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You’re a CEO on a mission. Over recent years, you’ve scaled your business with a sound strategy and talented people.
But cracks are starting to show. Systems that you’ve relied on have started to break. People have stopped putting their cups in the dishwasher. Accountability and profitability are dropping. As your headcount approaches 100 staff, you’ve hit an inflexion point.
People often ask me what we do. My reply often surprises them. Pattern-matching. That’s it. We’ve coached clients in different-sized businesses for the last eight years, all growing fast. And they all hit the same challenges. But growth isn’t linear. It’s exponential. And, if you’re not ready for them, the challenges come thick and fast.
CEOs will give me an overview of their business early in our relationship. How many staff, turnover, sector, etc. And like mystic Meg, I predict precisely the problems they’re facing. ‘Is such and such happening?’ I ask. ‘Yes – how did you know?’ they reply. ‘And this, and this and this?’ I go on. ‘That’s creepy! How can you tell?’ It’s because I’ve been there. I’ve scaled two UK businesses from zero revenue to £30 million in 5 years. And we hit many of the issues our clients face now.
So if you’re heading for 100 staff, here are some essential questions you need to ask.
What’s the efficiency of your business model? Do you know how it compares with similar companies in your sector? As a rough rule of thumb, we work based on around £100K revenue per head. If this is lower, you likely have a team overseas reducing your efficiency. If it’s higher, it could mean you’re leveraging some IP or a process delivering significant value. Do you know this? Do you track it? This is what we mean by managing your business with intent.
As well as looking at revenue per head, we suggest you look at your ‘Labour Efficiency Ratio’. This helpful tool was designed by Greg Crabtree, author of the excellent book ‘Simple Numbers 2.0’. I interviewed Greg for our Melting Pot podcast and have devoted a blog to this tool. It’s a great way to address your staffing balance and ensure you have the correct percentage of management-level labour.
Looking at revenue per head and your Labour Efficiency Ratio, can you see who’s delivering the work? Are you getting a good return? Do you need to adjust your staffing levels? And as you plan for the future, can you predict how many people you will need and by when?
It’s essential to compare profitability with your competitors. Create some benchmarks. Look at their revenue per head, using information from Companies House. Is it smaller or bigger than yours? They’re running better if they have a higher net profit than your business. So, what are the things they’re doing differently?
And know that, as you grow, you can expect your revenue per head to increase. We expect mid-market companies to track at around £250K per head, and you should see this rise as your business grows.
Until this point in your growth journey, you’ve likely managed with your Executive Team. When you started, it was you and your number 2. This quickly grew to a top team of around 6 or 7 talented people – am I right? But when you reach around 100 staff, you will need a new management layer.
Whilst it may have been easy to create the Executive team, it’s often this new team of managers where businesses come unstuck. Because you’ve been spending time ‘doing’ rather than ‘developing’, there’s a dearth of management expertise. Businesses often need to recruit from outside or open up a management training scheme.
I write about trial runs at management in my new book, ‘Mind Your F**king Business’. From an organisational perspective, it’s good to create opportunities for people to ‘try out’ management roles to see if they fit. Don’t change job titles or give more money at first. Make it clear that it’s a temporary posting so you don’t lose the employee if it doesn’t work out.
It may sound odd, but are you spending all your time being CEO? Or is your time split with your old functional role? When your business gets to 100 people, you should only do one job – that of CEO. It can be hard to ditch your functional role. I get that. It’s where you feel most comfortable.
When you became CEO, likely, you were still involved in sales, marketing, customer experience or whichever is your background. This is mainly because you’re good at it. It’s how you got to where you are today, and you’re better at it than others in your business. Or you think you are!
Yes, it brings you joy, and yes, it feels easier. But it needs to be handed over to another executive team member. Otherwise, you’ll be working 14-hour days, seven days a week.
Now is the time to implement an agile structure allowing your business to grow effortlessly and efficiently. According to Prof Robin Dunbar of Oxford University, the human mind can only handle around 150 relationships simultaneously. As companies get larger than 100 staff, one person can’t know everyone individually and understand where they sit in a relationship. This is when passengers appear – no one knows what these people do or can hold them to account.
So Dunbar’s hypothesis is you should build business units of no more than 100 staff to add value to particular customer cohorts. And this will give you the agility to react to economic turbulence.
Consider restructuring your business into pods or stripes, with multi-disciplinary teams delivering value to different customer groups. This will set you up to scale because you can go from 100 to 300 staff without creating a bureaucracy that will weigh you down. Don’t let the silos kill you!
It’s likely that, as you’ve grown to 100 people, you’ve accumulated some annoying baggage. You know – those things people do ‘because they’ve always done it this way’ without wondering why. Nothing annoys talented people more than stupid rules. And if you want to retain these good people, you must sort this out.
We worked this through with a client’s management team last week. I told them, ‘It’s time to get rid of all the stuff that annoys you in your job.’ People started quite tentatively with small, minor inconveniences. They were easy to sort. No one could remember why these things existed, and they agreed to stop them. Then we moved on to policies, and a defender would pipe up trying to justify why the policy was there. But if the argument was weak, the policy was dropped. Finally, I said to them all, ‘Come on. Someone must have something more controversial. What are you worried could get you fired if you bring it up?’ And people started cheering when they confronted these more significant issues. Great stuff!
At 100 people, it’s time to get deliberate about culture. As you go forward, you’ll need rituals that will bind the organisation together. Some things should be mandatory, like weekly 1:1s and monthly All-Hands meetings. Create stories and legends out of your successes. It’s essential to emphasise praise and celebration. This is a question in the Gallup Q12 measure of staff engagement for a reason. You want all your staff to recall a recent example of receiving praise at work, ideally in the last seven days.
When giving and receiving feedback, teach your people to be direct. Because one thing’s for sure, they will have been taught not to be. Doug Bouey discusses this in his excellent book, ‘Fixing Fractures: Restoring Shattered Relationships’ and emphasises the importance of transparent communication. By building a culture of trust, people can speak up if someone’s upset them. This avoids corrosive issues building up in your business.
Likely, most of the processes you’ve relied on will break at 100 people. The Finance system you put in when you had ten staff? It needs to change. The CRM you were using? No longer fit for purpose.
Most important of all will be your recruitment process. Hiring talented people is the most significant difference you can make to your business. And at 100 people, you will need to delegate to managers. With a rock-solid process, they will likely make better hiring decisions. You must ensure every recruit is an A-Player because it can be tough to unwind further down the line. Make sure someone on your Executive team is accountable for talent acquisition. Don’t delegate this to a low-level HR manager. Give it the priority it deserves.
Dominic Monkhouse is a proven architect of business growth with a demonstrable track record. As managing director, he scaled two UK technology companies from zero revenue to £30 million in five years. Since 2014, Dominic has worked as a CEO and executive team coach, helping ambitious CEOs and their leadership teams reach their full potential and achieve sustainable growth. He is the host of “The Melting Pot with Dominic Monkhouse” where he talks with some extraordinary thought leaders, fellow business authors, and CEOs to absorb their wisdom. Dominic is the author of F**K PLAN B: How to scale your technology business faster and achieve plan A, an exciting blueprint for cultural change and business transformation.
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