Basic Management Challenges for Emerging Companies

While the success of any emerging company is dependent on a number of factors—the specific business model, technological advantages, the skills and talents of the management team, and competitive and other environmental factors—it is now well understood and accepted that companies often rise or fall based on whether they are able to create management systems that effectively support growth while minimizing and the tension and strife that often occurs when organizations expand rapidly and are confronting with substantial demands from external sources.  There are obvious differences in the scope and detail of the management systems used by smaller companies and large global organizations; however, the basic challenges are essentially the same regardless of size:

  • A clear organizational structure must be defined that includes all of the key functional activities required for the company to achieve its goals and objectives.
  • Markets with the best potential for the company’s products and services must be selected and sales and distribution strategies must be designed to meet the specific requirements of each market.
  • Production methods and strategies must be established that control costs while satisfying quality standards and keeping inventory levels low to free up capital while still allowing for timely fulfillment of customer orders.
  • Risk management strategies, including insurance and security measures, must be established. 
  • Attention must be paid to governmental and community relations including compliance with applicable laws and regulations.
  • Human relations policies must be established to ensure that the business runs smoothly and the company is able to recruit and retain talented managers and employers.
  • Planning systems, including performance evaluation and measurement tools, should be created and regularly evaluated and the key elements of the company’s plan should be communicated throughout the company.
  • Financial controls and reporting systems, including projections and budgeting systems, must be implemented and continuously reviewed to ensure the company is able to finance growth, invest in new opportunities and keep track of all aspects of business operations.

No company has solutions for all of these areas in place at the time the business is launched and it is common to try and address strategic issues and other growing pains through informal meetings and personal observations long after it is clear that the preferred and necessary approach is identification and adoption of formal and sophisticated management systems.  The consequences of neglecting the task of creating management systems is that the company stumbles once it hits a certain size and is unable to take advantage of growth opportunities that can be seized and exploited by competitors that have the systems in place.  An unprepared company without reliable management systems cannot deliver on promises made to customers, suppliers and investors.  Moreover, the senior managers of the company will grow increasingly frustrated with the costs of burdens of attempting to carry out activities that should be routine after a certain point in time.

 

Clear and concise business strategies coupled with management systems that address each of the areas above are essential to facilitating coordination within the company and ensuring that necessary information is collected, analyzed and distributed to those inside the company that have a “need to know” and to external stakeholders such as the board of directors, investors, banks and regulators.  Also, as referred to above, management systems allow senior managers to reduce the amount of time they spend on routine transactions and focus on the “big picture” and expanding the organizational domain of the company.  The utility of management systems for emerging companies during their start-up and early growth stages would appear to be clear; however, there is still much to be learned about how such systems can be implemented for these types of companies given that most of research in this area has focused on larger firms that have been in business for significant periods of time.

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