Moving your organization from mom and pop to mature

According to Google statistics, “Approximately 20-24% of small businesses fail in their first year. After five years, that number rises to about 50%; by the tenth year, nearly 65% have failed.” Why? In my experience, it has much to do with a lack of a culture of discipline, accountability, and results.

It is not that those who start these businesses are not bright and smart. In fact, entrepreneurs are individuals whom I admire greatly. They find niches, take risks that others would not take, and often, through sheer energy, grit, and willpower, manage to get things off the ground and see significant profits in the short to medium term, only to see the business fail in the long term.

Why does that happen? Often, they never transitioned from the mom-and-pop, seat-of-your-pants, unorganized, and unfocused start-up phase to a more mature organization with clarity, discipline, and scalable internal structures and culture, which could allow it to grow with stability.

New businesses are often run in a hub-and-spoke management style. The hub is the entrepreneur, and the spokes are everyone else. Frequently, in this management style, the owner makes major decisions and directs their staff to perform various tasks. Decision making is centralized in one person, and because they got the business up and running, they often find it challenging to share decision-making responsibility with others. They are the experts, and they know what needs to happen…or so they think!

In that environment, there is often no team culture where people can strategize, plan, and make corporate decisions together. The founder finds it challenging to give up control, so he/she is bound by what he/she knows how to do. They are also bound by the hub and spoke system, which limits their growth to the size they can personally control. In other words, scalable systems are not developed, people are not truly empowered, and there is a delegation of responsibility but not authority, which remains with the owner.

This is what happened with one organization I worked with. They grew to a $25 million operation over several years and contracted to a $15 million operation in one year. The lack of internal discipline, team processes, clarity of roles and responsibilities, and reliance on the owner who always had the final say meant that the business had a functioning structure but not internal stability, and it collapsed quickly when it did. The owner had worked in the business, but not properly on the business, and it had never moved from a mom-and-pop management style to a mature organizational style. It worked until it didn’t! And you can imagine the pain of losing 10 million in revenue in one year. The business almost did not survive.

Perhaps you recognize some of these challenges in your business or organization. If you do, I encourage you to get the help you need to move to a more mature organization with a healthier culture. These principles apply equally to not-for-profit as well as for-profit organizations. 

How does this go unnoticed? First, because there are sales and momentum, we assume that all is ok. It is no small thing for a business to be doing 25 million a year in sales. Further, we get used to doing things a certain way, and are comfortable. However, the management needs of an enterprise when it is new differ significantly from those when it is growing in staff and revenue. Third, the skill set of the leader who, through grit and determination, made things happen is critical in a start-up, but not all that the organization needs long term. Finally, the ego of the founder is often a barrier to learning new skills and ways of doing work. 

What are some of the differences between mom and pop and mature organizations?

In a mom-and-pop structures:

• One leader often calls the shots in a hub and spoke system
• There is often not great clarity around processes and procedures
• Things change rapidly
• There is not a well defined organizational culture
• There is often loose accountability because of the lack of organizational clarity
• Not a great deal of attention is paid to the internal structures
• Staff training and development is an afterthought if it happens at all

Remember that in a start-up phase, these are to be expected. What works in that phase, however, hurts the organization if it is not modified long-term. Unfortunately many organizations languish in the mom and pop far longer than they need to and leave tremendous opportunity on the table as a result. 

In mature organizations:

• There is a defined senior team that makes collaborative decisions under good leadership
• Mission,  vision, and direction are clear to all, and while methodology may change, the philosophical boundaries of the organization are constant
• There is great clarity at all levels
• There is a high degree of accountability, and promises are kept
• There are regular, carefully crafted management meetings for alignment and accountability
• A clear and healthy organizational culture is in place and adhered to
• Internal structures, processes, and procedures are clear and consistent

Moving from mom and pop to mature usually takes a coach, as the skills and behaviors are very different. A mature organization that is healthy is far stronger than mom and pop stuctures. The sooner you can move from the one to the other, the stronger you will be.