the business cycle
What is the business cycle?
The business cycle demonstrates the phases that businesses continually go through as they grow.
‘Start up’ is the point at which businesses either start up or it is when they start new ventures such as new businesses, new locations to operate from, operating in new countries or perhaps it could be internal within the business where new departments are developed.
‘Growth’ is very much self explanatory. This is the part of the cycle where the business develops through sales, people, systems and structure. Somewhere along the road of business evolution the business growth will slow down and whilst it will still be growing the company will enter the phase of ‘continuation’ .
Continuation’ is where a company settles down into a comfortable rhythm. Growth becomes less dramatic and the company has all the resources in place to be able to cope at that stage of evolution. The challenge comes in this phase if something changes externally e.g. marketplace or economy.
The next phase of the cycle is ‘reorganisation’ where the business has had to change to respond to challenges or opportunities. Whatever the reason at some point in time companies will need to be re-organised and restructured in order to take full advantage of future growth.
The final phase is ‘recovery’ this is after the re-organisational or restructuring phase and is where the company is in a situation where it is in a phase where it is getting back to full efficiency or profitability.
The people a business needs at each of these phases will change dramatically as they move through these phases E.g. you don’t use people who are most comfortable in continuation phase to start a new business or open a new department, vice versa you don’t use people who are good at starting things in the continuation or recovery phases.
You will often see this in large companies, a person who has been very successful at running a large company will get head hunted to run another business, then 18 months later they leave because things haven’t worked out? Simply the right person has been selected but in the wrong phase of the business cycle.
In smaller companies, this may also occur in the growth phase. It may be necessary to set up a person in a totally new role or department. If a person is hired who is most accustomed to the continuation phase they may struggle, because this is actually a start up role. They may not have the skills and abilities to cope – again the right person has been selected but is in the wrong phase of the business cycle. Understanding the different Business Cycles can help you match the right person to the right cycle.
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the business cycle
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