There are really THREE stages of business growth for small businesses (defined as having less than 100 employees). The first is the solo entrepreneur who starts the business and operates it as the sole person in the business, perhaps sometimes assisted by external resources (family or paid help e.g. accountant.)
The next phase is the first step for traditional business growth. Either to grow the business, or adapt to growing demand for products and services, the solo owner employees his or her first employee. This period of time in the business lasts until the owner can no longer directly supervise new hires, which would often be around the ten employee mark. Another aspect of this period is that the organization has a flat structure. There’s no hierarchy, no managers. The owner does all that work.
The third phase involves having more employees than the owner can directly supervise. Generally, when someone has more than ten employees (sometimes more, usually not less), it’s necessary to hire supervisory or middle management help.
There’s actually a fourth stage, but one that moves the small business out of the small category, and that’s when growth is so strong that the company now employees over 100 employees.
Each of these stages requires changes in the owner’s skill set, and also changes in the psychology of owning and running a business. If the owner does not “grow” with the business, it’s likely that growth will stall, OR, that the entire business may be at risk.
You simply can’t run a business with ten employees the same way one runs a solo business. So let’s take a look at the changes needed.
The Solo Business
When you are the sole person in the business (again, excepting some family or contracted help), you have to be chief everything. You market, sell, produce, invent, provide customer service…all the “stuff” of the business process devolves to you.
On the other hand, you don’t generally need the kinds of people, supervisory and management skills that are necessary later on in the growth cycle, AND, the level of complexity involved in running a solo business is low. There’s far less paperwork, less definition of roles, no need to training others, and a raft of things that come up later.
Psychologically, though, here are the characteristic important for solo success:
- Personal accountability: You have to be comfortable taking total responsibility for the success, or failure of the business. After all, all the business is ….well….you.
- Task Flexing: Since the solo operator is responsible for everything, the ability to juggle different tasks, prioritize, shift back and forth between sales tasks, and customer services tasks (as an example) is critical. Along with this is the ability to manage and control one’s time, and also to balance work life with non-work life.
- Not Easily Overwhelmed: Related to #2 is the ability to work long hours, and deal with all kinds of tasks, without feeling overwhelmed. The feeling of being crushed by the amount of work (some boring) can contribute to increased anxiety and depression which in turn makes you less productive.
- Positive Minded: Running a solo business is tough. There will be ups and downs throughout the history of your business, whether you grow or not. Without some sense of optimism about the future and its possibility of success, it’s hard to soldier on. Many business founders have experienced huge amounts of “failure”, before they succeed, and their positive mind sets helps them LEARN from those mistakes.
- Isolation Tolerant: The solo entrepreneur is often so caught up in day to day tasks that he or she neglects social contacts, and connecting with friends and family (or meeting new friends. This is particularly the case when the business is internet based or deals with things like writing, or other solo activities. Not only is this unhealthy, but there’s a risk of getting “out of touch” with what’s going on in one’s niche. And, social media and internet “discussions”, while helpful cannot replace personal face to face contacts to help relieve the sense of being isolated or “in it alone”.
There are certainly other qualities that help the solo business operator succeed, but these are some of the important ones.
The Business With A Few Employees
When you hire that first employee, or actually as you plan and go through the hiring process, a lot of things change. It’s not that the business becomes harder to operate, but it becomes quite different from your days as a solo entrepreneur. You’ll have additional paperwork. You have to train your staff, and you’ll have to know and conform to labor and tax laws. Along with that, since you are still THE business (it can’t exist without your everyday involvement) you need to make some psychological shifts.
- Tolerance For Others’ Mistakes: As a solo operator, you only answer to your self, and you set the bar for how the tasks you do are to be achieved. Many solos particularly successful ones are detail oriented and perfectionists. And that can be a good thing as a solo.
- Now, all of a sudden you have to deal with mistakes, errors, and styles from your employees. They are going to screw up, and you can’t just shift from beating yourself up to beating up on employees. You need to recognize that employee errors and behavior are often a result of how well (or badly you trained them). In any event no employee is going to do things exactly how you want things done, and you need to be tolerant of that.
- Willingness and Ability To Delegate: The purpose of hiring staff is, among others, to free you, the owner from tasks which need to be done, BUT don’t actually require you to do them personally. The notion is that you free yourself up to focus on what you and you only can do best to move the business forward. So, you need to delegate, not just in the sense of dumping work on employees that you don’t want to do, but using delegation to grow the skills of your employees so they can continue to take on more and more complex work. So, in a sense, you need to let go of things you used to do, and TRUST that employees can do them as well, or at least well enough.
