With mergers and acquisitions, growth, and scaling up in general, we often forget the preliminary rule of organizational analysis: the size of the organization is a critical component, which may have an impact on the essence of the organization.

The impact of organizational size on structure, and processes has been well researched. Going back to 1971, in a classic work, already long-forgotten, The Structure of Organizations, Blau and Schoenherr showed that increasing the number of employees creates challenges for supervisory structure and systems accountability. The authors demonstrated that as organizations scale up, the sheer mass can overwhelm organizational leaders. Mergers and acquisitions often overwhelm leaders because they are unprepared for the impact of rapid scaling, in the terms of the sheer number of employees. They may have done their due diligence on the business models, studied the IT implications, and considered some of the logistical support implications. But more often than not, they have not looked deeply into their core scale challenge: how will size impact how they lead, and how they structure the organization, and design the work.

When thinking of increasing organizational size, especially in the case of rapid growth, leaders need to focus on three underlying challenges:

1. Integration:

How can integration be maintained? As the size of the organization grows, particularly if it grows rapidly, leaders have to examine each part of the organization, each section, and each employee, and ask whether the increasing size of the organization will have an impact on the core organizational culture. Will individuals identify themselves as part of the organization--and therefore will reach out to other sections--or will they lock themselves into silos focusing only on their specific needs and challenges?

2. Coordination:

To what degree is there in place mechanisms to coordinate and supervise activities across the organization? As companies grow in size, direct supervision becomes difficult and coordination becomes more challenging. Activities become somewhat indirect as leaders become dependent on intermediaries and automated systems to monitor activity. This inevitably leads to worries about the challenge of quality control and efficiency. What had operated as a smooth, efficient organization can become a bit more uncoordinated in a larger organization.

3. Agility:

Can the organization remain agile? As organizations grown in size, they often lose their agility. This is especially the case when through a merger or acquisition they bring on new businesses that have not been well integrated into the mission or core of the organization. It is can also happen in the case when they bring in groups who are in the same business or industry, but who do their work in a radically different way. This means that the organization will likely see a breakdown in the team mindset that could lead to an inability to be agile, respond rapidly, share ideas, and therefore, be innovative. This lack of agility is a special problem for organizations that while getting larger are trying to become more diversified in their products, or moving away from products altogether, to a solution mindset.

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The challenge of organizational size creates a leadership dilemma. On the one hand, leaders may feel they can serve a larger market share, increase production, diversify the product lines, and offer more solutions to their customers. To achieve these aspirations, the reality is that leaders must try to figure out how to grow while not losing structural integration, not losing their ability to coordinate, all while remaining agile.

Published on: Oct 9, 2015