Can companies grow too fast?

When a business expands, we generally see it as a sign of success. Opening a new branch, tapping into new markets, and hiring new employees indicate positive growth. But scaling up a business doesn’t always deliver the expected results. Growth needs to be strategically planned and managed. While leaders are overseeing expansion, who is running the day-to-day operations?

A new study published in Organization Science explores this question. The research, co-authored by Dimo Ringov (Esade Business School), Aman Asija (Lisbon University), John Joseph (University of California), and Gabriel Szulanski (INSEAD, Singapore), examines how organizations balance two competing priorities: transferring knowledge to new locations while ensuring that existing locations continue following the routines that underpin their success. The findings suggest that rapid growth can come with a cost if organizations become too focused on managing growth rather than maintaining the practices that made them successful in the first place.

Growth demands attention

There are challenges to growing a business. You have to take proven practices and replicate them in new locations. The researchers call this ‘knowledge transfer’. At the same time, existing locations must continue operating successfully. This is referred to as ‘knowledge retention’.

To achieve this, a business leverages its managers. But managerial attention is a limited resource and can only be stretched so far. Imagine a sports coach starting a new training academy while simultaneously preparing his existing team for a tournament. He spends time recruiting new players, training new coaches, and setting up new facilities, which all detract from the time he has to dedicate to coaching his existing team. The challenge for businesses is not dissimilar. Managers responsible for opening new offices, stores, or franchises often have less capacity to oversee day-to-day operations elsewhere.

The researchers emphasize that scaling is not simply about opening more locations. Organizations also need to preserve the routines and practices that made them successful in the first place.

Growth is not only constrained by financial resources or market demand. The study argues that attention itself becomes a scarce organizational resource.

What happens when companies scale rapidly?

To discover how scaling works in the real world, the researchers analyzed a decade of operational data from thousands of outlets belonging to one of the world's largest U.S. franchise organizations. As the success of a franchise depends upon delivering a consistent customer experience across all locations, this provided an ideal context for the study.

A pattern soon became clear. When expansion occurred, existing outlets were less likely to follow organizational routines as usual. The reason wasn’t that those routines were deemed less valuable or relevant, but rather that managers had to divide their attention between opening new operations and monitoring existing ones, and they simply didn’t have the capacity to continue monitoring existing locations as closely.

The challenge is familiar to many growing businesses. As one Pizza Hut manager observed in earlier research: “We added three units to one market, and it simply was too fast; we were still trying to get things settled down there. Opening a new restaurant required a disproportionate amount of management time compared with managing existing units.”

It’s hard to maintain consistency while organizations grow. Merely replicating successful practices isn’t sufficient. Managers have to monitor operations unfailingly to ensure that standards don’t drop.

This applies to most businesses that want to expand, from restaurants and hotels to universities and tech firms. Larger, more geographically dispersed organizations all face the challenge of maintaining reliable standards across all operations.

Experience changes the equation

It’s not all bad news. Businesses can expand successfully. Yes, rapid growth stretches managerial attention, but the study found that with accumulated experience, businesses can manage the competing demands.

In short, area managers got better at balancing both responsibilities. They were able to open new outlets and monitor standards in existing outlets. Experience did not eliminate the trade-off, but it significantly reduced its impact.

The researchers suggest that experience helps organizations manage competing priorities by reducing the amount of attention managers need to devote to familiar tasks.

As individuals and teams repeat complex activities, many decisions become more routine and require less conscious effort. That frees managers to devote attention to new challenges without entirely neglecting existing operations. It’s a bit like learning to drive a manual car; initially you concentrate hard on changing gears and cannot chat to the passenger while you’re driving. With more experience, gear changes happen almost subconsciously, allowing you to pay more attention to the conversation with the passenger.

The balancing act of scaling

Scaling has become a central ambition for organizations in almost every sector. Digital technologies allow companies to fast-track their growth, while investors reward businesses that grow faster than competitors.

Yet it would seem a mistake to measure growth only by the number of new locations, employees, or customers. Sustainable scaling also depends on preserving the organizational routines that created success in the first place.

Many scaling companies struggle to maintain culture and operational consistency as they grow. Managers juggling the responsibility of overseeing expansion while maintaining existing units can start to see problems. Maybe a previously happy employee quits, a deadline is missed, or decision-making takes weeks instead of days.

Given that the global franchise market is projected to expand, the importance of scaling effectively is crucial for business. Forecasts are for a compound annual growth rate (CAGR) of 10% from 2025 through 2030, driving a market value increase of $565.5 billion over that period.

One consultancy specializing in franchise operations estimates that around 70% of multi-unit expansion agreements stall or underperform. This occurs because brands fail to adapt their systems to support multi-location logistics. Knowledge retention and knowledge transfer are not balanced.

Starbucks initially scaled so rapidly that it diluted its signature ambiance, which threatened its market position. The company responded by launching systematic operational overhauls.

Today, companies such as Starbucks and McDonald's are good examples of how consistency across thousands of locations requires carefully designed systems, extensive training, and continuous monitoring rather than the assumption that successful practices will automatically be applied throughout the organization.

Managerial attention

If there’s one lesson to learn, it’s that expanding into new markets should not come at the expense of maintaining standards in existing ones. Organizations that invest in learning, experience, and effective monitoring are likely to be better equipped to achieve both.

The key to successful scaling isn’t just financial capital, technology, or market opportunity. Managerial attention is a valuable and oft-overlooked resource, and the ability to balance growth with consistency may become one of the defining capabilities of long-term success.