Stumblers and stars in the management of rapid growth

Donald C. Hambrick, Lynn M. Crozier

Research output: Contribution to journalArticle

222 Scopus citations

Abstract

This article examines the problems of managing a rapid-growth firm. We contend that instead of being a time for entrepreneurial celebration and relief, a period of over-50% growth is a time for wariness and some very difficult decisions. Such firms face a fragile transition: they are beyond being intimate, cohesive entrepreneurial ventures but they have not yet become secure, stable entities. Not only are they in flux, but these firms are often disoriented by the pace at which change is occurring. Firms such as Atari, Cray Research. Cullinet, Osborne Computers, People Express, and Rolm recently have faced (or now face) these challenges with very different degrees of success. This article presents observations drawn from several sources: a study of thirty rapid-growth firms which we have underway, literature and press accounts of rapid growth, and our consulting and discussions with executives in such firms. While far from definitive, the article reports several themes that are very pronounced in the situations we have studied. These themes are of two types: 1) recurring challenges and traps faced by rapid-growth companies, and 2) characteristics af firms which seem to avoid or surmount these traps. These are the four fundamental challenges that we see confronting rapid-growth firms: 1. 1. Instant Size These firms double and triple in size very quickly. This in turn creates problems of disaffection, inadequate skills, and inadequate systems. 2. 2. A Sense of Infallibility By virtue of their success to date, rapid-growth firms often view their strategies and behaviors as infallible. The unfortunate irony is that they become convinced of their wisdom while the environment is turbulent and large competitors are entering. 3. 3. Internal Turmoil As a social organism, a firm growing at 50% per year is under great strain. There is a stream of new faces, people who do not know each other and who do not know the company. Decision-making suffers, turf battles abound, and people burn out. 4. 4. Extraordinary Resource Needs Rapid-growth firms are typically cash starved. Instead of abundance, they often face a bare-bones existence. Each of these challenges calls for its own solutions. But we have observed some overarching themes in firms that have successfully traversed a period of rapid growth: • • The chief executive is able to envision and anticipate the firm as a larger entity. • • The team needed for tomorrow is hired and developed today. • • The original core vision of the firm is constantly and zealously reinforced. • • New "big-company" processes are introduced gradually as supplements to, rather than replacements for, existing approaches. • • Hierarchy is minimized. • • Employees hold a financial stake in the firm. Beyond developing these themes for success, the article concludes with a brief discussion of the effectiveness of owner-founders in rapid-growth situations.

Original languageEnglish (US)
Pages (from-to)31-45
Number of pages15
JournalJournal of Business Venturing
Volume1
Issue number1
DOIs
StatePublished - Jan 1 1985

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Management of Technology and Innovation

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