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Growth Stages for Emerging Companies

It is generally believed that emerging companies go through several identifiable stages of growth, each of which has its own set of "typical" business characteristics and accompanying management issues and problems.  While a single model of growth and development certainly cannot explain or predict everything for the management of a particular firm, it can be useful in providing them with a sense of where the company stands and the challenges that are likely to require their immediate attention and in the foreseeable future.  Armed with that information, management can make intelligent choices about acquiring the necessary resources for the business, establishing priorities for work activities, and designing and managing the organizational structure of the firm.


There is no single theory regarding the stages of development of a business that is universally accepted and there is real controversy as to whether or not firms really do need to go through a single, predictable path as they grow and mature.  Various factors, notably significant advantages in communications technology and rising standards of living in foreign markets, have pushed young businesses into global markets soon after formation and created challenges for their managers that were traditionally deferred until the firm had gone through an extended period of domestic growth and expansion.  Companies are also becoming involved in acquisitions and strategic alliances with outside business partners before they have had an opportunity to fully build and stabilize their own internal business infrastructure.  As a result, management may be overwhelmed by the size and scope of the human and physical assets that they need to oversee and the challenges of coordinating activities and strategic goals with new stakeholders who were not part of the original team that conceived and launched the company in the first place.


We will delve into stage theories of the evolution of a firm in great detail at some point in the future.  For now, however, let us simply accept the utility of recognizing and understanding the following stages of development for an emerging company: concept stage; formation and organization stage; crisis and survival stage; initial growth stage; expansion stage; and maturity stage.  For those of you who don’t like to think of an emerging company as “mature,” simply apply that description to a specific product line or business unit within a larger firm that is hopefully continuously growing, expanding and integrating new products, technologies and markets that must themselves go through their own formative growing pains and challenges before they become an integral and permanent part of the company’s business.  What I hope to do over the next few weeks is present a series of posts that identify some of the key business characteristics associated with each of the stages—immediate business objectives, predominant management style, organizational structure, and the state of the company’s product and market activities—and the main managerial challenges that come with graduating into a particular stage (e.g., resource management, sales and marketing, and communications and cooperation within the organization).  I’ll also discuss some of the business characteristics and managerial challenges in detail to explain how they change across stages so that founders and managers of emerging companies can understand where they might be heading and plan accordingly.  Finally, I’ll present a few illustrations of how this entire framework can be used as an assessment tool to provide help the executive team of an emerging company establish priorities with respect to business and organizational planning.


Differences in Managerial Values in China

Chinese managerial values have been the object of numerous studies and attempts to identify and explain differences among Chinese managers have focused on the location and level of industrialization of their businesses, the level of education of the managers and the age of the managers (i.e., “generational” differences).  In “Culture and Management in China”, which appeared in M. Warner (Ed), Culture and Management in Asia (London: Routledge Curzon, 2003), Child and Warner summarized some of the most interesting and important findings as follows:

  • Individualistic attitudes were found to be more prevalent among “cosmopolitan” Chinese (i.e., managers living and working in regions exposed to higher levels of foreign influence, typically coastal area) than “local” Chinese; however, both cosmopolitan and local Chinese managers maintained a strong commitment to traditional Confucian values such as societal harmony, personal and interpersonal harmony and virtuous behavior.
  • A comparison of Chinese managers in Guangzhou, a “cosmopolitan” city that has experienced substantial contact with foreign investors and influences, and the more traditional city of Chengdu indicated that individualism, openness to change and self-enhancement were seen as much more important by Guangzhou managers and that those managers attached less importance to collectivism than their counterparts in Chengdu, although they were not willing to abandon Confucian values such as collectivism in their entirety. 
  • A study of Chinese managers and professionals working in SOEs concluded that “New Generation” managers—aged 40 or younger—scored higher on individualism and lower on collectivism and Confucianism than their counterparts in two older generational categories (i.e., the “Current Generation” (aged 41 to 51) and the “Older Generation” (aged 52 and older)).  Based on these results, which were achieved after controlling for other demographic factors (e.g., religion, gender and position with the firm), the researchers concluded that the new generation of Chinese managers are “more similar to Western managers than are the previous generation, especially in respect to individualistic behavior”. 

Child and Warner noted that the results of the research appear to indicate that younger managers and workers in the coastal regions of China, particularly in urban areas, have had substantial exposure to new and powerful economic and social forces such as consumerism and the Internet and have also had heavy interaction with foreign investors, and this has led them to question, and deviate from, traditional Chinese cultural values and embrace elements of Western-style culture such as individualism.  Child and Warner also caution, however, that it remains an “open question” as to just how much traditional Confucian values are being diluted or forsaken.  For example, they referred to e another study of Confucian values among a group of Chinese managers also found that while some elements of Confucianism are weakening among those in the younger generation certain fundamental values appear to remain in tack for the time being including benevolence; temperance, including harmony; and persistence, including perseverance, patience and adaptation.  Child and Warner concluded that perhaps younger managers are seeking to separate the values that they adhere to in the workplace from those that they continue to follow in their private and community lives.  In any case, there is clearly a struggle going on in China between the demands of pursuing success in the new world economy and the need and desire to maintain the social traditions and cultural values that have played a fundamental role in preserving the unity in the country for thousands of years.



Creating a Skilled and Diverse Board of Directors

Assisting clients in putting together a skilled and diverse board of directors is the subject of my latest post on West's Business Currents.


Hit the Ground Running in Counseling New Clients

In my latest post on FINDLAW I provide ideas on how to "hit the ground running" when counseling new clients.