How to restructure your Management team in a growing company

At a glance

• Adding to your team at the right time needs careful planning and may require difficult conversations with your existing staff.
• If you’ve hit a growth ceiling, think about the organisational structure you need to achieve your long-term strategy, mapping each role carefully.
• You may also need to review your own place in the company, and whether it should evolve so you can enjoy the future you want.

As an SME owner, you naturally want a good relationship with your management team, as they’re critical to delivering your strategy. But as your firm grows, executive roles will need different skills and experience, which may require you to look for fresh expertise.?

Reconfiguring and adding to the team at the right time is essential. For example, you may start with a bookkeeper in your finance department, then evolve to a Financial Controller, a Finance Director and, finally, a Chief Finance Officer.?

This can lead to tough decisions and difficult conversations with staff, so you should plan and manage such transitions carefully. Map what a good management team looks like for each growth stage, and?recruit new skills?if existing managers are not ready to take on the necessary responsibilities.?

Will Davies, CEO of property-maintenance firm Aspect, faced this dilemma recently.

“Reconfiguring your team may mean recruiting new people ahead of those who have done well in getting the business to that point,” he says. “But the business will only continue to prosper with the right people. We had to do this for the next stage of our system development and technology plans, which include developing a more systemised and integrated in-house customer relationship management [CRM] solution.”

Aspect needed a Chief Technology Officer with experience in delivering and managing a project of this scale. It meant recruiting a high-level executive who would rank ahead of the existing team. But they have benefited from the new hire’s knowledge and experience, says Will.

When to improve and reconfigure your team

Martin Brown, CEO of business-growth advisors Elephants Child, says: “During growth phases, you tend to hit glass ceilings when you can’t seem to grow the business. These may align with levels of revenue at, say, ￡1, ￡5, ￡10, ￡20, ￡30, ￡50 and ￡100 million, and so on. When you hit a ceiling, everything becomes more challenging and feels like wading through treacle.”?

To address this, Martin recommends setting your strategy and plan, then thinking about the organisational design you need to deliver it.

Establish the necessary structure, roles and job descriptions and get a sense of the gaps in skills, experience and behaviour, which you can address through development and recruitment.

For example, as you plan to grow, you may need a more relevant finance function, with a CFO instead of a Finance Director, or more specialism in sales or marketing. If you plan to expand to multiple locations, you might need a new role in facilities management. And if ESG is a focus, you may need a Head of Sustainability.

How to choose and keep the right managers

Hiring the wrong person can be costly and take many months to correct. To minimise this risk, map each role in as much detail as possible before recruiting, so you know exactly what you need.?

Protect key employees?with health cover, key-person protection and shareholder protection. Give your reconfigured team clear roles and targets with related bonuses. For long-term effectiveness, it's likely you’ll need to give them a stake in the business, such as through a share scheme.?

Will says that such schemes can be costly, but it’s worth it as “a smaller slice of a bigger cake can be better for everyone”.

How to organise a management reconfiguration

Andrew Shepperd, Co-founder and Director of consultancy Entrepreneurs Hub, says: “Some roles outgrow people. But don’t abandon those things that have got you to where you are. Find a way to blend new expertise with the old. That can be challenging and even lead to disputes. For example, a technician who was instrumental in founding a technology business no longer had the necessary expertise to run it as it became much bigger, with formal systems and processes to satisfy legal and governance requirements. His approach no longer fitted.”

Start addressing such issues as soon as they become apparent, rather than letting them drift then changing suddenly, says Andrew. Plan the change carefully and over time, so everyone has space to adjust. Communicate clearly what’s necessary, why and how it benefits all parties.

“SME owners often say, ‘I never expected my business to grow this much’,” he adds. “They’re no longer sure they have the skills or experience to manage it. Often, they haven’t invested enough in people and don’t have the right team.

“Sometimes they have great businesses, but think people at larger companies wouldn’t want to work for them. But many talented professionals enjoy working in SMEs, where they can have more impact.”

Personal goals and choosing a new CEO

One of the toughest decisions may be around your own role in a growing firm.?

Martin says: “Just because you’re the CEO and major shareholder today, that doesn’t necessarily mean you’ll be the right CEO in the future. That role may not inspire or motivate you, so you may need to replace your role but continue as major shareholder. You could become Chair, or go back to whatever role you enjoy most – such as designing products – while someone new leads the business.”

Your personal situation will play into this decision. For example, will changing your role allow you to semi-retire or retire when you want to? Could you afford to downsize your role to pursue other goals, such as starting another business or social project? Speaking to us about your situation will help you gain clarity around such decisions, so you can do what’s best for you, your management team and your employees.

Where the opinions of third parties are offered, these may not necessarily reflect those of?St. James's?Place.

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SJP Approved: 06/01/2023