Growing Pains: Transitioning from an Entrepreneurship to a Professionally Managed Firm / Edition 4

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The past few decades have witnessed an explosion in entrepreneurship. Thousands of new companies have been created in areas a diverse as bioengineering to chocolate chip cookies. The question is: Why after a successful beginning do some successful start-up business lose momentum and fold? What secrets have other start-up companies discovered to help them navigate the rough waters of rapid growth and ultimately flourish?

Since it was first published in 1986, Growing Pains has become a classic resource for understanding how start-ups can make the transition to become large, professionally-managed organizations that maintain the special spark that launched them. In the fourth edition of Growing Pains, authors Eric Flamholtz and Yvonne Randle have thoroughly revised and updated the book to include new ideas and concepts including information about strategic planning, Sarbanes-Oxley, family businesses, and overcoming growing pains, as well as new examples and cases of companies.

Growing Pains shows that many entrepreneurs are unprepared for the rigorous organizational demands of rapid growth. As firms mature, the loose, informal management styles that drove them to success become inadequate. Original systems are strained, profits decline, and founders are ousted to make room for more experienced managers. Drawing on the experiences of Starbucks, Wal-Mart, PowerBar, eBay, Dell Computers, among other success stories, Flamholtz and Randle show entrepreneurs how to make the successful transition from humble start-up to professionally managed firm without sacrificing the unique spirit that inspired the company in the first place.

The authors provide readers with a framework they can use to evaluate their firm's growth objectively, anticipate problems, pinpoint solutions, and plan strategies that will move their company toward desired goals. They outline the seven predictable stages of organizational growth and identify what must be accomplished in each stage to ensure the company's continued healthy development.

Growing Pains provides the entrepreneur with many proven principles of professional management, providing guidance in such key areas as strategic planning, organizational structure, management development, organizational control, leadership, and corporate culture management. Growing Pains offers business founders the information they need to face the often complex challenges as they transform their companies into professionally managed firms.

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Editorial Reviews

Shows entrepreneurs how to make the transition from a humble start-up to a professionally managed firm without sacrificing the unique spirit that inspired the company in the first place. Provides a framework to evaluate a firm's growth objectively, anticipate problems, and plan strategies, and outlines seven stages of organizational growth, identifying what must be accomplished in each stage to ensure the company's healthy development. Flamholtz teaches management at the University of California-Los Angeles' Anderson Graduate School of Management. Randle is vice president of a consulting firm. Annotation c. Book News, Inc., Portland, OR (
From the Publisher
"...whose clear analysis, audit tools and real life case studies make it an invaluable complement [to The Essential Guide to Managing a Small Business]..." (Financial Times, 18 September 2003)
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Product Details

  • ISBN-13: 9780787986162
  • Publisher: Wiley
  • Publication date: 4/20/2007
  • Edition description: REV
  • Edition number: 4
  • Pages: 496
  • Sales rank: 396,363
  • Product dimensions: 7.30 (w) x 9.53 (h) x 1.57 (d)

Meet the Author

Eric G. Flamholtz is a professor of management at the Anderson Graduate School of Management, University of California at Los Angeles. He is president and cofounder of Management Systems Consulting Corporation.

Yvonne Randle is vice president of Management Systems Consulting Corporation, where she has been a consultant since 1983.

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Read an Excerpt


The Transitions Needed to Keep a Growing Firm Successful This introduction presents a case study of an entrepreneurship-a printing company with approximately $10 million in annual revenue-that needed to make a transition to a new stage of growth. The issues that the entrepreneur and the firm faced here are similar to those faced by managers in diverse organizations with revenue ranging from approximately $1 million to substantially more than $1 billion. It has been selected as a prototype of a widespread phenomenon, not one that is limited to certain companies or industries.


Joe McBride began working at Custom Printing Corporation while he was still in high school. He worked hard to learn all that he could about the printing business, since he had decided he wanted a career in this industry. Two years after Joe's graduation from high school, when the original owner of the print shop retired, Joe borrowed money from his parents and bought Custom Printing for $10,000. At that time, the shop employed two persons besides Joe.


It was at about this time, in the early 1990s, that Custom Printing began to experience the typical symptoms of organizational growing pains. Some of these symptoms were more severe than others, but nearly all warranted attention. These symptoms will be discussed in order of severity, ranging from most to least severe.


Joe McBride realized that despite the company's growth in sales, it was in trouble. He had to make changes in the way the company was operating as well as in his own style of running the business. He knew that both he and the firm had to make a transition from the present entrepreneurial style of operation to a more professional style of management.

Phase I: Assess the company's current state of development as an organization and its future development needs.
Phase II: Design a program for the development of the organization as a whole.
Phase III: Implement the organizational development program.
Phase IV: Monitor the program and make changes as needed.

Making the Transition: Phase I

In order to assess the company's current state of development and future needs, an organizational audit was performed by collecting information from the company's employees about their perceptions of Custom Printing and its operations. One tool used in this process was the Organizational Growing Pains Questionnaire described in Chapter Three. The score that was calculated from responses to this questionnaire revealed the severity of the company's organizational growing pains and indicated that it was time to make some changes. Specifically, the audit revealed that the company needed to do the following:

Making the Transition: Phases II and III

Having identified its current needs, Custom Printing proceeded to the next steps in its organizational development program: designing and implementing a program that would meet these needs and help the company prepare for its next stage of development. Management decided that the program should have three parts: organization design, strategic planning, and management development.

Making the Transition: Phase IV

Joe McBride wanted to be sure that the changes brought about by the organizational development program would have a positive impact on his company's performance. He therefore established a system to monitor the program's progress in accomplishing its goals. By monitoring the program, Joe was able to change it whenever he determined that it was no longer successful at meeting its goals or whenever employee resistance to the changes being implemented became too great.


In order to make the transition from an entrepreneurship to a professionally managed firm, a company must first recognize that change is needed and then design and implement a program that will facilitate the required transition.

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Table of Contents

Foreword vii

Preface ix


1 How to Build Successful Companies 7

2 Identifying and Surviving the First Four Stages of Organizational Growth 26

3 Recognizing Growing Pains and Assessing the Need for Change 48


4 The New Venture and Expansion Stages 73

5 The Professionalizing Stage 93

6 The Consolidation Stage 119


7 Strategic Planning 147

8 Organizational Structure 188

9 Management and Leadership Development 214

10 Organizational Control and Performance Management Systems 243

11 Effective Leadership 272

12 Corporate Culture Management 298


13 Advanced Strategic Planning 335

14 Managing the Advanced Stages of Growth 359

15 Making the Transition to a Public Company 379


16 The Special Case of Managing Family Business Transitions 401

17 The Transition CEOs Must Make to Survive Beyond the Entrepreneurial

Stage 427

Notes 454

Index 463

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