Focus on four key areas to ease SME growing pains
Nathan Davis says small companies face challenges when deciding to increase their headcount – but they can be overcome
The government’s ambition of economic growth can only be delivered through successful businesses expanding their market and ultimately increasing the numbers they employ. But this latter point is one that can also create significant challenges for many smaller companies, which often struggle when they extend beyond a headcount of around 20 employees.
Small companies employing fewer than 20 people will typically develop informal communication structures with colleagues likely working across multiple levels of the business and often in close physical proximity to each other in the same office or, in many cases, the same room.
The principle behind Metcalfe’s Law on the influence of a telecommunications network dictates that, amongst a group of 20 people, there are already a possible 190 different communication points. When headcount extends to 25 people, the number of points increases to 300 and continues to rise exponentially as additional employees are added.
For a growing SME this is likely to create communication challenges across a broad range of areas including clarity over its mission and how growth targets should be achieved.
To help address these, many businesses will typically restructure and move their people from being part of one larger team into multiple, smaller functional teams. While this can be effective in reducing the total number of communication points, it also increases the risk of teams working in silos and moving in different directions from their colleagues.
While increasing headcount is usually essential for growth-focused businesses, we know from our own experience of supporting aspiring SMEs that it also requires a new approach. Succes in moving beyond 20 colleagues usually demands a careful focus on four key areas: strategy, people, process, and technology.
The starting point in addressing these growth pains is to focus on a clear strategy with objectives that are fully aligned with the purpose of the business. Risk-based and principle-led strategic planning and execution is key to ensuring there is clarity of purpose across an expanding team of people. Embracing this approach will help provide colleagues with a single direction that aligns business and team decisions with a clear overriding ambition. It also reduces the risk of newly emerging separate teams from inadvertently working against each other.
As you would expect, growing the numbers employed within an SME also requires a strong focus on people. Aligning team and individual objectives with the overall business strategy is critical in giving a clear understanding to all employees on how they can contribute towards a positive impact and help deliver growth.
Processes are a further important part of this mix. The multiple communication pathway options that exist within a small business combined with a new structure of smaller, separate teams creates an essential need for clearly defined processes. Setting these out with clear roles and responsibilities will help colleagues better understand how they should work together across the business. It also reduces the risk of teams working in isolation or making decisions that may positively impact them but could be detrimental to growth.
Technology is the final area that can help overcome SME growing pains. The right technology can be a real enabler for collaboration between teams by ensuring processes are streamlined and allowing important data to be accessible to an expanding team.
As well as enabling growing SMEs to make informed decisions within a rapidly changing business environment, investment in technology is also vital in helping SMEs manage a growing headcount as they aspire for growth.
Nathan Davis, Evolve Consulting Director at accountants CT
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