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July 2004

Is your Business Flat? Maybe it's a Plateau

By "The Growth Strategist", Aldonna R. Ambler, CMC, CSP

When a division President says that "business has been pretty flat, " in a single word, he/she conveys a lack of change in gross revenue, net profit, the size and number of customers, and the number of employees. One can just imagine the graphs and charts that provide details about the plateau at corporate meetings. The word 'flat' also conveys how it feels to work in that division. Energy levels are flat. The vibrant taste of innovative juices is long gone.

What Causes a Plateau?

Certainly, shifting economic winds can slow the growth of a company that had previously been on fire. My 30+ years of experience as a growth strategy consultant has taught me that 90% of the time flat business is a matter of management issues and internal dynamics. The organization has plateau'd!

One of the first steps in "blasting past a plateau" is to assess the underlying causes. The initial inclination is to look at shifts in the economy, the impact of competition, customer purchasing patterns and problems within distribution channels to find causes for a plateau. However, it is important for a Division President not to camouflage organizational causes by becoming caught up in the quest for external data.

Frankly, in my experience plateaus are most often created by management issues rather than external causes. Plateaus are most often a matter of organization dynamics, a loss of psychic energy and/or an inability of the executive to face transformational change. The organization was compromised before the external factor happened.

When Do Plateaus Occur?

Plateaus occur when the major elements of a business are out of balance. Most businesses excel in one or two areas, such as marketing and sales or production and finance. The typical scenario is that at least one major aspect of the company's functioning lags behind the others . Growth stresses the weak areas - the limiting factor becomes a brake to continued growth. We all know of companies that have lost customers while they had to focus on the installation of a new computer system or wait for their newer employees to learn enough to be given some authority to make decisions. All too often production and/or financial management lag behind the capacity to bring in new customers. The plateau occurs when the limiting factor must be faced.

What are the typical responses to Plateaus?

Ironically, breaking out of a plateau can be more difficult than digging out of a hole. When a division or department is clearly in trouble, leadership tends to kick in and make decisions. It may be no fun to lay people off, reduce operating budgets and postpone promotions, but hopefully your company can respond when it starts to bleed red ink. But somehow, a plateau doesn't cue emergency action.

The most frequent response to the development of a plateau is denial. Denial happens where the leader acts as if the plateau doesn't exist. The executive assumes that things will eventually change and asks him/herself 'why they should bother doing something now when there is no crisis?' Goals continue to be set the same way they have been for the past few years.

A second typical response is avoidance. "We've grown to this point doing things in a certain way. Why should we change at this point?" So many business executives have become comfortable dealing with operational issues. They enjoy dealing with current customers. There is little risk in making incremental improvement to products and services.

The third classic response is 'lip service' where the executive says that he/she wants to make a change, but resists learning new skills or isn't aware of the new skills needed to actually address the intractable plateau. Many executives really aren't that good at dealing with internal dynamics and employees . nor do they really want to.

As the executive fails to address the dynamics of the plateau, the decisions are made for him/her by the pre-programmed responses of employees to the business environment.

But if a plateau persists, the next phase will inevitably be a downturn, so it's important for leaders to find ways to "blast past a plateau" and not linger too long.

What are More Productive Responses to Plateaus?

Use dynamic instead of arbitrary goals

Goal setting methods must change when a leader is facing a plateau. Instead of incremental goals (e.g. "Let's try to grow 10% across the board."), dynamic goals make more sense. In dynamic goal setting, each aspect of the business is brought into a new balance. The contribution of key functions and processes must be recalibrated. The rebalancing may look like the following - Perhaps improving the sales department's closing percentage could result in 10% improvement all by itself. Maybe 5% growth could be accomplished through technology improvements. Maybe another 2% growth can be accomplished through the acquisition of new skills. Perhaps another 7% growth can be accomplished by targeting larger accounts. Maybe another 6% profit can be achieved through improved efficiencies or cost cutting. Perhaps more focused marketing could result in 3%.

Resolve long-standing internal conflicts

When organizations are in growth mode, internal conflicts between different functions take a backseat. While an annoyance, they are less important than the immediate requirements of closing new customers, supply chain, financing and product improvement. Plateaus are telling you that more and more unseen resources are falling into these wasteful holes. The innovations that are needed for future success are stalled. Ask people you trust what internal conflicts are getting in the way? What would be their solution? Let this 'kitchen cabinet' help clarify the issues and recommend actions. Your job is to be decisive.

Revisit the External Landscape

Plateaus often occur when the previous view of the external landscape has played itself out and it's time to update everyone's view of where things are and where they are going. This is not the time-consuming wordsmithing of mission (which could well remain the same despite the plateau). It is people coming to grips with new realities so that execution can now match the day to day realities that people are facing. The review of the external landscape would help people articulate execution plans that flow from new realities.

Expand your repertoire of growth strategies

Division personnel can become over-identified with a particular way of doing business. Perhaps it is timely to challenge long held conclusions. When a plateau occurs, it is helpful to expand the growth strategies utilized by the division or corporation. Here are a few possibilities:

  • The corporation has executed strategic alliances, but has never tried true joint ventures. Look into it.
  • Perhaps the division leader has looked into licensing products but never considered franchising. Could that be an opportunity?
  • Perhaps the division has tried to increase its control over various channels of distribution, but has been reluctant to consider true geographic expansion. How would geographic expansion contribute to your company growth?

The Velcro Point

When growth is stalled it may be a plateau. Plateaus are an internal imbalance. Don't let external conditions camouflage the need to quickly address internal dynamics.

 

Aldonna R. Ambler, CMC, CSP, known as The Growth Strategist helps companies reach their goal of Achieving Accelerated Growth With Sustained Profitability® through a combination of speaking, consulting, executive coaching, authorship, and growth financing. Aldonna was the national (USA) "Woman Business Owner of the Year" for 2000 and was recently inducted into a "women's hall of fame". For more information contact Aldonna Ambler at
+1-888-Aldonna (253-6662) or at www.TheGrowthStrategist.com.

©2004 Innovate LLC (all rights reserved)

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