We often have clients who come to us for guidance as they confront a stall in their business. Generally, these are small or family-owned businesses whose growth and/or profitability have reached a plateau and are having difficulty figuring out why the things that used to work no longer do.
With over 28 million small businesses (those having fewer than 500 employees) employing 50% of the workforce, keeping those businesses growing is vital to our economy.
Although each business can vary in the exact challenges they face, my observation is that there are two common issues that generally prevent moving from a stable entrepreneurial stage of business to the growth stage of real success. Delegation and governance primarily deal with the people-side of an organization and, if not managed properly, have the potential to derail progress.
When a business is starting out, the organization is very simple. The owner or founder is a one-person shop, performing most or all of the functional tasks and putting all their energy and resources into keeping the company alive. The same is true of the first-hires. It’s a heady and exciting time. But as the business evolves, that pace is difficult to maintain.
The crucial question is, when second-level managers are brought on board, can the first-wave management disengage and give the newcomers the latitude to make decisions (and mistakes), while still providing the business vision?
The answer is: they must. Growing the company necessitates mastering people management, leadership development and, most importantly, succession-planning. When hiring, executive management must keep in mind both the company’s current condition and its future. All talent should be assessed on competencies, performance and value to the organization. Otherwise, the company risks continuation of the status quo.
Governance can cover a wide scope of items but I’m talking here about governance that ensures separation of what is good for the business from what is good for the individual. They are not always the same.
When talking to people who are considering joining a small business run by a dedicated group “forever”, I hear concerns about hidden agendas, favoritism, non-fact-based decision-making, lack of independence and lack of autonomy. Establishing good governance practices can alleviate most of these concerns. These include:
- Establishing an independent board of oversight
- Committing to sound decision-making practices
- Establishing clear boundaries between individuals and the business
Good governance helps businesses attract and keep successful managers over the long haul. And successful managers are key to jump-starting the growth engine.
While these are not the only challenges facing businesses that have plateaued, learning to delegate and providing context in the form of governance for business decisions help establish a strong foundation for growth.