CEOs of manufacturing companies are still optimistic about their growth prospects. U.S. manufacturing, helped by strong auto sales and overseas equipment demand, has remained an economic bright spot. Asian economies continue to be a bright spot, even as Europe’s debt crisis caps exports. As the economy in the U.S. and the emerging regions continue to improve and provide organizations ample growth opportunities, organizations that have the right products and execute well can grow significantly faster than their competition. But how can they ensure that their systems and processes are setup to help them effectively sustain this fast growth in an economical manner?

There are three things that organizations need to do right to sustain their growth:

1.)    Create an organizational and systems structure that insulates fast growing divisions from corporate bureaucracy, so that they can continue to grow fast.

2.)    Ensure systems and processes in fast growing organizations are flexible and scalable, so that they don’t come in the way of growth.

3.)    Provide managers an ability to continuously measure performance of all activities, so that they know what is working well and what is not and take rapid action.

Let’s look at each capability in more detail.

Setup an organizational and systems structure that supports growth

When large companies acquire a fast growing small- to mid-sized company to get into new markets, they often set it up as a subsidiary, so it can continue to make fast operational decisions.  Similarly, international operations in fast growing economies are often setup as separate subsidiaries so that they can aggressively pursue local growth. 

However, these subsidiaries still need to coordinate certain activities closely with the corporate. For example, subsidiaries also have to support an increasing volume of cross-company purchasing and sales, as well as internal invoicing/billing.

Similarly, corporate controllers want to ensure that financial consolidation is accurate and timely. However, despite the need from corporate for coordination, control and visibility, fast growing subsidiaries often want to use a separate business system so that they can maintain autonomy in decision making and execution at the subsidiary level. 

Such a deployment model – where corporate and subsidiaries have different ERP systems by design – is called two-tier ERP model. Once a two-tier ERP model is established, fast growing subsidiaries should select a business system that meets their budget, has functional and regulatory requirements and integrates well with the corporate business system. 

Ensure systems and processes are built for where you want to be

The organizational processes and systems at many fast growing companies may be well suited to today’s challenges, but may well buckle under the strain of new demands or make it impossible to meet them.   

It’s important for a fast growing company to determine which processes and systems will come under particular stress when it grows and proactively address them before it gets there. Similarly, the existing systems, processes and methods at many fast growing subsidiaries for tracking internal purchasing break down in light of higher volume/diversity of product flow. 

In addition, an increase in intra-company transactions also puts additional stress on their financial consolidation processes. Hence growing companies (and subsidiaries) need systems that and processes that can scale rapidly and do not present an impediment to growth.    

Provide managers an ability to continuously measure performance

Fast growing organizations need the flexibility and speed to move faster so that they can respond quickly to changing market dynamics, as well as capitalize on opportunities. However, they cannot afford to move quickly in the wrong direction and lose momentum.  

Growth also naturally creates new interactions and processes – expected and unexpected – and often at a fast pace. This requires that managers are able to take initiative beyond the confines of their current jobs; therefore, managers need to have clear visibility into what is working well so it can be quickly capitalized upon, as well as take into consideration what is not working well so it can be rapidly addressed.

 

In conclusion, if organizations setup an organizational and systems structure that insulates fast growing divisions from corporate bureaucracy, ensure systems and processes in fast growing organizations are setup to be flexible and scalable, as well as provide managers with the ability to continuously measure performance of all activities. This will ensure that they are setup to grow fast.

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Edited by Allison Boccamazzo