A Stage 2 company’s Gates of Focus are Profit first, Process second, then People third.
Just as in Stage 1, Profit remains the top priority for a Stage 2 business. The company needs to maintain its focus on Profit so it has the capital needed to fund continued growth as it begins to transition from being an owner-centric business to an enterprise-centric business. In this Stage, reviewing margins by revenue groups and customer segments and ensuring employees know how the company makes and keeps money are ways that a leader can successfully show a focus on Profit.
However, in Stage 2 Process moves up to the second priority ahead of People. With 11 to 19 people, the organization has increased in complexity and needs to put greater attention on process and systems in order to ensure quality. Otherwise, the new employees who have joined the company will experience chaos and instability, both of which are likely to drive them away.
The People Gate drops to third priority in Stage 2. This does not mean people are unimportant, but it means People do not require as much of a focus for growth in Stage 2. With the right systems and processes in place, and with clearly defined Brand & Core Values, the company’s employees will have a strong foundation that allows them to execute consistently.
Business leaders embracing these Gates of Focus should be constantly thinking about how decisions will impact the company’s profitability. Their energy should be focused on activities that generate revenue and increase profits.
Gates of Focus Misalignment
A small moving company is starting to have success. After two years of steady growth and chasing down whatever business they can find, they are finally able to book jobs well in advance. Their customer base is growing and the pressure of running a start-up is lifting. They are adding new employees, but the owners are also eager to reward their original employees for sticking with them by offering more benefits. They purchase a new truck that’s safer and more comfortable, new equipment to help make the work easier, and company phones to help improve communication. The employees are all grateful for the improvements and morale goes up.
As the expenses increase, however, the owners face a new challenge that is much more concerning: can they make payroll? Business has been steady but has plateaued and isn’t increasing at a fast enough rate to cover the additional expenses they’ve incurred. Just when they’ve added new employees, they start considering cutting back again on staff.
These Stage 2 business owners have made the mistake of making People their first priority. Profit used to be their main focus and driver of decisions. Whereas most of their time and energy was going towards marketing and maintaining efficiency, they have now shifted their focus to how to retain old employees and attract new ones. The danger in overspending in this one area, though, outweighs the immediate benefits. While the company’s employees will be happy in the short term with nicer equipment and more perks, they will suffer in the long run if the company cannot remain profitable and has to let people go or close altogether.
The concepts from this article were taken from The Ramp-up Stage: Organizational ReWilding Rules for Business Growth. Available through The ReWild Group and Amazon, the book explores this and other concepts in-depth while providing illustrations to help business leaders incorporate the ideas into their organizations. Get your copy today to learn the rules for growth for companies with 11-19 employees.