Stage 10 to 19 employees: Start Delegating
Research shows that there are 6 stages along the evolution from 0 to 100+ employees, each with unique characteristics and milestones. Here is a description of Stage 0 to 9 employees. This is a section in the article in Cool Companies magazine 2007 Vol.2 Issue 2: What are your company’s next growth stage?
Content by Donald Rumball, Chair of Cool Companies magazine’s Editorial Board, and past Business Editor of The Financial Post. Interview by Claudia Sammer, Founder and Editor of Cool Companies magazine
Top challenges identified by CEOs in Stage 10 to 19 employees
1. Hiring and retaining good employees.
2. Marketing and sales
3. Visioning and strategic thinking
Operational focus: The CEOs starts to focus on creating a sustainable business out of their successful product.
Marketing and products: The company takes off: the average number of customers triples in this stage. There is an expansion into new markets. There is little change in the number of companies that export but the one that do expand to other countries. Fewer CEOs handle all customer accounts personally. There is a marked increase in new product development with a high degree of experimentation and expansion of the breakthrough product line. The average number of product lines increase quite sharply after the firm passes 10 employees. This increase is mostly due to companies with one or no product lines which add extra product lines to move into the category with 2-5 product lines.
HR: The CEO starts to departmentalize their business. They start to build a formal management structure: they hire an extra manager to report directly to them, they create departments and begin to delegate. CEOs consult their managers on strategic decisions far more in this stage. To protect themselves as they delegate more, CEOs use regular review meetings and think harder about how to motivate their employees. The more they delegate, the more they realize that importance of having the best employees possible. If they haven’t yet, this is the first stage CEOs recognize the importance of hiring and retaining good employees. This continues to be the top challenge in every subsequent stage. Almost 50% of CEOs believe their senior managers have the necessary capacity to grow with the requirements of the job (this decreases in later stages).
Financing, ownership and shareholders: Once companies pass the 10-employee mark, there is a sharp decrease in the CEOs ownership percentage. Only 56% of companies continue to have the CEO as 100% shareholder. Interestingly, this percentages remains constant over the next 3 stages until 100+ employees. In companies where the CEO does not hold 100% of shares, 44% of companies have a shareholder other than the CEO. 38% of the outstanding shares are held by private investors, which has not increased from 0 to 9 employees. However, many of these CEOs choose to give their shares to employees and managers as a way to motivate them. Almost 56% of shares not held by the CEO are given to this group. Interestingly, this strategy is reversed quickly in subsequent stages. There is more awareness of financial management as CEOs learn to understand their financial statements.
Planning: While there is not much change between CEOs that have written business plans at this stage, the significant change points are comining at 20, 50 and 100 employees. These transition points are when the CEOs have to impose discipline on their operations and think ahead more carefully.
Core competencies: Having seen that their customers will buy their products, companies can switch to a classic niche strategy where they do not compete on price and build in more value to justify raising prices. As their competitive advantages, CEOs cite first the unique skills of their employees, and secondly, highly customized service (flexibility).
The Entrepreneur Quote
Gabriel Erdelyi, President and CEO, Dieroll Tool Inc. is a precision tooling and automation shop mostly for the automotive industry., 20 employees, 218 % growth in 3 years, one of Profit magazine’s 2007 fastest growing companies. www.dierolltool.com, based in Mississauga ON.
- The value of plateaus
I’ve heard of too many stories of companies that grew very quickly and lost control. They drowned themselves in overhead and weren’t able to absorb the costs. .. (To avoid that situation), I recently pulled back on the reins just a little bit to make sure that what we’ve built doesn’t run out of control…It should be like that because if you don’t make sure you have all your ducks in a row (in preparation for the next growth stage), you’re going to fall over very quickly.(To maintain control) we have put certain systems in place. We have put in a control measure to better track jobs on the floor. I used to track all the jobs myself but I now delegate that responsibility. Now was a good time to develop our control system because when we do make the next (growth) step, we will already have them in place; it’s a lot easier to build them now than later.
Foresight is also really important (when you are in a plateau and have some time to think). You need to try to plan ahead so that when you get to a certain point (and are faced with a major challenge), you already have got some ideas in motion to help you tackle the situation… Many people (don’t plan ahead and) just fight fires - that’s probably why there’s a high number of small business failures.
{What else has been important to a high-growth company that has 20 employees?} Coming up with that niche market concept that you can sell to customers is probably the first key thing (to really getting a company off the ground). The second thing is building an internal team and building it at the right pace. …{Also}, we can attribute our growth to certain key customers, but we are now at the stage where we don’t want to rely on just those few key customers anymore; we’ve broadened out so that we don’t put all our eggs in one basket.
For more descriptions on the stages of growth in a company’s evolution from 0 to 100+ employees, return to this article in Cool Companies magazine 2007 Vol. 2 Issue 2, What are your company’s next growth stage?
