Stage 50 to 100 employees: Professionalizing
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 50 to 100 employees
1. Hiring and retaining good employees.
2. Visioning and strategic thinking
3. Creativity of senior managers / Sales and marketing (Tied almost)
Operational focus: The CEO has a major change in their perspective of the company’s future. The CEO and the company are now ready to look for the next big expansion that will take them into the next stage. CEOs review their strategic options and begin to appreciate that their role is not to maximize the performance of their current management team for their current customers. Instead, their role is to be a catalyst in the creation on an appropriate management team for the most appropriate mix of customers. To achieve this goal, CEOs must see themselves as a separate entity from their own business. They develop the understanding that the company is not a longer a support system for the successful products they discovered and perfected in the previous stages. With the economies of scale achieved to reach 50 employees, they drop the classic niche strategy. The company is now a vehicle to create a successful business with whatever products and customers make the most sense.
Marketing and products: Companies increase the number of product lines, clients and markets; and they commit to new product development and more diverse exports. The average proportion who do not export drops below 50%. With the resulting economies of scale, they drop the classic niche strategy that they pursued in the previous three stages.
HR: CEOs make almost no changes to their HR structure created in the last stage. Hiring many new employees rapidly would not be possible without this solid management structure in place. However, there is a big change in the people holding senior positions. Many managers are hired from outside the company. Their professionalism give the CEO a greater level of confidence in the capacity of their senior managers to grow with the requirements of the job. CEOs delegate a high percentage of the daily management tasks. Their priorities are planning and strategy. There only outstanding concern is the creativity and entrepreneurial flair of their new vice presidents. Having hired professionals out of large, bureaucratic organizations, their only outstanding concern is that their new vice presidents don’t have creativity and entrepreneurial flair.
Financing, ownership and shareholders: The percentage of CEOs who are 100% shareholders remains constant at 56%. The percentage has not changed since 10 employees, over 4 stages ago. Clearly, control is very important to many of the CEOs who run high growth firms. In companies with shareholders other than the CEO, public shareholders replace some of the private investors (which, of course, is exactly what the private investors are usually looking for).
Planning: With professional management teams, CEOs are more methodical in their planning process. There is a significant increase in the proportion of CEO with written long-term strategic plans, and a sharp reduction in decisions made without consulting senior mangers.
Core competencies: There are significant changes in what CEOs perceive as their companies’ competitive advantages. Having past 50 employees, companies have acquired economies of scale that give them the capacity to lower prices without affecting quality. So they move away from the niche strategy of past stages that focused on adding value and move to compete on price. There is a big decrease in maximum flexilibtiy in meeting customer needs in the past stages since this works against achieving efficiencies.
The Entrepreneur Quote
Frédéric Boulanger, President and co-founder, Macadamian Technology Inc. is new product software development company. 110 employees, 180% sales in past 3 years, bootstrapped, founded in 1997, 3rd fastest growing company in Ottawa in 2007, One of Profit’s 2007 Fastest Growing companies, http://www.macadamian.com/, based in Ottawa ON.
- Measure it!
You never get better if you don’t measure it. You have to find things that are meaningful for each business function in order for them to start improving on it. For us, we are a project based business and understanding our margin at all times in a given project is important. At the beginning, the numbers (for those measurements) are totally chaotic and they don’t even add up. But because there’s a number there, you try to get a more accurate number. And because you get a more accurate number, it gets you to formalize other things in your process. And because of that formalization, you become a better organization.
- Customers are investors
We were bootstrapped from the beginning and profitable from Day 1. (Because of the nature of our business) we never had a financing requirement. I believe our lives were much easier because of that. I believe having VCs or outside money is a good thing when you need to grow very fast and you believe the cost of that money is going to be lower than not capturing that opportunity at all. ..But, I would much rather spend 10 hours selling to a potential client than putting a PowerPoint together for a VC. In a way a customer is an investor in your company. It’s just that the return is more concrete for them.
- Reward shareholders immediately
Something we set out to have very, very high on our priority list was rewarding our shareholders. It was not to make huge tons of money, but always (provide) a good return every year because we wanted our investors – myself and other shareholders – to be patient with the company and the way you get them to be patient is to give them a return on their money that is better than they can get at the bank.
- Our first customer
We started the company with 4 guys. Our initial goal was to find a marquee client, which was my former employer Corel. It was really going above the call of duty and making sure they were happy so we were going to build the runway we needed to have the credibility we needed to go find other clients.
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?
