Potential Problems to Fast-Growing Firms

The work is to be 8 pages with three to five sources, with in-text citations and a reference page. One major problem that arises due to first growth is poor coordination. With a huge workforce working for the organization and a lot of resources being utilized to ensure high productivity, there are high chances of poor coordination setting in. Although the company might record increased sales, this does not automatically mean that the company is becoming more profitable. The organization may, in fact, be spending more to achieve less. In this respect, there are chances that lack of proper coordination could lead to cash flow shortages, which at first may be subtle and easy to ignore but with time, expenses will start exceeding revenues at a higher pace with each new month of business growth.&nbsp. Under this circumstance, the company then begins to hemorrhage and becomes less profitable. Although hiring more employees results in increased production, it could negatively affect its performance. This is mainly because as the number of employees increases, the company and its principles begin to lose touch with the key employees, most of whom are more experienced, well trained and are more depended on by the company. Such employees will suffer greatly from the loss of job satisfaction, become demotivated and could even quit the company. Having many employees could also lead to unproductive divisions that could strain their profitability and performance. As they try to control increased business activities and increased employee base, the management could lose track of the business functions that are more essential and this directly impairs its performance. The other potential problem that fast-growing firms could encounter as they grow is lack of proper business planning. This problem mainly arises because the decision to expand in such companies is driven by the desire for personal/company satisfaction and the need to take advantage of available business opportunities instead of economic analysis, market studies, and sound financial evaluation. As a result of this, the management of the company will end up creating for themselves a challenge beyond their capability and experience. Because of the improper motivations, such firms end up making rash decisions and developing projects or buy machinery that may not necessarily increase the profitability and performance of the company. Such projects or machinery could block the ability of the company to develop more appropriate projects or purchase more effective machinery due to incompatibility with the rashly established projects or acquired machinery. It could even lead to incompletion of these projects due to the problem of underfunding and this will have used funds for setting up more appropriate projects. Question 2: Solutions Solutions to loss of clear insight into the performance of the business and its profitability The company’s management must ensure that all its undertakings aim at supporting the core activities of the business. This means that the company must ensure that all the activities of various functions are properly coordinated. Good governance also plays a great role in the success of companies experiencing fast growth. The management of the organization should see to it that good decisions are made and that policies created by management apply throughout the organization. The company should limit all new projects to those it has the capacity and experience of handling. If not, it should hire people who are experienced and competent enough to handle such projects.&nbsp.

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