Growth Related problem in Business

The biggest problem of size – a problem of small, fair-sized, large and very large enterprise alike is the fact that these four do not form a continuum. A business does not imperceptibly grow from fair-sized to large. Each of these stages is distinct. We deal, in respect to business size, not with the gradual matter of classical physics; we deal with a quantum phenomenon. It is this, that makes size a problem of quality as well as of quantity.

The biggest problem of size is the problem of growth, the problem of changing from one size to another; and the problem of growth is largely one of management attitude, the requirement for successful growth is primarily the ability of management drastically to change its basic attitudes and behavior.

Several years ago, a large plant burned to the ground – four months after it had started production. Safety experts still debate the lessons of the fire. But the main cause of the fire was not unsafe construction it was management’s inability to adjust its attitude to the realities of a large enterprise.

The enterprise had been founded by the man who was still managing it at the time of the fire. He started as a mechanic in the back room of his father’s small shop. At first he employed two or three men. Twenty-five years later, at the time of the fire he employed nine thousand. But he was still running a small shop, even though he, by the time of the fire supplied a vital part to most of the mechanical industries of this country.

When the company had first stated the plans for the new plant, several of the Board members urged that four or five plants be built rather than one. They pointed out that to put all production into one plant might create trouble in case of accident bombing or fire. They also pointed out that the customers were distributed all over the country so that freight considerations alone would argue for a multi-plant pattern. The chief executive turned a deaf ear to these suggestions. His argument was that he had to guarantee quality to his suppliers and therefore had to be personally responsible for production. The real reason was simply that he was emotionally unable to let go any part of the responsibility.

That the fire spread so rapidly was owing to the absence of any fire retarding walls. The president had vetoed any such walls in the architect’s drawing so as to be able to view the entire plant from a gallery behind his office. When the fire started the foreman tried to reach the president. He was out to lunch There was no other management; the president was still has own plant manager, indeed has own department superintendent. As a result nobody coordinated the fire-fighting efforts, nobody even tried to remove the most important machines, files, or blueprints when it became clear that the plant could not be saved.

Not only did the plant burn to the ground, but the business was destroyed. For there was no one except the president, who could negotiate with customers, suppliers and machine builders or could subcontract the production while the plant was being rebuilt. The company had to be liquidated.

And yet, as one Board member remarked, the company and its stockholders did better than if they had waited until the old man died. Or as he said, we at least had the insurance money to distribute; it we had waited until the old man’s death we would have had not even this but would have been just as unable to continue the business.

This is, of course, an extreme example. But the situation itself is common. Perhaps the only difference between the typical situation and that of the plant that burned down is that no attempt was made there to camouflage reality by an elaborate pretense of paper management organization. But the man who has started a business is often fully as unwilling and unable to accept the fact that he no longer runs the back room of the small shop.

The real problem of growth is not ignorance. It is first the lack of a clear tool to ascertain what state a company has reached. It is secondly a problem of attitude: managers, especially top managers, may know intellectually what is needed, but be incapable emotionally of making themselves take the necessary steps. Instead they cling to the old and familiar. Indeed they often set up beautiful mechanics, “decentralize” their organization chart, preach a “new philosophy” and go on acting as before.