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What Force Stops 98% of Businesses From Growing?

2 weeks ago

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It’s a well known fact that most businesses never achieve their full potential.  A high percentage of start ups will fail during the first few years, but those that do continue will often reach a plateau and stay there, not really growing as the years go by.  So what is it that’s holding them back?

Well, in some cases, the business owner just doesn’t want to grow the business, or doesn’t know how to.  Other possibilities are that they aren’t able to access the finance to enable them to grow, they don’t have the competitive advantage enjoyed by other businesses, or they lack the resources.

To be honest, I have never believed that these factors are really the problem, they are just an excuse.  If people are prepared to work hard enough and look for opportunities, they will always find the solution to overcome these challenges, and indeed any other external factors that they believe are holding them back.

What is holding your business back?

The truth is that the only thing that ever stops us growing is US.  But when it comes to a business, what is it specifically about “US” that’s the real challenge we have to overcome?

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Well, in my 20+ years of working with hundreds of different business, of different sizes and in many different sectors, there is one clear factor present in businesses that grow, and lacking in those that don’t.  That factor is the ability to manage a bigger group of people.  The one thing every growing company has in common is that it has more people this year than it did last year.  If it isn’t managing those people better each year, then the business will suffer and to go backwards.

Defying gravity

So is the answer simply that you need to get better at managing more people in order to grow your business?  Well, yes and no.  There are some hidden forces at play here.  Imagine you are a child, and your ball is stuck high up in a tree.  No matter how hard you jump, you can’t reach that branch, because gravity is at work to keep you close to the ground.  Just as gravity prevents you leaping 10 metres in the air, in management there is a force that will prevent you managing more people effectively.

In 1933, Vytautas Andrius Graiciunas (1898-1952), a Lithuanian management consultant, management theorist and engineer, published a paper called “Relationship in Organisation”.  He was interested in why it seemed to get harder to manage each subsequent new person coming into a group.  He found that managing one person was OK, but managing 2 people was more than double the effort of one, and managing 3 was more than 50% more effort than managing a team of 2.

Managing multiple relationships

In his study of groups, he started to see that there was more at play than just a relationship between one person and another, and every new person exponentially increased the number of relationships that had to be managed.

This is because each new member of the team would have a relationship with all the other team members. In fact, a complex web of relationships is in play within a team, further complicated by the fact that people may well act differently in a group setting than in a 1:1 setting.

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For example, say we have manager A, and employees B and C. The relationships that exist in this scenario are:

  1. Between A & B
  2. Between A & C
  3. Between B & C
  4. Between A & B when C is present
  5. Between A & C when B is present
  6. Between B & C when A is present

So there is much more going on that you might at first think!  With just one manager and 2 team members, there are 6 relationships to manage.  With one manager looking after a team of 5, there are 100 relationships to manage.

In fact, Graciunas calculated that, with only 10 people to manage, you would have to be able to cope with over 5000 relationships!  And guess what?  Just as you cannot overcome gravity, you cannot overcome the basic fact that the human brain can only cope with about 200 relationships, and for some people, me included, even 100 would be a struggle.

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So how does knowing this fact help us understand what we need to do in our businesses to help them to keep growing without us getting overwhelmed?  Well, no differently to when we understand that we cannot overcome gravity whilst here on earth, and that there will always be a limit on how high we can jump.  We should work on another way to solve the problem, and maybe use a ladder instead!

Graiciunas concluded from his studies that 6 people was the most that anybody could readily manage.  My feeling is that larger groups can work, but they need to be engaged in more process, direct-order driven roles, where the task is simple and easily managed.  In the old manufacturing days, this was possible.  In today’s automated world, I think there are now less cases where this is possible.

Your job as a business leader is not to learn how to manage more and more people, (i.e. jump higher), but to build a management structure (ladder) that allows you to overcome the management “gravitational force” that Graiciunas was so helpful in identifying.

So go on, take ACTION, and put in place the steps to build your business to infinity, and beyond!

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