What’s Happening in Your Organization?: Key Trends on the Journey to Scale
The funding has been committed. The Value Creation Plan built. And following the celebrations of the next major growth milestone, thoughts and questions quickly turn to, “What needs to be in place to make sure this business can scale? What’s going to get in the way?” At Summit Leadership Partners, we work with many clients who want clear answers to these questions. We help our clients by collecting and analyzing data from both the strategic players in the company as well as employees deeper in the organization to quickly gain insights and drive recommendations for scalability. Based on more than 7500 responses to Summit’s Organization Growth Diagnostic (OGD), an online survey that measures seven key performance indicators powered by Entromy’s AI-supported software and normative database, we see several key factors that have the greatest impact on high-growth companies.
Culture and Engagement are Key Differentiators.
High-growth organizations are frequently fueled by the unique culture and employee engagement that helped them find initial success. As organizations prepare for scale, employees and leaders alike cite culture as a key attribute of both attracting and retaining quality talent. The executive leaders are seen as key culture carriers and employees are driven to work hard by their passion for the company’s purpose and mission. However, as organizations continue to grow, concerns typically rise about how to maintain the cultural enablers that have helped them achieve success so far.
In comparing OGD results of PE-backed clients over the past year to examine differences between companies where their Value Creation Plan (VCP) was on track versus those where it was not, we found that VCP on track companies scored on average 16 percentage points higher on Culture and 13% higher on Engagement than companies that were off plan, suggesting Culture and Engagement have a relationship to underlying strategic goals for value creation.
Additionally, there may be opportunities to mature the culture or introduce new cultural enablers to enhance scalability and the bottom line. Based on benchmarks from our partner, Entromy, top performing companies experienced an 18 percentage point* advantage on culture compared to bottom quartile companies. For companies without an intentional culture, aligned leadership team and motivated employee based, the pressures of growth will exacerbate these challenges. Without a strong foundation and continued attention, undesired consequences may ensue, including loss of cultural artifacts, disengagement, attrition, and VCP falling off track.
Issues within the Executive Leadership Team Cannot be Masked.
When a company has a strategically aligned and cohesive Executive Leadership team, the results speak for themselves. We tend to see more favorable ratings across both Leadership and Strategic alignment drivers when the senior-most leaders are working well together. Employees perceive the strategic direction as clearer, have faith in the company’s future success, and generally, rate senior leadership as more effective. Further, the entire Executive team is more often identified by lower-level employees as key influencers.
In contrast, when the leaders at the top are experiencing conflict, uncertainty or tension, the entire organization knows it. Lower performing companies score nearly 20 percentage points lower on Executive Leadership favorability. Cascading down to the employee experience, perceptions of future success, desire to stay and clarity of direction dip. Further underscoring the linkage between Executive Leadership and growth, companies executing effectively against their VCP scored an average of 24% higher on Executive Leadership items than those struggling to keep their VCP on track– the largest survey dimension gap identified on the OGD. The strength and cohesiveness of the executive team is not only highly visible to the broader organization, but it is not also important to staying on track with the VCP.
To successfully scale, companies require an aligned executive team with healthy behaviors around conflict management, decision making and how to work together. Without these features, companies will struggle with growth and the whole organization will know it.
Middle Management Effectiveness is Colored by Expectations.
For the average employee, the strengths or challenges of middle management are colored by direct experience within one’s department or team. If someone likes their direct manager, s/he may view their performance more favorably, whether they are effective in their role or not. Senior leaders’ perceptions of management may differ from those of employees based on their expectations for manager performance. There may be broader issues for middle management that lower-level employees do not directly see, such as a lack of bench strength or need for greater accountability. Nevertheless, these gaps impact employees’ experiences more broadly, including communications effectiveness, understanding of company direction, and cross-departmental collaboration.
On the flip side, managers who execute on strategy, but do so through toxic behaviors, may please senior leaders with their performance but will drive employees out of the company. Differing perceptions of managerial effectiveness between levels, creates an obstacle to growth. At successful companies, middle management is viewed favorably at all levels of the organization, entry level through senior leadership, and acts as a conduit for communication, strategy, collaboration, engagement, and other key features for growth. In these situations, VCP On track companies average scores around the top quartile benchmark at 80% probability, compared to VCP Off track companies at 67%, on average. Organizations with ill-prepared middle management will face greater obstacles as they scale.
Structure and Talent are the Glaring Constraints to Scalability.
As organizations scale quickly, both structure and people can become sources of strength or barriers to growth. The structure that once helped the company flourish can become a bottleneck that slows down decision making. Similarly, having the right talent in the right seats becomes more challenging as the number of employees, roles and capabilities needed increases exponentially. While these drivers are not obstacles for all high-growth companies, more often than not our clients struggle to find the right structure and talent to meet the demands of scaling rapidly.
In fact, in Summit’s research, VCP On track companies averaged 50% favorable for Structure and 44% favorable on Talent. While still higher than the VCP Off track companies, averaging 33% and 29% respectively, structure and talent represent clear opportunities for organizations at both ends of the spectrum. Further, VCP On Track companies have much to lose in the long run if these elements are not attended to as they grow.
Growth necessitates faster hiring and department expansion, which then place new strains on processes like onboarding and recruitment and can exacerbate ineffective structure. To scale successfully, companies must professionalize their talent functions to attract, onboard and develop the talent for both current and future capability needs. They must also identify an ideal future state organization structure into which the company can grow purposefully. Without an eye on the future and an understanding of how to get the right talent into the right seats, organizations may still grow but their effectiveness will increasingly drain over time.
While we often see these key themes emerge, each company is unique. It is important to thoroughly understand each organization’s nuances to understand the key strengths and obstacles that may impact its ability to meet strategic growth goals.
*Benchmarks provided by our partner, Entromy. Data provided was calculated as percent favorable – number of responses that were Agree or Strongly agree – and based on a 0-100% range. Companies measured as on VCP Off track was based on results on their organization performance scorecard. Statistical differences must be interpreted as directional only given the sample size used.