Bureaucracy rears its head in the form of more memos, meetings and buck passing, further compounded by a defective monitoring and information systems. Growing companies must be able to obtain information in a timely, organised and efficient manner.Ricardo Semler, author of the book Maverick, says that only two things grow for the sake of growth: businesses and tumours. I think he had a point. Just keep it at 20 miles.Mr Waswa is the managing director, OutdoorsAfrica.