Over the years of working with our clients, we have encountered critical phases in their growth. When a business is born, it is typically made up of a single individual or a small, close-knit group of dedicated individuals committed to success.
With success, the demand for output increases. Staff numbers increase, and the organisational chart begins to get bigger. With this, the span of control of the original founders gets wider, and the demands on their management skillset grow. Roles initially based on specialist know-how or technical ability now expand to include people management and leadership skills.
What was once an effective Micro-Business now begins to encounter a bottleneck in performance and output. Micro-businesses can be highly efficient in staffing, with individuals performing multiple roles at a small scale. They can respond rapidly to market changes, and everyone knows what is happening in the business and switches roles according to need.
As numbers grow, so does the distance between the founders and the interface with their customers. Similarly, as the workload increases, the distance between the founders grows, and gaps begin to appear in the channels of communication. As a result, some founders will surge ahead, while others will falter and lag behind, putting a brake on progress.
Eventually, the business reaches a crisis point where it must take action or fail. This is an entirely predictable crisis. It is measurable from day one in the business and can be managed given the right insights and actions. However, in most cases, acting is delayed due to personal ties and a fear of breaking up a formerly successful set of relationships. In the end, the business either restructures or fails. Unfortunately, a failed business leaves even more damage behind than a reformed business.
CSO data suggests that 1 in 3 businesses fail to survive the first five years, while US figures show that only 1 in 4 makes it to 15 years. The most common causes of failure may be grouped under four headings, Finance, Business Knowledge, Market Knowledge and Human Capital. Of these four, Human Capital is the most critical and often the first to fail. The reason for this is that the right Human Capital brings with it a wealth of knowledge of finance, business and the market.
Businesses do not succeed; only people can succeed. A brilliant business idea is no guarantee of success. You need the right people to bring success to your business. At each growth stage in the life of a successful business, you will see a change in people at or near the top. This is because, at each step in a company's growth, it faces a new set of challenges. The skills and challenges faced by a growing business change constantly.
You need to manage those four critical factors to grow your business successfully. The first three are well established.
· Manage your Finances
· Learn about your Business
· Study the Market.
There are well-established processes, procedures and resources available for that. But managing Human Capital is often seen as a Black Art.
People are a mystery to most people. There are many hidden sides and dimensions to people that we are not always aware of because of our learning. People can be fickle and changeable. But underlying the mystery, there are many constants. Just look around you at your close friends and colleagues. Have they changed so radically over the years that you no longer recognise them, or have you seen them grow and develop?
Your old schoolmate that had to win every ball in the game still likes to win. Your close confidant still lends an understanding ear. That person who backed away from every confrontation still walks out at the first sign of trouble. We may lose our extremes over time, we learn to soften the rough edges, and we may add a few new skills, but when push comes to shove, the old me or you is still in there and can still show the edge when required.
Today, we have some great tools to help us to assess human potential. Moreover, we have great resources to enable us to release or recover that potential. Specialists can become experts; managers can become leaders. Human Capital can be leveraged and developed, but you need the right insights into your people and your business requirements to make the right decisions about your human capital assets.
To begin any journey, you need to know where you are now, where you need to get to, and what you will need for that trip.