- Trusting Others: Related to #2 you have to be able to trust those employees. Surprisingly trust isn’t just created on the part of the employee, but it’s a psychological trait on the part of the business owner. Some simply don’t trust easily (particularly the perfectionists). Others are comfortable letting go and trusting others to do their parts.
The reasons this (and delegation) is so important is that it makes micromanagement less likely. You don’t want to stand over your employees constantly telling them what to do. Neither do you want to continue to make all decisions. Micromanagement comes from a lack of trust.
- Being Responsible For Others: Perhaps one of the toughest shifts from solo to employer is that you will now be responsible for the welfare of your staff. The solo entrepreneur is responsible for his or her family’s welfare and financial health, but that’s the main responsibility. As soon as you have employees, you become responsible for THEIR welfare and financial health, and that is a heavy load. And sometimes you have to make tough staffing decisions, depending on how your business is succeeding.
So, you need to have some level of comfort around the notion that others are depending on you and your business. You also need to be able to balance that responsibility with the health of the business. A bankrupt business no longer employs anyone, so that’s why balance is so important.
- Management & Interpersonal Skills and Attitudes: Finally, because you are going to be supervising all your employees, there’s the entirely new process of explaining their jobs, helping them improve, communicating with them and so on. Solo entrepreneurs obviously need various interpersonal skills to deal with clients and customers (but can survive with poor skills), but the business owner who abuses staff though intent or ignorance, or is incapable of managing and helping employees improve is going to be in big, serious trouble.
More Than Ten Employees
Once your business has grown to ten+ employees, once again there’s a big psychological shift required. The biggest change is that you will need a person or people who report to you as supervisors or managers of employees farther down the line. While it’s theoretically possible to keep a flat structure with no middle management, it’s exceedingly hard to make that work. So you need to hire and train a supervisor/team leader or whatever you want to call it. As a result of moving into this phase you are no longer “down at floor level”. The information flow tends to come through your middle management, rather than from your own direct observation. That’s a huge change.
Here are some of the psychological shifts.
- Comfort With Joint Decision Making: While you may often choose to get input from floor level employees to make decisions, and continue to do so, you now have an additional level involved — the supervisors/managers that are responsible for IMPLEMENTING any decisions made. While you can remain the chief decision-maker, you need buy in and understanding at the mid-management level. To do that you need to involve them in the actual decision-making process rather than making decisions by fiat. Remember, also that the best managers and supervisors WANT the ability to make decisions as autonomously as possible.
- Valuing Team Building: Of course any group of people involved in an enterprise need to function as a team, so that’s a factor regardless of how many employee there might be. What’s different here is that the cost of two or more middle managers in constant conflict or working at cross purposes can be huge. That’s because their span of influence exists over their direct reports. Managers pulling in different directions and creating conflicts for employees is demoralizing but also can cripple the ability to get things done. So not only must you value team building but you have to work intentionally toward building team among your direct reports — supervisors/team leaders.
- Letting Go Of What You Love Doing: This is a big one. You probably started your business because you loved doing what the business required you to do. It might be coming up with new products, interacting with clients, or a number of things. However, when you are managing a company with mid managers and many employees, you may not get a chance to often do the things that made it worthwhile to start the damned thing. In short you can end up isolated from the things that you enjoyed.
- Big Picture Focus: As the owner you need to focus on big picture ideas. One of your most important responsibilities is to develop strategies and plans to move your company forward, and to respond to market changes an conditions. While you don’t have to do that alone, since you will have other hopefully competent managers, the buck has to stop with you. It’s going to be your job to plot the future course over a period of years, and nobody else’s.
- Lonely At The Top: With many employees, you are now responsible for even more people’s welfare, and you will be called upon to make very difficult decisions about staffing levels, allocation of funds, etc, and while you may get a little help from your middle managers, once again, the buck stops in your pocket. And it’s not always possible to discuss everything weighing on your mind with others in the organization, since you aren’t just a “person struggling with a decision”, but the BOSS who has to project certain things to others in the organization. It can be lonely at the top, so you may need sounding boards outside the company.
Doubtless there are other shifts required — probably a book load of them — when it comes to role and psychological perspectives as your business grows. Let’s end with a tip.
Don’t wait until you move into the next stage to start grappling with these kinds of changes. For example, a good time to build your supervisory skills is when you are a solo business. Always try to be learning about how to succeed at the NEXT stage.
Here’s another tip:
Before you try to grow your business in a kind of knee-jerk, more is better response to possibilities, consider whether you WANT to run a complex organization. Sometimes it’s best to stay small. As we say: Small IS Beautiful.