As we mentioned in last month’s Strategic Edge Newsletter Edition (see #2,#3, & #12), cultivating your people, Human Capital, can be a powerful leverage point to move your firm into the top 25% in your industry. As your small company grows larger, providing the payroll, hiring and retaining the right people to grow your business from 10 to 50 or 50 to 100 employees introduces your firm to the challenges of keeping an organism healthy.
“If your business’s profit and people are not in the top 25% of your industry, by definition
it is underperforming, and you are missing a huge opportunity to accumulate personal wealth”
Furthermore, growing a company from 100 to 500 employees requires the introduction of human capital engineering technologies drawn from the HR expertise of larger companies:
In a knowledge-based economy, skilled talent may be what most differentiates great companies from the rest of the pack. Skilled talent can help drive innovation and customer value, creates growth opportunities, and mitigates a growing river of risk. Organizations that do an extraordinary job managing their talent agendas have an opportunity to set themselves apart – in both the talent arena and in the broader marketplace.
Deloitte, Human Capital Trends 2013
Growing the mid-sized company is no easy task. Many owners find themselves in an unfortunate u-shaped valley of engagement/satisfaction among employees. Small and large companies had the most positive attitudes and mid-sized the least. For example more than two-thirds (68%) of employees in organizations with fewer than 100 employees were somewhat to strongly favorable toward management.
Only half of organizations of 100 to 1000 or 1001 to 10,000 trusted management. But in firms over 10,001, the percentage climbed back to 64%. This same pattern holds true for pay levels, supervisors and career paths. 1
The mid-sized company struggles because it no longer has the agility of the smaller company nor has it grown to have the systems and resources of the larger company.
A recent Harvard Business Review article suggested a couple of additional factors that could keep the mid-sized company stuck.
- Cultural misalignment: One company run by a CEO with a sales pedigree was unable to pay to get the necessary supply chain and finance executives to ensure accuracy of orders, invoicing and AR management. His sales team, acting as though they were a Fortune 500 company that could fulfill any customized order, added to the pileup of incorrect orders and poor execution. The result? Unhappy customers unwilling to pay.
- Inability to rapidly acquire the right people: Finding and developing key people during periods of rapid growth are key to preventing operational breakdown. The specific skills that mid-sized companies need today – which weren’t necessary when they began life – expanded rapidly, requiring subject matter experts in niches that small firms don’t need and big firms already have in place. The firm of 100 that needs to design positions, find, hire, and onboard 50 new people in one year most likely lacks the HR capacity to do so. In order to keep departmental managers focused on their area of competency (sales, operations, or finance, for example), requires the bulking up of the HR function. Otherwise that HR need should be outsourced or complemented by outside virtual executive expertise.
- Lack of clarity: Millions of business owners are wearing rose-colored glasses. They believe they are doing a good job running their business and they fail to recognize that the human capital side of their business is underperforming.They believe they “can’t find good people” or that they have “problem employees.” They have difficulty seeing that they must make changes to be the kind of company that has the vision, a clear plan and solid execution to continue progressing into the top 25%.
Next time we’ll look at the surprising impact of having fully engaged employees on your company’s bottom line.