Your business is growing and you want to keep the momentum going. Tomorrow you will hire your ninth employee, but someday soon you hope to hire your 99th. While each new hire presents unique challenges and opportunities, what we at Performentor have found is that there are key similarities in the challenges and decision points businesses face when they reach certain employee-count levels. These transitions are critical turning points for your company – transitions which will challenge management, cohesiveness and your ability to set and meet goals. The way things run just feels different with each growth-related transition.
Understanding these transitions is important.
You don’t just want to grow over the next six months, you want to keep growing for years to come. And you want to do it in a way that’s healthy for the business and its employees. The ways a small business team interacts as the number of team members increases has predictable themes. You know this intuitively.
Imagine a baby, since this business is your baby.
Many entrepreneurs are also parents, so this analogy should resonate. At the very least, we all have a rough sense for how things go with babies. Infants grow in spurts. One day you are rocking and feeding the baby, and suddenly you are outfitting them in shoes and holding their hands on the way to school. In the blink of an eye you are taking them get their driver’s license and helping them apply for college. The days are long, but the years are short. You’ll feel this with your business too.
Nurturing a growing business means guiding it through changes, too.
Just like children, your business can grow suddenly—even unexpectedly. Generally, as your business grows, so too does the size of your team. As your business bandwidth expands, your operating procedures, job titles, quality management processes, delegation tasks, and business growth goals need to change too. This means taking time to work ON the business as well as IN the business: each step can be facilitated by the work you do not only in it but also before you reach it. As you approach one stage, it’s a good idea start thinking ahead to the next so you are ready when it occurs.
A useful roadmap for growth is based on headcounts.
We work with businesses from 3 people strong to more than 100, and in a wide variety of industries. While each business is unique, they all have people, and people tend to interact in certain ways based on the number of them interacting together. Our experience shows that those interactions change at key team size levels. Managing these interactions is a critical step to making sure your team stays cohesive, is on-point and goal-oriented, and stays focused.
Where are the headcount pivots?
Here we highlight some of the natural pivot points we’ve seen by describing the situation, identifying the main challenges that arise, and offering some guidance for getting past those challenges. This isn’t a hard science and every business is different, so it’s worthwhile taking note of the phase before and after your current size.
THE SITUATION: Early on, purpose and strategy tend to be reactive and disseminated through osmosis and the general momentum of daily activity. The founders oversee most activities to ensure coherence; this model ensures great responsiveness to changes in the market and with clients. Depending on the business, there may be some degrees of person/role specialization, but in all likelihood, everyone wears a number of hats and rallying to the day’s challenge is the modus operandi. Your team will likely function smoothly until it has 8-10 team members—that’s when some cracks in the surface begin to appear.
THE NEW CHALLENGES: There’s always so much to do in a growing business, so it helps if you show people how to prioritize their time by providing a rough, flexible roadmap of priorities. The brand’s promise may be unclear or may need to be updated to reflect the capabilities of the larger team. Think through feedback processes: often, by the time you have 8-10 team members, this has fallen by the wayside or is hit-or-miss.
WHAT YOU CAN DO: Team meetings and check-ins should be planned and deliberate. Make sure you have an agenda of important items and that you stick to it. Don’t hesitate to end a meeting early, and definitely don’t let one drag on. This is a good time for one-on-ones, team meetings, functional coordination, and purposeful use of communication tools like Slack and Drive.
Take some time to clarify each team members’ priorities. Identify team members who can begin to take on light supervisory responsibilities as the team grows, such as leading projects and coordinating activities. Are there people on staff who can do some business-necessary tasks better than you? Each founder should be clear about the highest and best use of their own talents and to find opportunities to hand off those parts that don’t match. This is also a good juncture to consider outsourcing activities to part-time specialists, such as bookkeeping, invoicing, tax preparation, marketing, and more. The founders should begin to think of the opportunity cost of their time spent on tasks.
THE SITUATION: You’ve likely added a layer of middle management by now, even if it’s just one or two people. It’s at this stage that inconsistencies in people practices get problematic—such as performance feedback, pay decisions, and role clarity. With continued growth, enthusiasm is still high, and the members of the small team feel like they are part of something bigger than themselves and that it’s actually working. It’s an exciting, optimistic time!
THE NEW CHALLENGES: The founder or co-founders find themselves spending more time than they’d like focused internally, which puts business development, account management, and market awareness on the backburner. That’s not a great strategy for continued healthy growth.
BEFORE YOU GET HERE: Take your mission, vision and value statements out of the company handbook (if you have one) and put them to work to help you accomplish goals; don’t forget to reference them regularly. If you don’t yet have middle managers, consider adding them to the parts of your business’s operations that most require greater consistency of operations or specialized oversight. Be mindful of selecting people for supervisory roles based on managerial aptitude rather than promoting the most competent technical expert. On the compliance side, consider meeting challenges like ADA and Title VII.
