BOOK REVIEW: Scaling up successfully

Scaling Up: How a Few Companies Make It...and Why the Rest Don't, by Verne Harnish

THE presumption of this book is that your company is growing and that you are profitable. It also presumes that you want to "scale up" from a small business to a much larger and more profitable business. As the sub-title suggests, a few companies make this transition and the rest do not, and this book will give you guidance on how to be in the first group.

The method Harnish offers is to make the correct decision for each of the four dimensions of a business. Follow his prescription, he asserts, and you will be successful; fail to follow the prescription and you will fail. To this end, he offers a thorough description of a set of practical tools and techniques that cover each of the four dimensions of a business. 

The four dimensions of any business, he asserts, are the People, Strategy, Execution, and Cash. The way you deal with these dimensions is to attract and retain the right people, create a truly differentiated strategy, drive flawless execution, and have plenty of cash to weather the storms.

That is unarguable. It is comparable to saying a successful marriage is made by a physically healthy, loving couple, who are emotionally and ethically committed to each other.

They resolve all disagreements using an orderly format in advance of disagreements becoming divisive. There are examples of couples who have chosen to use the format and are happy, successful and have two gorgeous kids to bolster this.

Added to this is the claim that "when our tools are successfully implemented, organizations attain these four outcomes: At least double the rate of cash flow. Triple the industry average profitability. Increase the valuation of the firm relative to competitors. Help the stakeholders - employees, customers, and shareholders - enjoy the climb (to outrageous success.)"

However, despite these claims being, well, too good to be true, the book does offer an organised collection of some very sound advice that would benefit companies of all sizes.

Staying in business is hard enough, and turning a successful small business into a successful medium-sized business on its way to a successful large business is no easier. All good advice should be gratefully accepted.

Growing an already successful small business is often hampered by the company's failure to identify and develop the required number of leaders for the growth. The now stretched leadership (both of you) is expecting to be able to lead a staff twice the size of the one you started with.

Don't demotivate but rather 'dehassle' your workforce

Leaders, Harnish explains, help people play to their strengths and don't demotivate but rather "dehassle". They set clear expectations and give employees a way to see the purpose of their work and the effect their actions are having. Good leaders recognise and appreciate people's contribution.

They also "hire fewer people, but pay them more - frontline employees, not the top leaders!" Harnish calls the people supporting the leader "supports", and not subordinates. (I like it!) It is both more respectful and more accurate.   

When it comes to choosing the leaders, you will need to be sure that they fit your culture so that they will pass it on. There are two additional abilities leadership recruits need to display: "They don't need to be managed. They regularly wow the team with their insights and output."

As Peter Drucker famously said: "The bottleneck is always at the top of the bottle." Having the right people to grow your business is necessary but not sufficient. If your infrastructure is not scalable, the wheels will come off as your expand. You need to be able to accommodate both the people and the demands on the system, so that expansion does not make you less secure than you were when you were smaller.

To drive execution, Harnish recommends three key habits: set only a few priorities. Gather information daily and review it weekly. Schedule "daily, weekly, monthly, quarterly, and annual meetings", and do not miss any because the rhythm of these meetings needs to be maintained.

Finally, cash. Harnish's exhortation is "Don't run out of it!" This will only be achieved through scrutinising every decision and checking its effect on cash flow, not only income and profit. As we all know, growing gobbles cash and not having cash limits your ability to grow.

Little of what this book deals with will surprise you. Yes, Harnish does have some memorable turns of phrase, but the rest is business common sense. If so, why should you bother reading this book? For two reasons.

The first is that business common sense is not that common. In the daily whirlwind of activity, we forget to do what we know we should. The second is a warning Harnish issues: "Companies can get by with sloppy execution if they have a killer strategy or highly dedicated people willing to work... eight days per week to cover up all the slop. Just recognize you're wasting a lot of profitability and time, (and you will) burn both cash and people in the process!"

Readability: Light —+— Serious
Insights:     High —+— Low
Practical :    High +— Low

*Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Strategy that Works. Views expressed are his own.

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