Group Corporate Profile

A Globally-Diversified Company

The Real Crisis of an Enterprise

 

“The biggest crisis in the growing period of a enterprise arises from the unmatch between enterprise resources and ability. Along the development of an enterprise, more and more resources will have come in and resources gap can be filled in a short while, but due to the impact of learning curve, the ability will be improved slowly. Consequently, contradiction for an enterprise’s growth comes into being. It will not only have great impacts on the strategies making and execution, but also can be clearly described in lever.”———Landing Zhang from CYAMLAN INVESTMENT

Amid the globalization trend, Chinese enterprise come into the spotlight for the first decade of this new century due to its fast economy growth. When we put our eyes on their success enterprises, we often ignore stress from fierce completion that many enterprises are still in deficit, operation failure or at the edge of bankruptcy.

If those failed enterprises would like to take modern management system, lots of failure can be avoided. But on the contrary. Most of the enterprises are indulged in temporary success and totally ignore the crisis ahead of them. Even sense crisis showing up gradually, and they are still in mood of profit of yesterday.

During the evolving of enterprises life cycle, with the fast growing of China economy, the industry cycle change repidly.It just take china several years to go through western hundreds years economy route.

Of course, there are numerous enterprises failed before complete one life cycle, while the other enterprises that have crossed the period to move into next step-the growing period.

Will the enterprise has no risk when they get into growing period? Or what will be the real crisis for enterprises in the future?

Take a side uncontrollable external factors, the biggest risk of enterprises arises from the unmatchness between resources and ability.Along the development of an enterprise, more and more resources will have come in and resources gap can be filled in a short while, but due to the impact of learning curve, the ability will be improved slowly. Consequently, contradiction for an enterprise’s growth comes into being. It will not only have great impacts on the strategies making and execution, but also can be clearly described in lever.”

At the initial period, the enterprise’s resources are always limited and the requirement of ability to distribute resources are relatively low, so enterprises in this period always centralize their energy on business development for survival, business-oriented. Staffs information channels and information transmitted directly, accurately and rapidly and decisions always made by the founder exclusively. There is high efficiency and strong control. The loss will be relatively small for mistake and can be reversed quickly.

After the enterprise step into growing period from survival period, the policy-making and execution-lever will show impact. With the increase of employee and management layers, will be increased and the information channel will be prolonged, and information will be distorted. At this time, the loss caused by wrong decision or improper execution may be far more than all the invested capital, and its earning. It is just the impact of lever enlargement. Enterprise will no longer just depend on the individual decision of the entrepreneur. It should establish effective and suitable management control system. In one word, this period is for the team and scientific analysis, policy and execution are the element of enterprises.

In fact, for most enterprises in growth period, the decisions are still made by the founder, the randomness and non-systemization of policy-making is common.The risks embeded.More and more resources acquired without right growing of its management ability,we see the outstanding can tradition which finally lead to crisis.

Hence, the management ability keep developing growing period.With the development of enterprises will grow more and more resources. Consequently the unmatchable status between resources and ability will bring bigger risk for the enterprise, contrary between resources and ability coming into being. As the saying from ancient wisdom of china:keeping is harder than winning.

How to solve this crisis?

The enterprises should plan to improve their management ability with resources increasing in different stage. They should be open to train those critical and unique staffs with new knowledge and skill training and practice as soon as possible or introduce employees with relevant knowledge and skills into their companies. Continuously improving the management control system.

At the same time, they should bear it in mind the purely hiring of relevant skilled employees may not be the solution. They should solve problems systematically. They might easily ignore one important thing whether the employees they hired are to run system or to design the system, it just like whether comer the drives are for driving the car or for designing the driving system. The result may totally different. If we couldn’t figure it out, it will not solve crisis but will accelerate the coming of crisis.