People Add Complexity to Small Company CEO’s
Often when working with some of our small business clients I have felt (and heard) the frustration of the founding entrepreneur when speaking about their business. What gives? Is the question I have asked myself and the founder of these companies.
Well, I finally got the answer from research done by James Fischer.
While most people focus upon the sales or profit growth of any organization as the cause of this frustration, they are wrong. The real culprit is a growing number of employees. This fact has been overlooked by some very smart people until this research exposed the true.
Then a company is first starting up there is a small group of individuals and each acts like an owner in the business (assuming these people are hired due to cultural fit rather than competencies and experience). As the business increases more people are added to handle the increasing work load – sound familiar?
An entrepreneur can usually remain the dominant CEO type up to about 20 employees. If they remain in the dominant leadership style over 20 employees, the values or purpose of the organization become clouded and communication begins to break down. Then the problems (real or imaged) begin to appear in the mind of the entrepreneur.
You see the entrepreneur did not realize a complete change in leadership style occurred on their watch and they didn’t know how to change or to change the results.
The research shows when a small company grows past 20 employees they have now entered a very dangerous time. A time when the majority of business failures happen. Why does this happen at this stage? Because the entrepreneur has grown the organization size without clear plans for these critical factors…
- Hiring systems have not been set up to find competent people AND Managers
- They needed Managers who have been there and done the job at a successful level.
- The entrepreneur needs to change their leadership modality from Dominant to Facilitative
- The focus of the CEO is moved to People and later to Process from Sales
- For the first time aggressive growth strategies must change to dealing with infrastructure within the organization.
- And finally, the Entrepreneur has to learn to be a manager rather than a specialist or visionary.
All the above issues have a beginning with the number of people hired by the organization. This transition period is the toughest job for an entrepreneur to make. In fact, I have often seen companies get to this size and the entrepreneur is troubled and de-energized. It is also a time when companies begin to have serious directional issues leading to financial crisis or even failure.
If you are an entrepreneur, you did not get an owner’s manual when you started your company (with a possible exception of well run franchise operations) so you have had to learn on the fly. I know you started the company because you loved the business concept and the freedom it offered for you to run it the way you wanted to run it. And, you have invested money, time and energy into making it a success.
So what happened when you added people to the equation? Complexity and the uncertainty of their actions and commitment (including buy-in to your ideas and leadership style).
Yet, all is not lost in this situation since the research has uncovered the issues a growing company will have. Thus providing a sense of certainty or predictability to the CEO / Small Business Owner. This allows you to make the right choices at the exact right time to build your company’s wealth and stability.
This research has lead to the Stages of Growth strategies in order to grow with people and the processes which create greater long term wealth for the owner. If you want to learn more about the Stages of Growth Strategies, contact Voss Graham at 901-757-4434 to discuss how you can successfully grow your business. Sign up for more Leadership Insights now
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