Exploring the timing of organizational changes

Strong growth companies (HGF) refer to companies that reach rapid growth in terms of employees or income. Based on the established definition, HGF are companies with at least 10 employees and annual growth rates of 20% or more, observed over a period of three years. This three -year period is considered the company’s high growth period (HG). Even if this growth is often short -lived and difficult to maintain, it plays an important role in conducting economic dynamism. Consequently, research linked to entrepreneurship often focuses on the HGF growth model and the factors that affect their growth.

Such a factor that affects growth is the introduction of hierarchical layers. To shed light on the role of the introduction of hierarchical layers in HGFS, Professor Alex Coad of Waseda Business School, at Waseda University, in Japan, with Dr. Antonio Martins-Neto, World Bank, Washington, DC, United States, conducted a study based on the Brazilian-reporter of the Brazilian employer. An article describing their research was published in the journal Small businesses September 11, 2025.

“There are two competing theories concerning business plans for organizational infrastructure,” said Professor Coad. A theory concerns planning in advance, which emphasizes how companies plan in advance and invest proactively before the HG period. According to this theory, companies invest in the addition of management layers in anticipation of growth. The other theory is called “dragging their feet”. This refers to the situation where companies have rejected the adjustment of their organizational structures as long as possible. In these cases, the addition of a hierarchical layer often occurs at the end of the HG period.

The researchers conducted a study entirely based on the Sociian database (Rais) by Relação Anual de Informações (Rais) from 2003 to 2019. This complete database is managed by the Brazilian Ministry of Labor and Employment and includes information on more than 40 million individuals per year.

The analysis was carried out on the basis of 3,211,353 observations, and 2013 to 2016 was considered the HG period (in the basic analysis). The study followed the classification of previously established workers who included heads of management and managers, professionals, technicians, clerks and services and production workers. By applying the technique of difference in difference, the conditional correlations between the growth of companies and the changes in their organizational structure were established on the basis of the database to study the perfect “calendar” for organizational restructuring.

“The results of our study were interesting,” said Professor Coad. “The results do not adapt closely to the scenario of” planning in advance “, and they did not adapt to the theory of the feet”. “

The addition of the new hierarchical layer did not occur neither at the beginning nor at the end. However, while businesses have started to develop, HGF began to add new knowledge hierarchies until they stopped developing. This change occurs gently and evenly.

A notable distinction in hiring patterns has also been observed between larger and smaller companies. Small businesses, with less than 50 employees, tend to add layers shortly after the start of growth, highlighting the influence of size on organizational decisions. As companies increase in size, the share of managers decreases, which suggests that companies have low management resources at the end of an HG period. The number goes back later.

“Planning in advance too much can be a risky strategy. But there again, it is also possible to delay as much as possible. It is better to take the road route,” explains Professor Coad, while speaking of the implications of the study.

The study can give decision -makers to support businesses during their growth phase, instead of seeking a proactive role. This could lead to additional HGF growth and development in the near future.