WHEN YOU ARE HERE: This size of company is a key turning point for many, with major shifts as you move from small-size to mid-size. A key indicator is that your company’s middle management will begin to grow:
- Challenges include consistency, visibility, and clarity for decision rationale.
- New-to-management people are excited about the fresh challenges but may not have the support they need to develop managerial skills.
- Founders often hesitate to delegate decision-making and as a consequence become overwhelmed.
- Purpose and strategic direction are still shared through osmosis.
Roles are starting to specialize but how that works is glossed over:
- People are still wearing multiple hats with tasks being allotted according to interest and ability.
- Zoom out to see if there are overlapping responsibilities, unclear decision hierarchies, and incoherent roles that could use some simple codification.
- You seem to have the right people for the job and things appear to be running smoothly, but you’re at full work capacity and job roles are not really defined. Poor communication begets chaos. Consider ensuring that there is sufficient management bandwidth to oversee your growing team and objectives.
- Despite the changes, the original owner and many of the original staff are still there and handling day-to-day tasks.
If you haven’t articulated what your values and/or culture are, take a little time to write down a beta version. You can always tweak these later and it’s better to have something concrete than simple unstated mores—but it’s too soon to invest tons of time and energy into perfecting something that is likely to evolve.
WHAT’S NEXT: Culture begins to form. Be sure measures are in place to keep best people practices and promote the kind of culture you’re hoping to maintain.
WHAT YOU CAN DO: Create an accountability chart to map out how work products and value creation flow through the people of the business. Going through this exercise sheds light on what new roles will be needed in the next phase of your growth and what new responsibilities your current team could start learning so everyone is prepared for that growth. This exercise also helps identify confusing or unclear decision-making patterns.
Create simple single-page role descriptions that people will read and understand. Focus on consistency. If you don’t have role clarity, you will have big problems scaling.
THE SITUATION: Your success is evident, and every day you look less like a scrappy outfit and more like a professional organization. You’ll want to act the part, and now is the time to globally analyze your policies, procedures, and personnel management practices. The top talent you’ve got is going to want to be paid in line with what they could get elsewhere, and you are now in a real struggle to attract new talent—meaning your perks have to be in line with industry standards.
THE NEW CHALLENGES: Ask yourself if spreadsheets and QuickBooks are the best ways to keep track of your people data. Maybe they still are, but start thinking ahead to what tools you’ll need over the course of your next 40+ hires. Your policies around pay and time off might need to be upgraded because new hire prospects will see you as a successful business that ought to have people policies to match that success. Similarly, new hires may begin asking for better pay and perks. Your previously scrappy team is starting to look professional, but this won’t happen without bumps in the road such as water cooler rap like “things used to be so much simpler” and “I used to be more involved in big decisions.”
You might notice a divide between the early arrivers and the recent hires. Be ready to nip that us-vs.-them dynamic in the bud with a compelling shared purpose. Think about a gradual and fair approach to raising pay ranges closer to market rate in cases where you have room to improve. Adding FMLA policies to your handbook is now a thing.
BEFORE YOU GET HERE: Shop for healthcare plans since the Affordable Care Act requires compliance after 50 full-time employees and note that “full-time” for the ACA means averaging 30 hours per week or more. This isn’t necessarily a fun task, but it’s important. Also:
- Develop effective, efficient training procedures.
- Establish consistent feedback systems so employees feel valued and informed.
- Establish consistent communication strategies.
WHEN YOU ARE HERE: Expand the responsibilities of your office manager and/or accounting manager or outsource to fractional HR that specializes working with smaller, high-growth businesses. Begin to better outline work processes, job responsibilities, and roles. Keep in mind:
- There will be more specialization in job duties, so make sure responsibilities and decision-ownership are clearly delineated.
- Management practices must change to accommodate the extra people and likely changes in the way work is accomplished. Expect to discover that your old methods will be inefficient and unsustainable with the expanded workload. For example, ad hoc decisions can be grouped into a limited set of options that cover 90% of cases and delegated out of the C-suite.
WHAT’S NEXT: Until now, your team did whatever it took to get the job done. Now, you will need clearly-defined roles and responsibilities that begin to look more and more like typical functional roles you see in other businesses. Develop solid measures of performance and productivity both for the organization as a whole and for the individual performers within it. People will begin to say, “I used to be more involved in decisions and now things are happening that I wasn’t part of deciding. This makes me feel left out.” To combat this, make a deliberate effort to get input from the people whose work will be directly affected by your decisions. This may take extra time now, but it will save you many headaches in the future if it is done properly.
