How to Lay the Groundwork for Growth as U.S. Economy Grows Stronger

Kaufman Rossin | American City Business Journal | July 19, 2016

With the U.S. economy showing positive signs, you may be feeling optimistic about the health of your business. You might be planning to hire staff, expand into new markets or add new product lines. However, if your operating model is not scalable, your company may not be prepared to handle future expansion.

What works for a 20-person, $10-million-a-year firm might not work for a 100-person, $50-million-a-year company. It’s important for business leaders to understand support infrastructure demands while they are building their organization, so that they can adapt to future needs.

It may seem obvious that a company’s infrastructure (aka operating model) should be designed from the start, but it’s rarely done. Many entrepreneurs are laser-focused on perfecting their products and growing their customer base while thinking the infrastructure will naturally create itself. In some cases, by the time a business owner realizes the operating model needs attention, the company’s cost structure is unnecessarily bloated, and management will need to tackle a time-consuming, expensive exercise to unwind all of those complexities.

Effective management of general and administrative expenses focuses not only on doing things better but doing better things. For example, there may be business processes that you can automate, with the potential to not only increase efficiency and reduce costs, but also to enable high-earning support staff to focus on more strategic growth initiatives and analyses instead of spending time on routine tasks.

Likewise, there may be aspects of your operations that could be standardized, such as accounts payable, and other aspects, such as financial planning and analysis, which could remain specialized.  In some cases, standardization of processes can help to lower risk and improve efficiencies. Specialization allows for greater customization to help meet the needs of internal stakeholders and customers.

The following are a few questions to consider for assessing your current corporate infrastructure.

Developing a future state operating model from the start

Because organizations change constantly, most businesses can benefit from the development of future state operating models. Don’t overlook the importance of defining anticipated infrastructure needs (not wants), prioritizing those needs, and then discerning the capabilities required to meet the needs.

  • Is your operating model flexible enough to support future demands if the business grows as projected over the next 5-10 years?
  • Is your internal support infrastructure effective, adaptable and scalable?
  • Are overhead costs proportionate with other expenses? How do those costs compare to revenue? What reports and forecasts are being shared with the management team? How frequently are these reports providing accurate, actionable data and insights?

Conscientiously developing and analyzing your internal infrastructure can pay off in the long-term profitability of your company.

Reviewing your current operating model when something seems wrong

If you create your business model with the end-state in mind, your support infrastructure can be designed to balance the need to standardize versus specialize.  It can also help you focus on quality versus cost containment. Think about your short- and long-term business goals when assessing your current operating model. If it is out of alignment, you may need to make some adjustments.

  • Is your company looking to be a niche player with a few offices?
  • Is it growing through acquisitions while keeping a centralized structure?
  • Could a shared service structure that integrates acquired support functions help support growing client needs?
  • Are there functions at your company that are currently specialized, but should be standardized (or vice versa)?

Measuring, monitoring and adjusting

Creating an execution governance framework to measure and monitor results can be critical to success. Measurement tools can help you ascertain how your organization stacks up against your plan and against peers.

  • What key performance indicators (KPIs) does your business use to measure growth?
  • Does your management team have access to tools such as scorecards or dashboards with KPIs and benchmark data?
  • Do you have an execution governance framework in place?
  • Are rewards and consequences tied to business goals and objectives to drive desired behaviors?

With the economy growing stronger, now is the time to take a look at your organization’s operating model with an eye on the future. You can start taking steps today to help your business develop an infrastructure designed to support current and future growth.