GrowthStarHub Business Site
StarHub Business Site
Why unplanned growth
hurts your business
For all of our collaborations and tech startups, businesses in Singapore remain varied on the topic of growth and ways to deal with the challenges it brings. Growth opportunities may be in abundance across the Singapore economic landscape, however a growth in your business’ service or product demand might not always spell financial growth.
Some companies may set geographical expansion as priority yet fall short in their organisational infrastructure. Unpredicted surge in demand, despite being potentially profit-making, could instead lead to a downward spiral when businesses lack the technology and skillsets to cope.
In Singapore, six-in-ten organisations found growth to be challenging last year in 2015, with nine-in-ten suffering from the pitfalls of “unplanned business growth”. As small and medium-sized enterprises (SMEs) make up 99% of Singapore’s enterprises, we witness more SMEs describing growth as “painful” when transiting into bigger enterprises.
High turnover rates are just the tip of the iceberg
According to Asia Business Outlook Survey 2016 findings by The Economist, Asia's fastest-growing economies are the most volatile with staff turnover. When an unexpected growth surge occurs, the most direct implication would be higher demands for goods and/or services, leading to an increase in workload and potentially, higher turnover rates due to weak management.
“When operating in Asia’s fast-growing emerging markets, employers need to be prepared for tendencies—and geographically varying tendencies at that—towards staff turnover and strategise accordingly.” 1
Employee turnover has a direct effect on revenue and profitability. Hiring expenses, training labour and lost sales are just some implications on the business. Even if companies are financially stable enough to tide through this, the resulting low workplace morale can spread like wildfire, lowering productivity and the effectiveness of employee retention strategies.
More than half of business leaders in Singapore have expressed concern at the increasing pressure on their staff beyond acceptable level during unplanned growth, prompting key employees to resign.
Loss of customer intimacy
Increased workload from unplanned business growth could also fall on the lap of the customer service team. With fewer or even newer hires due to employee turnover, the pressure to serve more customers at once could force business leaders to adopt formulaic, systematic procedures that may gradually water down customer intimacy, especially to the existing loyal customer base.
“Customer intimacy is the edge that will give the small independent retailer the competitive advantage against the big boys.” 2
A fast expansion can also have a diluting effect on the company culture. Hiring new team members hastily may result in poor culture fit. With less time on hand to work with the team personally, the company is prone to become more segmented and bureaucratic.
Globally, six-in-ten business owners revealed their concerns of the excessive pressure on operations that unplanned growth brings, resulting in damaging quality and customer satisfaction.
Lack of resources and technology to cope
Manpower may be Singapore’s biggest asset, then again, human effectiveness at work is not without the aid of physical equipment and technology. Resource availability is a massive concern for business leaders when considering taking on larger, complex projects. A small slip can potentially lead to failure to deliver, damaging brand reputation.
Physical equipment, technology and intelligent systems might not be able to keep up with the new production capacity. Unsuspectingly, previous profitable operations might even be rendered obsolete as inefficiencies that previously went unnoticed at a small scale, could now be irreparable.
In a 2016 international research on the pitfalls of business growth by software provider Epicor, almost eight in ten businesses (78%) worldwide believe in the importance of an integrated and effective IT infrastructure to support them in times of growth.
"Adoption of new technologies should position organisations to reap the benefits of newfound efficiencies and pave the way for growth." 3
In light of this, there is no surprise that managing growth expectations is one of the most complex challenges businesses are currently facing. Growth can be difficult but rewarding. Business owners can manage and harness the opportunities sudden growth presents by scaling up, ensuring that technology infrastructure and staff are prepared for possible upticks in demand. They should also be able to respond to roadblocks in a timely, proactive manner. With adequate proactive preparation, growth will open many new doors for your business.
2 Sam Allman: Customer intimacy leads to customer loyalty