Business growth: growing without losing shape

In this Italian-language video, shot in Piazza della Santissima Annunziata in Florence, I say that everything here seems to have proportions designed for people, and that a company should ask itself not only how much it can grow but how it can remain harmonious. Here I describe Brunelleschi’s loggia, which faces the piazza, and a 1959 economics book by Edith Penrose that explains why a company’s growth, too, has a pace of its own.

Video transcript (translated from Italian)

When you visit, or live in, cities with a strong Renaissance imprint, like Florence, where we are now, you sense something that goes beyond visible beauty.

A sense of subtle order, of natural balance, as if everything had been conceived not only to be admired, but to last.

In Florence, for example, everything seems to be in proportion.

And this is not a limit; it is room to breathe.

The facades, the cloisters, the piazzas: everything is designed to welcome people, not to tower over them.

It is in this proportion that the Renaissance found its eternity.

A sense of proportion is not a cage for ambition, but its highest standard.

It is what keeps an idea from getting lost, and a company from becoming mechanical.

So every company, like every work of architecture, should ask itself not only how much it can grow, but how it can remain harmonious.

Because a company that ignores its own proportions ends up distorting reality, and turning strategy into sterile power.

In this sense, the business strategist safeguards proportion: the one who reminds the project of its soul, who holds together numbers and words, profitability and meaning.

Places like this teach us that real innovation comes not from excess, but from balance.

And that a sense of proportion, in the end, is the highest form of freedom, and also of good management of a business project.

The Innocenti loggia is built on a module

On one side of the piazza stands the Spedale degli Innocenti, built to take in abandoned children. The Arte della Seta, the silk guild, entrusted it to Filippo Brunelleschi, who directed the building work from 1419 to 1427. The first child was taken in on February 5, 1445 (Museo degli Innocenti). Forty years later, in 1485, it was for this same Spedale that Domenico Ghirlandaio signed the contract I describe in the piece on patronage.

The loggia on the piazza has nine bays, and each one repeats the same module. The distance between the columns, center to center, is 10 Florentine braccia, about 5.8 meters (the braccio, literally “arm,” was the city’s unit of length). It is equal to the depth of the portico. Each bay is roughly a cube, covered by a small dome. In 1516, on the opposite side of the piazza, Antonio da Sangallo the Elder and Baccio d’Agnolo began the Loggia dei Servi di Maria to the same design. From 1599 Giovanni Battista Caccini repeated it in the portico of the church of Santissima Annunziata. The piazza grew over almost two centuries, and each addition followed the module of the first.

A company can grow only at the pace at which the people who run it learn to work with newcomers, and beyond that pace it begins to lose its shape.

Proportion has to be defended during construction

The proportions of the Innocenti did not stay intact. In 1427, when Brunelleschi had already left the project, Francesco della Luna, who was overseeing construction, made decisive changes to the design: he added a second story and changed the proportions and the arrangement of the architrave and the cornices. Antonio Manetti, Brunelleschi’s first biographer, criticized them harshly (Dizionario Biografico degli Italiani). The detail matters for the people who run a company. The shape of a building, like that of a company, also depends on who carries on the work when the person who conceived it is no longer there, and on how much the two had shared.

Edith Penrose: growth moves at the pace of people who already know how to work together

In 1959 the economist Edith Penrose published The Theory of the Growth of the Firm, which came out in Italy in 1973 as La teoria dell’espansione dell’impresa (Franco Angeli). For Penrose a firm is more than an administrative unit: it is a collection of productive resources, and what matters are the services those resources can provide, depending on how they are used.

Among those resources there is one that cannot be bought. The capacities of a firm’s existing managerial personnel, Penrose writes, “necessarily set a limit to the expansion of that firm in any given period of time,” because management of this kind cannot be hired on the market. A management group, she adds, is more than a collection of individuals: it is a collection of individuals who have experience in working together. New managers have to be welcomed, trained and helped to work with the others, and that work is done by the managers who are already there.

Edith Penrose explained in 1959 that the existing management team sets a limit to a company’s expansion in any given period, because the experience of working together cannot be bought on the market.

She spells out the consequence herself. If a firm expands its organization faster than its people can gain experience with one another, efficiency suffers even with the right structure, and in extreme cases the firm may no longer be able to compete. It is the risk a company runs when it moves from the founder’s decisions to a structure, a transition I have written about in the piece on bringing in professional management: the structure is designed before anyone knows how to make it work.

The limit moves if growth keeps to its pace

The fourth chapter of Penrose’s book has a title that strips the limit of any sense of finality: Expansion Without Merger: The Receding Managerial Limit. Over time newcomers gain experience, the management team expands and the firm can grow further. In a footnote Penrose reports the case of a chemical company that had set itself an optimum rate of growth. It was expressed as an annual increase in personnel, based on the number of new employees the company believed it could assimilate each year.

The limit moves: over time the management team learns, and the company can grow again.

That is why the question in the video, how a growing company can remain harmonious, is a practical one. The people who run a company decide how fast to hire and how fast to expand. Every decision of this kind is also a decision about how much new experience the management team will have to build in the same period. In the video I say that the business strategist safeguards proportion. That means keeping it in view, together with the owners and the board, when growth speeds up. It also means helping to decide what not to do when there are more opportunities than the company can absorb. It is one of the choices in the work on direction and priorities, and one of the hardest in a business strategy.

What to do and what not to do

• Before growing, estimate how many new people the management team can take in and train in the same year.
• Develop the company’s leadership as volumes grow, not afterward.
• Judge every new location or acquisition by the experience it demands of the management team as well.
• Do not read a limit to growth as a limit of the company: it is often a matter of time.
• Do not chase every opportunity just because the market offers it.

Sources

• Edith T. Penrose, The Theory of the Growth of the Firm, Basil Blackwell, Oxford, 1959, ch. II, pp. 24–25, and ch. IV, pp. 45–48 (quotations from the 1959 edition); Italian edition: La teoria dell’espansione dell’impresa, Franco Angeli, 1973.
• Istituto degli Innocenti, “History.” https://www.istitutodeglinnocenti.it/en/about-us/history
• Museo degli Innocenti, “Storia.” https://www.museodeglinnocenti.it/en/museo/storia/
• Howard Saalman, Filippo Brunelleschi: The Buildings, Zwemmer, 1993 (on the module of the Innocenti bays).
• Isabelle Hyman, “Brunelleschi, Filippo,” Dizionario Biografico degli Italiani, vol. 14, Istituto della Enciclopedia Italiana, 1972. https://www.treccani.it/enciclopedia/filippo-brunelleschi_(Dizionario-Biografico)//)
• Jane Turner (ed.), Encyclopedia of Italian Renaissance & Mannerist Art, Macmillan, 2000, entries “Baccio d’Agnolo” and “Brunelleschi, Filippo.”
• City of Florence, “Loggia dei Servi di Maria,” Feel Florence. https://www.feelflorence.it/en/node/67303