Scaling Up with Verne Harnish to Increase Your Capacity

July 7, 2020 | Roger and Susie Engelau

“I started my company at age 19. Though I hadn’t gone to college I read a lot of business-building books, blogs, and articles and as I hired people I read leadership and management content. In a few years I grew my manufacturing company to $14M on my own. By the numbers, I knew I was successful but I didn’t feel successful. I knew, too, that I hadn’t done it on my own. I was thankful to God for the services and the jobs the company provided to the community.

But the business seemed stuck.  It felt like it was getting away from me. I was working way too many hours yet important things continually fell through the cracks. There were increasing HR situations and legal issues unattended to, financial and sales projects unfinished, and IT and equipment innovations that needed researching… and I was losing ground on all. Worst of all, I couldn’t seem to push past the $14 million revenue mark. 

If my business success to date was an indicator of my abilities then I thought I should be able to figure this out. So I read more; it had worked for me before. I prayed about it. It began to dawn on me that I couldn’t run a company this size on my own. I simply didn’t know what I didn’t know. Realizing I might not be all that open to help,I worked a bit on humbling myself in order to open myself up for help. I ran across a blogpost by a business coach that offered a workshop in Indianapolis. After some digging about the business coach’s company, I attended the workshop. 

There I found peers—smart, successful business owners—whose stories were the same as mine, in varying stages of “stuckness.” There I found tools that would help me apply what I knew in my head but somehow didn’t implement. I found a partner who would work by my side to insure the slow and steady progress that would put my company back on an upward trajectory. I found methods of building and coalescing a management team that would increase our company’s capacity. I found a coach I could call on at any time to bounce ideas and problems off of and get quick answers and a way forward.”

In our June Growth Plan Workshop, this business owner gave this unsolicited testimonial and credited his business coach with the doubling of his revenue in under 5 years.

We hear testimonials like this regularly… and we see business owners in similar situations regularly. Business owners are often the head of everything. If we drew your org chart, your name would be in the top center box with a title like Owner, President, or CEO and your name would probably also be in most every box in the next row of positions underneath it:

    • Sales and Marketing Manager
    • CFO
    • Operations Manager
    • Head of Information Technology
    • HR Manager
Scaling Up your capacity to match your complexity

Growth is great but it produces complexity. When your business is small you have a small number of functions. But as it grows you have need for more and specialized functions… from HR to product development to financial reporting to more managers, more staff, more suppliers and on and on.  Every small business will hit this critical point of complexity eventually. The rules change and what worked before won’t work forever.

Verne Harnish quantified it. In his book, Scaling Up, he says the rule of thumb is that when growth doubles, complexity increases 12 times!  Growing from 3 to 4 employees produces a 33% increase in personnel but a 400% increase in complexity!

To deal with this explosion, you need to begin to consider a number of the foundational elements to enable you to continue to love what you do… and for you to retain some semblance of balance between your business and personal life.

As complexity increases so should capacity.

Key Scaling Up foundational elements to grow capacity

To grow capacity in the least expensive way, you want to add support staff to key people who are feeling the pinch of time constraints. The goal is to transfer lower-value activities to people you pay less in order to maximize your investment in highly compensated leaders thereby producing the greatest return on their unique skills and experience.

We know it worries you to add overhead costs but scaling up capacity involves the right investments. We’ve never seen the additional support staff strategy fail to produce a significant return as business owners regain the capacity to think and plan and innovate and grow!

Building your leadership team is another foundational element necessary in scaling up. Identifying leaders and clarifying their areas of responsibility allows you to delegate to them, essentially multiplying your personal capacity many-fold.

We’ve talked about the need for regular planning in many prior blogposts. As you begin to work through others, it’s vital to provide a clear vision for what you want them to accomplish in the upcoming periods so that they and you can move fast. A lack of clarity breeds confusion, frustration, and uncertainly that can bring the best organization to its knees!

Running a business is ultimately about having fun and making your community better. Scaling up your capacity to meet your complexity will ensure that you achieve both.

P.S. Click here to hear our founder talk about how your small business could benefit from business coaching.

P.S.S. Think about listening in on Inspire Results Business Coaching’s Friday 9am webinar, “Back to Business Roundtable” where we discuss this topic each week. Email Kena for an invitation.