The number one priority for most CEOs is to successfully grow and scale their businesses. Unfortunately, though, many of them joke that they find themselves building the road as they drive the bus down it. But attempting to grow without first building the infrastructure necessary to support growth can be as dangerous as it sounds.
If you fall prey to this tendency to invest in infrastructure—whether it’s an updated accounting system, new manufacturing equipment, a larger warehouse or something else—only as you need it, you are certainly not alone. You may have experienced times—as I did in my own business or advising other executives—when you drove a little ahead of the road-building activities or failed to invest in foundation expansions. And, as a result, you ran your business off the road or watched it teeter toward collapse.
It is tricky to determine what infrastructure to build to support growth without killing profitability or sacrificing the engines that are driving your current success. How do you strike the right balance?
My business partners have often told me that I am extremely cost-conscious. I tend to ask a lot of questions about purpose, fit and costs. Questions like: Why do we need to license a product? Do we not have a process or solution for that already? Do we need to hire individuals for each of these roles or could we get someone who can support multiple functions? Do we really need the gold-plated software platform?
It is important that the time your team spends conducting research and assessments fits the investment you are making. If the planned investment is small, less time is likely needed to research and make the decision. But if the planned investment is a sizable one, the research and follow-up discussion process will be well worth the time.
Twenty years of making reasonable internal infrastructure decisions have taught me that while building internal infrastructure is important, having a process in place to support the analysis, decisions and implementation of the related investments is just as significant. There are three critical elements to making smart decisions about building internal infrastructure:
1. Documenting everything to avoid duplicative investments.
Few things are as frustrating as seeing duplicative investments being contemplated—or worse, having been made. Unfortunately, countless businesses rely on oral histories rather than thoroughly documented and disseminated processes, practices and tools.
When you experience team growth or team turnover, oral histories are no longer viable for sustaining institutional wisdom. To avoid this problem, make sure the plans for the foundation you have laid are available to your team. If you document everything, it will not just save time and resources—it will ultimately help your team execute better and drive successes for the business.
2. Listen to your team, but with constraints known to all.
Listening to your team’s thoughts and needs is crucial to making the right decisions about internal infrastructure for your business. However, you need to make sure your team has the same constraints on investment that you do.
The best practice is to discuss internal infrastructure needs in each management and governance team meeting. And make sure that your team members are willing to voice their opinions on topics such as:
• What is missing from the business internal infrastructure that people need in order to do their jobs better or deliver for customers?
• What needs to be done to support your business culture or rebuild it?
• How should investments be prioritized?
• What are the critical timelines for implementing infrastructure investments?
In your management governance meetings, you should provide updates on existing and currently planned internal infrastructure initiatives and results, potential resources that are available for new initiatives, and scale-backs on planned projects. Focusing the discussions on the investments being made, the potential for new investments, and limitations of time and money can generally ensure that overbuilding and the resulting overextension of resources do not dominate the discussions. Instead, you can have realistic and reasonable conversations on the investments based on the existing constraints.
3. Extend the foundation from the ground up.
While sourcing input on infrastructure options is easy (and you likely have found that there are never shortages of suggestions), how do you make sure you make the right decisions about investing in the future of your business after you and your team have discussed the needs and priorities? You start by making decisions that focus on efficient expenditures that are aligned to the needs of the business and that do not kill your business culture. Both of these can be done by focusing on rebuilding your business the same way you built it—from the ground up.
If you are like me and are hyper-concerned about efficiency and the potential for overextending, you may cringe every time the topic of spending time, money and talent on infrastructure is discussed. For me and for many of the executive leaders I have advised, the first (and most difficult) aspect of extending the foundation is being mentally comfortable with making the investments.
The second element of internal infrastructure development that requires special attention is aligning the internal infrastructure development to the organizational culture. Keep an eye on balancing your future with your past so you do not overbuild and lose the support of your team along the way. If your team helps you spend a little money today, but you align those expenditures to what you can afford and the culture you want to sustain and grow, you will have smooth travels ahead.