The term 'organic growth' in business management is used in reference with a process which allows for a step-by-step progress, as opposed to that made via mergers and acquisitions. The acquisitions or mergers do not make use of the inherent or internal resources on bringing about its growth. It is therefore, referred to as inorganic growth.
What is Organic Growth?
It takes hard work and commitment to bring about organic growth of an organization. The in-house resources and ideas generated by employees are the assets in building a firm organically. The best thing about organic growth is that it brings long term stability and success for an organization. Going the organic way in terms of business management is cost-effective. This kind of business practice helps add value to the products and services provided by an organization.
It is said that the model of organic growth should become successful if the organization knows how to balance the following two points: value that customers seek and value that which employees add to the organization. Striking a balance between these two is important from the point of success of an organization. Ensuring customer satisfaction is the most important aspect of organic growth.
Working on a certain market segment is important from the point of providing quality service to a select audience. It helps in applying concentrated efforts on the needs of a relatively smaller market than catering to the needs of a mass market. This idea works for most of the small businesses who don't have the resources to advertise to or satisfy needs of a mass audience.
Importance of Making Profits
It is important for an organization employing an organic growth model to make profits. Those firms with this model of running a business are generally small-scale organizations. Such organizations face massive losses in case a failure occurs. Funds/sources of income with such organizations are far lesser in comparison to bigger business groups. The importance of earning profits should therefore, be given importance in running such businesses.
Faith of Investors
The investors which support any business organization wish to see the company performing at its best. Organic growth models exhibit a kind of management system which makes best use of the skills of their employees. The commitment shown by employees towards work in such organizations also helps in winning the trust of investors.
Tips for Attaining Organic Growth
The tips/points mentioned below should also have an influence on the rate of organic growth.
- First of all, the company/organization should make use of a growth model and process of working that is understandable for employees. Employee should clearly understand what their objective is.
- Keeping a record of minute details i.e. documenting them is necessary to assess as well as track the progress made by the company. Proper documentation allows for assessment of mistakes and also the profitable moves made by the organization.
- Delivering high-quality performance on a consistent basis is also one of the features.
- Employee retention is one of the important aspects that companies with organic growth intend to focus on. High employee loyalty results from retention. Attrition has an opposite effect on the progress of a company which operates on the principles of organic growth.
- Entrepreneurship is nurtured in a small business where workers often come together for brainstorming sessions. Experimentation takes place constantly in small businesses. This attitude of risk-taking is very important from the point of a company's growth.
Disadvantages of Organic Growth Models
The limitations of organic growth model are actually hidden behind the positive points mentioned above. A lot of ifs and buts are involved in the proper functioning of the organic model. What if the company doesn't perform well, what if a major loss occurs, what if the business model doesn't satisfy customers needs, are few of the points which need to be considered by those who run a business via organic growth models.
Quick profits/income are hard to find in businesses with organic growth. One has to be really competitive and offer the best services in order to gain the edge over rivals. All these limitations mak this model a business practice to be reconsidered. One should therefore, take a decision about running a business through such a model only after considering all the pros and cons.
The term 'organic' itself conveys how a particular business can be operated in a step-by-step and ethical manner. It is not that mergers and acquisitions are unethical. However, a business that is built brick-by-brick in a slow-and-steady manner definitely reaps the long term benefits.