THE SITUATION: The team is getting bigger and bigger, and it’s becoming hard to remember everyone’s name and keep track all the new team members. The 100-employee benchmark is either around the corner or recently in the rearview mirror. Some are proclaiming, “I can’t believe how big we’ve gotten!” Others bemoan the ‘bureaucracy’ that’s built up—and maybe it has: keep an eye out to ensure that processes and codification are done flexibly and are as user-friendly as possible. Be ready to articulate: Who are you (the business) in the marketplace? What’s your brand’s promise? What are your core competencies? Is it time to establish a brand that expands beyond the personality of the founders?
THE NEW CHALLENGES: Companies with 100 or more employees in the U.S. must begin filing an EEO-1 report. HR, accounting, and operations responsibilities have expanded a lot—that means more role specialization. Maybe you need a recruiting specialist and an administrator– PT or even FT.
WHAT YOU CAN DO: Start thinking about the Dunbar Number and what you need to do to scale culture in the face of lower team cohesion. The Dunbar Number is between 100 and 200—that’s how many people any one person can maintain stable relationships with and varies with the homogeneity (or not) of the roles and geographic dispersion of the team.
BEFORE YOU GET TO THIS POINT: Plan for the space that you will need for your larger team. Are you scaling with remote work-from-home staff or opening another, bigger office down the street? Consider specialized equipment that will keep your team connected and cohesive, like computer systems and conferencing equipment.
WHEN YOU REACH THIS POINT: Define career projection possibilities for your rock star team. If your top talent does not feel there is longevity in their career, they may look elsewhere.
THE SITUATION: Duplication of efforts can become more of a problem. The company may be too big to feel like a cohesive team because as it is legitimately difficult for your people to really know everyone in a group this big. Sub-cultures might become more defined, which is fine as long as it is within limits. Attention needs to be paid to the organization’s connective tissue, like your HR and communications practices. Cultural alignment, clarity of purpose, transparent roles, and accountabilities all need full alignment. Sometimes strategy execution models like Rockefeller Habits, Entrepreneurial Operating System (EOS), OKRs, V2MOM and others can help add rigor to the looser, flexible processes that you’ve outgrown.
The founders need be more mindful about the pace of change—at this size, system-wide changes don’t happen quickly and often have unintended consequences on the front lines that will come as a surprise to those initiating the change. Further, changes that come too quickly and frequently can feel arbitrary and breed cynicism. This can be hard for creative, innovation-driven founders to adjust to. Remember that not all resistance to change is bad. Find out what’s going on and why, instead of trying to squash all forms of dissent, even if it is done unintentionally.
If you have grown organically, you will begin to want more sophisticated financial planning and analysis capabilities in-house. Your trustworthy and responsible controller or accounting manager may be ready to take on these larger responsibilities. Data analytics is a function to pay closer attention to as well. This may require both systems improvements and use of Business Intelligence tools in addition to the upgrading or addition of people who can make meaning out of the numbers.
THE NEW CHALLENGES: A more mindful and strategic approach to internal communications, perhaps even through a dedicated staff member, can keep people up to date on the most relevant and current happenings. Be deliberate about establishing bottom-up and lateral networks for information transfer and innovation mining—this will maintain creativity.
BEFORE YOU GET TO THIS POINT: Realize that administrative bloat is likely. Avoid this by examining and streamlining administrative processes as best as possible.
WHEN YOU ARE HERE: Align job roles and objectives so everyone understands how they are contributing to the company mission. Make sure behavior and statements from the top of the organization promote value-added performance throughout the company. Getting and keeping the right people in the right seats is a concern that should be constantly attended to.
THINKING AHEAD: Remove inefficiencies that have remained or grown as the company has expanded. Consider value-added work, R&D investments, or “innovation sandboxes.” Plan for future problems and opportunities. Make sure your policy handbook is accurate and complete—focus on details like late payment policies, safety procedures, and disciplinary steps.
Summing Up: How to Use This Roadmap
Take a regular look at the phase you are at and the one where you are headed. Where are the likely gaps for you to fill? How are you making sure you are working ON the business as well as IN the business?
Do you need help from people who understand the specific challenges you experience in small-but-growing businesses? We specialize in assisting business leaders going through these exact stages. Performentor offers deep people operations expertise to help you navigate emerging people and organizational issues as you grow or transition. Our team understands people science and knows how to put it to use to discover the root cause of people problems by identifying organizational and other systemic influences. We also make it simple and as easy as possible for you to stay ahead of your people-related challenges.
Contact us today and let us show you how to grow with confidence.