Ksenia Zheltoukhova, Research Adviser at the Chartered Institute of Personnel and Development (CIPD), discusses the four stages of growth for a small business.
As a small business grows, its long-term success and stability depends on how well leadership is aligned, and how easily it can adapt to meet the changing needs of the business.
In our recent research into SMEs we pinpointed four key stages of growth for small businesses: entrepreneurial edge, emerging enterprise, consolidating organisation, and established organisation. Below is an insight into what each stage of development looks like, what implications it has for leadership style, and what to expect as a business continues to grow.
1. Entrepreneurial edge:
In the early days, there is likely to be a flexible approach to structures, with fluid job roles, informal channels of communication, and an emphasis on knowledge exchange. As a leader you can expect to be involved in every aspect of the business, from the day-to-day operations to the more strategic planning. Your role at this point is to provide the vision and company road map, inspiring and leading your team through a common purpose. Distributed leadership, which is shared by all of the team members, is common at this stage when leaders are likely to hire people who really get the company and what it’s about and can get on with the job without supervision.
2. Emerging enterprise:
At this point, the organisation’hs structure will become more formalised, with processes and procedures beginning to guide more of what the company does. In turn, your role as leader will become more directive and strategic, with responsibility for ensuring clarity of direction, connecting strategic vision with operational priorities. As newcomers arrive, you will be managing the rest of the team much more, usually through hands-on guidance and coaching.
3. Consolidating organisation:
With the continued growth of the business, a more systematic approach to people management will emerge, along with a greater consistency in how things are done around the business. Most employees will have received job descriptions, with clear roles and responsibilities, therefore requiring more managerial layers. This is the time for you to let go of the day-to-day and become a kind of business “pastor”, someone who oversees the formalisation of managerial structures and delegates much of the execution to senior managers with responsibility for different aspects of the operations.
4. Established organisation:
By this stage, the structure of the business will be clearly defined and the front line will have been empowered with skills and confidence to lead on behalf of the organisation. The role of senior management in this context is largely to nurture an enabling environment. By now you should have an overarching view of both the internal and external workings of the business, and can turn your attention to bringing in some external perspective and fostering company culture. Your role should now be almost entirely a strategic one, as you look to ensure that organisational practice supports business aims, and is aligned to the vision and values of the company as a whole.
To read Ksenia’s report in full, which contains additional information on adapting your leadership style, please visit Effective-leadership-management-sme