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Top 7 Tips for Successful "Organic Growth"

By Justin Gates

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With the economy in its current state, interest rate and inflation concerns, ever increasing energy and crude oil prices, concerns over the war on terror, and market variability as prominent concerns for many investors, venture capitalists, entrepreneurs, and small and medium sized business owners, addressing the concept of corporate growth is undoubtedly on the minds of many individuals. A highly recommended means of growing your small to medium-sized business in such an uncertain economic and geopolitical environment is through “Organic Growth”.

It is often thought by executives and other senior management personnel that mergers and acquisitions are the main drivers of corporate growth. However, when examining this route, one should consider other aspects of the transaction aside from simply focusing on being larger or having an expanded product line and/or footprint. While such benefits as expanded product offerings, increased customer base, enriched client lists, greater geographic coverage, and the opportunity to earn additional revenue for the firm are all potentially possible when it comes to mergers and acquisitions, it should also be noted that such detriments as poor financial performance, debt obligations, legal disputes, and investor/shareholder/stakeholder concerns are also potential inheritance from a merger and/or acquisition.

Such detriments have certainly turned out to be benefits in the long run for some (particularly for those executives and senior management members who are masters of the turn-around) and in some cases are viewed as benefits from the onset by some executives and members of senior management. However, such issues as the potential negatives associated with mergers and acquisitions have led many small and medium sized business owners to focus on “Organic Growth” or growth from within the firm which does not rely on mergers and acquisitions as a means to expand the firm, but relies instead on internal resources and capital to expand, grow, and enrich the organization.

The following series of tips, if followed in order, may greatly enhance the probability of success for the formulation, implementation, and execution of an Organic Growth initiative.

  1. Assess the Current State of the Environment and the Organization: Prior to assessing the organization to determine if it is a prime candidate for an Organic Growth initiative, one should first examine, analyze, and assess the industry and/or competitive environment in which one’s organization participates. From a general perspective, one should ask “Is growth from within the organization a general trend for firms within this industry or is it common to bring in new resources?” and “How competitive is this industry or market and will it be difficult to find outside talent and/or resources to bring into the organization?”

    Once the industrial and/or competitive environment has been assessed, then it is appropriate to move forward and assess the organization.

    For many, the concept of Organic Growth is something that they are aware of but are puzzled as to how to go about conducting effectively. One of the best ways to begin the process of achieving Organic Growth or “Growth from Within” is to begin by assessing the current state of the organization.

  2. Formulate and Design a Plan for Organic Growth: Once the initial assessments of the environment and organization have been completed and the fundamental questions regarding Organic Growth have been answered, the next step in the process is to formulate and design a plan for Organic Growth.

  3. Implementation of the Plan Based on a Timeline: After the need for Organic Growth has been identified and the plan for implementation has been drafted, it is then necessary to implement the plan based on a timeline. Timelines fundamentally assist in moving the implementation process forward and in allowing key parties involved with implementation to increase buy-in to the concept in some cases. It is important to recognize that the timeline should be realistic, achievable/attainable, and flexible.

    Additionally, a system of reward may also be appropriate during the progression through the timeline. By offering incentives and rewards for performance, this may create an organization that is more willing to accept the challenges that often accompany an Organic Growth initiative (such as resource allocation and deployment challenges). It is important to also keep in mind that punishment may not always be the best compliment to the reward system, as many may believe. It is recommended that rather than punishing personnel for not meeting milestones in the process, it is best to encourage personnel to reach milestones irrespective of the degree of deviation from the timeline.

  4. Execute the Plan through Instruction, Coaching, and Monitoring: Once the timeline has commenced in terms of moving forward with the Organic Growth initiative, it is important to provide along with the plan’s milestones and events, a means to instruct personnel whether it be through leadership, suggestive actions, or information, which are simply a few ways to instruct personnel.

    Instruction - Throughout the Organic Growth process, instruction and leadership assist in keeping the goals and objectives of the Organic Growth initiative at the forefront of the effort. Often, leaders of the effort are utilized for instruction purposes or it is often the case that leaders of the Organic Growth initiative emerge during this phase. It is recommended that such leadership resources be used wisely and as effectively as possible with the ultimate objective of setting examples for and encouraging personnel to work through the execution process.

    Coaching – Coaching is also important when undertaking such a detailed and intricate activity as Organic Growth. By providing strong and effective coaching during the execution of the plan, this allows personnel to learn, adjust, and improve concurrent with the plan implementation so that when the plan has been fully implemented, the probability of error with regard to sustaining the gains captured during the plan’s implementation and execution are reduced.

    Monitoring – While instruction and coaching are highly important to the organic growth plan implementation and execution processes, monitoring the activities of personnel when instruction and coaching are not taking place is just as important. Such “free range” activities are significant indicators of how effective current instruction and coaching processes are and ultimately the results observed during the monitoring phase of the plan’s execution paint a clearer picture of how successful Organic Growth may be for the organization from a general probability of success perspective.

  5. Evaluate & Troubleshoot: There is a great deal of debate as to how to evaluate and troubleshoot after the execution of the organic growth and initiative plan. In the end, it truly boils down to what the organization’s executives and senior management wanted to achieve through the use of Organic Growth, which will determine the effectiveness of the plan. For example, of the executives and senior management desired to launch a new line of business through the use of Organic Growth, observing if and when a roll-out of the new business line takes place is an indicator of the effectiveness of the Organic Growth initiative.

  6. Understand What Is Being Evaluated: It should be noted that while in the example involving the development of a new line of business the roll-out of the new business line may be used as an evaluation and troubleshooting measure associated with the Organic Growth initiative, the success of the firm in relation to this new business line may not necessarily be related to the success of the Organic Growth initiative as the initiative goals and objectives did not necessarily associate the success level of the new line of business with the overall success of the Organic Growth initiative, but instead focused on the launch of a new line of business. As such, it is recommended that the criteria used to evaluate and troubleshoot be designed to address the true nature of the desired effects of the institutive and not necessarily the sub-effects.

  7. Sum Up & Re-Assess: When it comes to pursuing organic growth, key decision makers within the organization must address how Organic Growth may affect the organization and when pursuing such an initiative in relation to a small or medium sized business is appropriate. It is important to assess the costs and benefits associated with Organic Growth (both financial and intrinsic) and to develop a comprehensive plan toward Organic Growth and to implement and execute the plan as effectively as possible. Once this is completed, executives and/or senior management should assess the outcome by asking, “What did we truly wish to achieve through this initiative and have we achieved it?” while keeping in mind that the achievements associated with the Organic Growth initiative may not always closely relate to the overall effect(s) of the initiative on the organization.

Justin Gates, MBA

Special Projects Manager

United Information Technologies (UIT)

Source: http://Top7Business.com/?expert=Justin_Gates

Article Submitted On: June 28, 2006