The common problem: coordination cost outpacing structure
Every organisation that scales faces some version of the same underlying problem: the coordination structures that worked at one size stop working at the next. Larry Greiner’s model of organisational growth — five phases, each ending in a crisis specific to what the previous phase’s solution can no longer absorb — remains one of the clearest statements of why this happens. Practices that resolve one phase’s problem become the next phase’s problem, in Greiner’s own words, an “irony” leaders repeatedly rediscover rather than a one-off failure.
For a Swiss mid-market business, that generic growth problem takes a specific shape, because the coordination cost of scaling is not smooth. It moves in steps that correspond to jurisdictional and regulatory thresholds, not to headcount alone. A business that has grown steadily within its home canton can add staff for years without encountering a coordination threshold as sharp as the one it hits the moment it opens its first office, or signs its first significant contract, in a different jurisdiction — Swiss or otherwise. The threshold, not the headcount, is what triggers the next phase of Greiner’s model in this specific context.
How it presents inside Switzerland, into the EU, and beyond
Within Switzerland. A business growing from a single canton into several faces cantonal variation in tax administration, employment regulation, and in some cases language of business — moving from German-speaking Zurich into French-speaking Geneva or Vaud is a genuine coordination event, not a formality. Ronald Coase’s argument that internal coordination cost rises with dispersion applies directly: each additional canton is a small increase in the range of external rules the organisation’s internal systems now have to represent correctly.
Into the EU single market. Switzerland’s position outside the EU but deeply integrated with it via bilateral agreements creates a specific complexity: a Swiss mid-market business expanding into the EU is not doing a simple “domestic to international” move. It is crossing from one regulatory architecture (Swiss federal plus cantonal) into another (EU-harmonised plus member-state-specific) with a bilateral treaty layer in between. The coordination cost here is disproportionately concentrated in a small number of functions — customs and trade compliance, VAT treatment, data protection alignment — rather than spread evenly across the organisation, which is a different management problem from the cantonal case above.
Beyond the EU — wider international scaling. A further step, into markets with no bilateral relationship to lean on, removes the treaty scaffolding entirely. Coordination cost here is at its highest and least predictable, which is consistent with Edith Penrose’s argument that the binding constraint on growth is rarely market opportunity — international demand for Swiss-made or Swiss-headquartered products and services is often strong — but the capacity of existing management to absorb and correctly direct a step change in regulatory and cultural variety at once.
A near-term consequence worth naming for each of these three contexts: the coordination cost does not announce itself in the same place it will eventually be felt. A business expanding cantonally often discovers the real friction in HR and payroll administration, months after the expansion decision, rather than at the point of the decision itself. A business expanding into the EU often discovers it first in a customs or VAT filing that behaves unexpectedly, not in the market-entry planning that preceded it. A business expanding beyond both frequently discovers it in a contract dispute or a regulatory requirement nobody on the team had prior experience with — precisely the kind of gap Penrose’s argument about managerial capacity predicts, since unfamiliar territory is where existing judgement is least able to substitute for direct experience.
What explains the difference
The variation across these three contexts is not about distance or cultural unfamiliarity in the abstract. It tracks specifically with how much of the coordination burden is already absorbed by an external structure the organisation can rely on, versus how much it has to build internally. Inside Switzerland, cantonal variation is real but bounded by a shared federal legal system. Into the EU, the bilateral treaty framework absorbs some of the burden but leaves real gaps at the operational edges. Beyond both, the organisation is coordinating almost entirely on its own account.
This has a practical consequence for how the same growth-stage crisis in Greiner’s model actually lands. A business hitting a coordination crisis while scaling within Switzerland is usually solving a structural problem — who has decision rights across cantons. A business hitting the equivalent crisis while scaling into the EU is more often solving a functional problem — which specific compliance and reporting capabilities are missing. A business hitting it scaling further afield is frequently solving a managerial-capacity problem in Penrose’s sense — not enough senior judgement to safely delegate decisions that used to be made centrally.
There is a consequence to getting this wrong that compounds rather than resolves itself: a coordination gap opened at the cantonal stage and left unaddressed does not stay contained to that stage. It tends to resurface, in a larger and more expensive form, at the EU-expansion stage, because the underlying decision-rights ambiguity the cantonal gap represented has not gone away — it has simply been operating under conditions where it was less costly to leave unresolved.
A common misconception is that these three contexts differ mainly in degree — that EU expansion is simply “a bit harder” than cantonal expansion, and wider international expansion “a bit harder still,” on a single continuous scale. The evidence doesn’t support treating it as one scale. The kind of problem changes at each step, not just its difficulty: a structural decision-rights problem is not solved by the same organisational response as a functional compliance gap, and neither is solved by the kind of managerial-capacity investment that wider international scaling requires. A business that prepares for EU expansion by strengthening the same decision-rights clarity that served it well domestically, without separately building the specific compliance capability the EU step actually requires, is applying the right lesson to the wrong problem.
Where this shows up
This perspective is read through the Zurich setting. The Zurich market page brings together the related Perspectives, and the Markets page places Zurich alongside the other business hubs.
Questions worth considering
- Is the next stage of scaling adding cantonal, EU-regulatory, or genuinely international complexity — and is the response calibrated to which one it actually is?
- Where is the organisation relying on an external structure (federal law, bilateral treaty) to absorb coordination cost that it will have to absorb internally at the next stage?
- Is the constraint on the next phase of growth really market opportunity, or is it the capacity of existing management to direct a wider range of regulatory and operational variety?
Your team is facing similar challenges?
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