Growing Pains. Flamholtz Eric G.

to Medco as follows: “I was walked to an area and was told: ‘It's your department. Run it.’”

      This lack of formal roles and responsibilities made it easy for personnel to avoid responsibility whenever a task was not completed or was completed unsatisfactorily. This also led to duplication of effort between departments. Since no one knew precisely whose responsibility a particular task was, two or more departments or people often would complete a task, only to find that it had already been accomplished by someone else.

       People Felt There Were Not Enough Hours in the Day . Most employees felt overloaded. They commonly stayed after hours to complete their work. Department managers, in particular, felt that their workload was too great and that deadlines were unrealistic.

      This situation resulted, in part, from the lack of adequately developed day-to-day systems to support Medco employees' work. The accounting, operational planning, and communication systems were adequate for a small company, but quite inadequate for one as large as Medco had become. Systems for purchasing, inventory control, and even distribution were either poorly developed or nonexistent.

       People Spent Too Much Time Putting Out Fires . Perhaps the best indication that Medco was beginning to choke on its growth was that employees spent an increasing amount of time dealing with short-term problems resulting from the lack of long-range planning. This was particularly evident in the constant lack of space within the company's headquarters. It appeared to most employees that as soon as the company increased its office space, the space already was filled, and it was time to begin planning for another move. It seemed that there was never enough space or equipment to support the company's staff adequately. When they worked at the firm's headquarters, salespeople usually arrived early to ensure they would be able to find a vacant desk from which to make their calls. Employees who did not go out into the field attempted to handle the cramped space by creating “schedules” for using phones, computers, and even desks.

       Employees Began to Feel That Medco Never Planned, It Simply Reacted . A joke around the company was: “At Medco, long-range planning means what I am going to do after lunch.” This was caused partly by the changes in the marketplace and the new demands placed upon the company. It also resulted from the tendency of entrepreneurial companies like Medco to spend most of their time simply staying afloat without keeping an eye on the future.

      Employees began to think that, simply because crisis is the norm at the company, that is the way they should operate. They began to call themselves “the fire fighters,” and even took pride in their ability to deal with crises.

       There Were Not Enough Good Managers . Most managers at Medco were promoted to their positions in recognition of service. Some were good managers, but most were described by their direct reports as “good technicians who lack people skills.” Further, they were seen as clones: Many employees believed that management had one and only one way of doing things, and that to deviate from the norm would result in adverse consequences.

      Plenty of people had the title “manager,” but relatively few really behaved as managers. After promotion, many people simply kept doing the things they had done in their former roles. They were poor delegators, often doing the work themselves rather than assigning it to others. As a result, employees came to believe that their managers did not trust them.

      Bob Mason was a strong individual who wanted things done his way, and he wanted to control almost everything. He recognized this, referring to himself as “someone who sticks his nose into everything.” Few decisions were made without Bob's approval or review. As a consequence, one of two things tended to happen concerning managers: (1) the stronger managers tended to butt heads with Bob and ultimately left; and (2) the remaining managers were slowly marginalized. Those managers who decided not to leave Medco tended not to take Bob on, at least directly, and they had little real authority and certainly no power. Inadvertently, Bob had created an organization of “managerial pygmies.” In effect, Bob was a victim of his own need for control. This phenomenon is part of what we have previously termed the “entrepreneur's syndrome.”10

       When Business Plans Were Made, There Was Very Little Follow-Up, and Things Did Not Get Done . As is true of many small and growing firms, Medco had traditionally operated on an ad hoc basis. No formal strategic planning system was needed, since Bob had provided all of the organization's direction. Further, the informal structure had allowed Medco's employees the freedom to generate new product and marketing ideas.

      As the company grew, however, Bob and his senior management team began to realize that they needed to monitor its operations. Unfortunately, Medco had not developed the systems necessary to have accountability.

       There Was a Lack of Understanding About Where the Firm Was Going . Many Medco employees complained that not only did they not know what was expected of them; they could not understand where the company was headed in the long term. This resulted from the inability of Medco's management to communicate its vision for the future to the company's personnel. Employees were aware that changes were being made, but were not always sure how these changes would affect them or their departments. Consequently, employees experienced high levels of anxiety. When this anxiety became too great, many left the firm.

       Most People Felt Meetings Were a Waste of Time . Employees complained that too many meetings were held among top managers and not enough among the lower levels of the organization. In addition, those meetings that were held were often inefficient and did not result in resolutions to problems. It was because few meetings had written agendas or minutes – many of those attending described them as “free-for-alls.” They were at best discussions, and at worst fights between departments or individuals. Worst of all, they went on interminably.

      Moreover, people complained that most meetings were called on an ad hoc basis. Since these meetings were unscheduled, people typically came to them without any sense of their purpose and certainly with no preparation. Thus, they tended to have the atmosphere of bull sessions in which people shot from the hip. In addition, people felt that they could not plan their work because they were constantly interrupted for “crisis” meetings.

       Some People Began to Feel Insecure About Their Places at the Firm . This problem grew out of the many changes taking place and the large number of problems the firm was encountering as it grew. Some original founding members were terminated and replaced. This caused people to wonder who was next. Although many recognized that some employees had not grown as the company grew, they worried about their jobs and their places within the firm. This, in turn, led people to spend an increasing amount of their time covering their vested interests.

       The Company Grew in Sales but Not in Profits . Medco, like many entrepreneurial firms, traditionally had been most concerned with increasing sales. It adopted the philosophy of many growing firms: “If we're selling more, we must be making more profits.” Unfortunately, this is not often the case. The other side of the profit equation, costs, often increases along with sales, and if costs are not contained, the firm soon may find itself in a position of losing, rather than making, money. Thus, although Medco sales were increasing at a rapid rate, profits were remaining relatively constant.

      Medco's problems certainly are not unique. Indeed, these are the classic symptoms of what we have termed “growing pains,” as will be described in detail in Chapter 5. It should be noted that while these “symptoms” represent problems in and of themselves, they also suggest a deeper, more systemic organizational problem. Specifically, they signal that the organization is coming precariously close to choking on its own growth. This, in turn, indicates that the organization must change its very nature; it must make a transition to a different kind of organization, a more professionally managed firm with processes and systems to facilitate growth.

The Need for Transitions

      Bob Mason recognized that his business was experiencing problems. He realized that the organization had outgrown the current way it was being managed, and that both he and the organization needed to make some serious changes in the way things were being done.

      His

10

Eric Flamholtz and Yvonne Randle, The Inner Game of Management (New York: AMACOM, 1987).