that typically occur as a company grows, this section presents a case study of an entrepreneur, Robert Mason and his company, Medco. Although the case selected is that of a medical products company, the issues faced by the entrepreneur and the company cited here are similar to those faced by CEOs in diverse organizations with revenue ranging from $1 million to substantially more than $1 billion. In brief, it has been selected as a prototype of a widespread phenomenon, not one that is limited to certain companies or industries.
Bob Mason, the founder of Medco, began his career as a salesman for a major medical products manufacturing and marketing firm. He worked hard to learn all he could about the industry, and discovered that the company for which he was working was not adequately meeting all of its customers' needs, and that there was an untapped market for medical products. So he decided to start his own company, a medical products business.9
Apparently Bob's belief about the demand for his products was accurate, because within a few years, his business began to experience rapid growth. Within five years, the company had reached more than $20 million in annual revenues, and it was estimated that within four more it would achieve $50 million in yearly sales.
When Medco reached $20 million in sales, and Bob Mason was feeling good about that, he also became aware that the business was beginning to experience certain organizational problems, which are what we term “growing pains,” as described below:
Many People Were Not Aware of What Others Were Doing . A significant number of people did not understand what their jobs were, what others' jobs were, or what the relationships were between their jobs and the jobs of others. This problem resulted, in part, from a tendency to add personnel without developing formal descriptions of roles and responsibilities. Since employees were added on an ad hoc basis whenever a staff shortage seemed imminent, there was often little time to orient them to the organization's operations or to train them adequately in what their own responsibilities would be. Indeed, there was no formal training program.
Some people were given job descriptions, but did not adhere to their specified roles. Others were given a title, but no explicit responsibilities. Surprisingly, many individuals often did not know to whom they were to report, and managers did not know for which employees and activities they would be held accountable. People learned what they were supposed to do on a daily basis; long-range planning was nonexistent.
Interactions between Departments Was Also a Problem . Managers often did not understand what their responsibilities were and how what they were doing fit in with the firm's overall operations. New departments were created to meet Medco's product and marketing needs, but many managers were not aware of how these departments fit in with the rest of the organization. One manager complained, “People sit outside my door, but I don't even know what they do.” Another new manager described his introduction to Medco as follows: “I was walked to an area and was told: ‘It's your department. Run it.’”
This lack of formal roles and responsibilities made it easy for personnel to avoid responsibility whenever a task was not completed or was completed unsatisfactorily. This also led to duplication of effort between departments. Since no one knew precisely whose responsibility a particular task was, two or more departments or people often would complete a task, only to find that it had already been accomplished by someone else.
People Felt There Were Not Enough Hours in the Day . Most employees felt overloaded. They commonly stayed after hours to complete their work. Department managers, in particular, felt that their workload was too great and that deadlines were unrealistic.
This situation resulted, in part, from the lack of adequately developed day-to-day systems to support Medco employees' work. The accounting, operational planning, and communication systems were adequate for a small company, but quite inadequate for one as large as Medco had become. Systems for purchasing, inventory control, and even distribution were either poorly developed or nonexistent.
People Spent Too Much Time Putting Out Fires . Perhaps the best indication that Medco was beginning to choke on its growth was that employees spent an increasing amount of time dealing with short-term problems resulting from the lack of long-range planning. This was particularly evident in the constant lack of space within the company's headquarters. It appeared to most employees that as soon as the company increased its office space, the space already was filled, and it was time to begin planning for another move. It seemed that there was never enough space or equipment to support the company's staff adequately. When they worked at the firm's headquarters, salespeople usually arrived early to ensure they would be able to find a vacant desk from which to make their calls. Employees who did not go out into the field attempted to handle the cramped space by creating “schedules” for using phones, computers, and even desks.
Employees Began to Feel That Medco Never Planned, It Simply Reacted . A joke around the company was: “At Medco, long-range planning means what I am going to do after lunch.” This was caused partly by the changes in the marketplace and the new demands placed upon the company. It also resulted from the tendency of entrepreneurial companies like Medco to spend most of their time simply staying afloat without keeping an eye on the future.
Employees began to think that, simply because crisis is the norm at the company, that is the way they should operate. They began to call themselves “the fire fighters,” and even took pride in their ability to deal with crises.
There Were Not Enough Good Managers . Most managers at Medco were promoted to their positions in recognition of service. Some were good managers, but most were described by their direct reports as “good technicians who lack people skills.” Further, they were seen as clones: Many employees believed that management had one and only one way of doing things, and that to deviate from the norm would result in adverse consequences.
Plenty of people had the title “manager,” but relatively few really behaved as managers. After promotion, many people simply kept doing the things they had done in their former roles. They were poor delegators, often doing the work themselves rather than assigning it to others. As a result, employees came to believe that their managers did not trust them.
Bob Mason was a strong individual who wanted things done his way, and he wanted to control almost everything. He recognized this, referring to himself as “someone who sticks his nose into everything.” Few decisions were made without Bob's approval or review. As a consequence, one of two things tended to happen concerning managers: (1) the stronger managers tended to butt heads with Bob and ultimately left; and (2) the remaining managers were slowly marginalized. Those managers who decided not to leave Medco tended not to take Bob on, at least directly, and they had little real authority and certainly no power. Inadvertently, Bob had created an organization of “managerial pygmies.” In effect, Bob was a victim of his own need for control. This phenomenon is part of what we have previously termed the “entrepreneur's syndrome.”10
When Business Plans Were Made, There Was Very Little Follow-Up, and Things Did Not Get Done . As is true of many small and growing firms, Medco had traditionally operated on an ad hoc basis. No formal strategic planning system was needed, since Bob had provided all of the organization's direction. Further, the informal structure had allowed Medco's employees the freedom to generate new product and marketing ideas.
As the company grew, however, Bob and his senior management team began to realize that they needed to monitor its operations. Unfortunately, Medco had not developed the systems necessary to have accountability.
There Was a Lack of Understanding About Where the Firm Was Going . Many Medco employees complained that not only did they not know what was
This case is based upon an actual situation, but details have been changed and the company has been disguised.
Eric Flamholtz and Yvonne Randle,
