Growing middle market companies and people

People and culture warning signs:

Growing companies will outgrow their people. People hired in the start-up phase become loyal, trusted employees and sometimes close friends of the founders. As the business grows however, many of these people do not have the skills or experience to manage larger environments and organizations. In certain cases these people can grow with the organization if growth rates are low, but on average, professional managers with the right experience will have to be recruited, often disenfranchising these loyal and long term employees.

With new managers come new processes and more formal structures, which can set off a process of culture change. The founders are now surrounded by a chain of command and the team spirit fades. The team's access to the founders becomes increasingly limited, impacting mainly on technical leadership and resources. Everyone but the founders seems to become aware of this.

If new managers and fresh ideas are not brought into the business, and long term employees are not growing with the business, this presents an even larger risk to the organization. The organization will get into a state where they don't always know what they don't know:

Warning signs typically include:

• Poor talent depth and results at middle and senior management levels, but good team spirit and loyalty
• Things not getting done, account-abilities and responsibilities not being met, increasing excuse levels
• Increased stress on the people who are working beyond their level of competence
• Key technical talent start to leave the organization
• A grapevine starts with rumors and gossip being spread
• Increased politics, favorites and silo's within senior management

By avoiding the issue:

The people issue is critical and cannot be ignored. People are the makers or breakers of strategy. The impact of not dealing with the people side of the business includes:

• Increased politics and silo's, impacting organizational efficiency
• Loss of key technical people, impacting on customer service and delivery
• Under performers not dealt with timeously, impacting on the morale of other staff, who are working hard
• Empires will be created, often at the expense of the general good
• Organization becomes increasingly inwardly focused, impacting on customer service and other stakeholder management

Common traps in managing people issues:

• Not believing and staying focused on the culture created by the founders. Setting expectations of new management in the recruitment process and forcing the culture into the growing organisation continuously
• Technical founders becoming professional managers, instead of sticking to what they are good at
• Not establishing formal performance measurement systems for the organization at all levels
• Not defining roles and responsibilities clearly at senior and middle management levels
• Not building future leaders from within the business
• Not bringing in fresh talent from outside

In these growth organizations, people may join for the thrill of being part of the growth and the potential future upside with respect to their personal wealth. If the business then splutters during its growth phase, these key people often depart for other opportunities having gained good experience in the process.

Making the business work and keeping it on course is the most important aspect for long term sustainable growth and profitability. Getting the right people and keeping them focused and managed will ensure this success. Being popular and having lots of loyal friends who can't deliver is a recipe for disaster.

Go back and continue reading on business growth challenges