SME with big business aspirations? Don’t put the cart before the horse…

Do you assume you have to provide big-company benefits and opportunities when you are still an SME and need everyone to take accountability? It’s a common mistake made by second generation organisations. Here’s why.

As a company moves from first to second generation, it can actually become quite big – the EU definition of SME includes “enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro.”

This often leads the directors and owners of the business to try to provide things they believe big businesses ‘should’ have. These can include:

  • A structured career path
  • Large annual bonuses
  • Regular promotion to more senior positions
  • A job which will build your personal CV

The problem is compounded by the fact that these are also the expectations of younger, often inexperienced recruits coming into the business. So the recruits outline their expectations based on assumptions about what the business seems to be able to provide, and managers conducting interviews make big promises. A recipe for misunderstanding, miscommunication and disaster.

You get situations like the following:

Young graduate recruits entering a medium-sized financial services company who are promised at interview a ten-year development plan leading to appointment as a company Director. All of them. Five or six years later, when it’s becoming evident that there will never be room for all of them to become Directors and that anyway, some are clearly more talented and suited to the role than others, there is widespread baffled resentment in the graduate intake group because “they promised…”

A young project manager recruited to a design and marketing agency employing around 20 people, pushing for promotion to Head of Project Management after a year’s employment. This, despite the fact that for much of the year, he has been the only project manager in the company and that, even now, there is only one other person in his ‘department’.

Senior managers in a large insurance company who, in a conversation about performance management, state their belief that they are all in line for a large annual bonus. When it is pointed out to them that the company hasn’t achieved its targets for two years running, they don’t get the connection, and reiterate their belief that they should still get their bonus, “because we’ve worked hard”.

What are the beliefs that allow people to make these assumptions?

Firstly, that large organisations – ‘corporates’ – have reserves, resources and slack in the system to allow staff the luxury of running their job to enhance their own CV, to get regular promotion and to be paid large bonuses, often with no direct connection to the standard of performance delivered. Setting aside the fact that this is not, or at least should not be, a true picture of ‘corporate’ life, second generation SMEs are not corporates. They are quite different in the way they operate and in the way staff are engaged in the organisation – and this one of the reasons that many of us find them so satisfying to work with.

There are many rewards for working with second generation organisations: hands-on involvement with clients, early opportunities to take responsibility, chances to learn and grow, and the fun and camaraderie of working in a smaller unit with other like-minded people. Structured promotions and enormous bonuses are probably not among them – but these too often substitute for real engagement and the enjoyment of finding intrinsic meaning and reward in your work.

Kate Mercer has recently been writing about how your organisation changes as it grows, from an energetic toddler stage (first generation, or 1G), to the moody teenager stage (second generation, 2G), before it reaches (if it ever does) the relative calm and maturity of the adult stage (third generation, 3G). It’s a way of looking at your organisation that is unfamiliar to most business leaders, especially professional services experts who are hugely trained and experienced in their professional skill, but generally not experienced or trained as managers. It’s why keeping tabs on everything often seems to get harder over time as your organisation grows. Perhaps the answer is to make some simple changes to your management style? Over the next few months, Kate will be writing articles on the most common mistakes people make in running 2G organisations, and how to start to change your thinking. This is the second in the series – read the first ‘Do you assume the organisation is ‘yours’ and running it is all down to you?