After an initial burst of creativity and commitment, growth can plateau
MIND The leadership gap
As the leader of a small company, performance depends heavily on you. Once you prove an idea, your next step will be to build a strategy for growth and communicate your vision to new employees who may be less engaged in the business than your first recruits. Many enterprises stall at this point.
According to research by Warwick Business School for the government last year, a ‘long tail’ of smaller companies lack the leadership skills to perform as well as they can. A close link across all types of business was found between leadership and results as measured by revenue, growth and productivity.
At the start, any shortcomings can be covered by the entrepreneurial energy of the founders. Trouble may then happen at two points in your development: when you start to grow and when you encounter turning points over your future direction.
These challenges demand radically different skills from the initial burst of creativity and commitment that made you successful in the first place. You will find yourself managing more people. You are taking on larger premises. You are extending your systems and networks. You are raising capital. You are managing risks.
For leaders, it can represent a significant psychological leap. Some retain too much control. Others avoid taking decisions. A few realise that it might be time to step aside. None of them can expect to operate in isolation.
Ideally, you will be lining up a more professional executive team who can report to a board of directors. Not all the personalities who were there at the start will necessarily continue as your organization develops.
It is just one of the tricky personal dilemmas that growth always brings. You can just rely on your instincts to see you through, although you may find yourself reaching a plateau beyond which it becomes harder to move forward and up.
The danger, as Warwick Business School found, is that under-developed leadership and management skills are constraining the performance and growth of a large number of SMEs. ‘Given limited resources, especially time, SME owner-managers may benefit most significantly from ensuring that their entrepreneurship skills and leadership skills are well polished,’ says the report’s author, Professor James Hayton.
For those running SMEs, it means grasping: ‘the fundamental benefits of a formal approach to strategic planning, communication, and adaptation, as well as being able to connect HR practices to the strategic planning process.’
Now a clearer link is being made between how SMEs are led and one of their most natural sources of help: the UK’s 130 business schools. In 2013, the prime minister’s advisor on small business and enterprise, Lord Young, took a lead in arguing that business schools can play a more active role in co-creating growth with SMEs, equipping them with the skills they need to take their organizations forward as they develop in scale, complexity and scope.
Such collaborations, whether in the form of coaching, consultancy or student projects, are promising to open up the way to more growth for SMEs and make it less of an uphill struggle for their leaders.