If your recruitment business employs up to fifty people, where should the founder’s attention be directed? The answer depends on what you are trying to achieve.
Understanding the transition
This is often the stage where founders realise that growing a recruitment business and leading a recruitment business are different. The founder realises they are not unilaterally in charge of the business anymore.
The business has moved beyond the founder’s natural span of control. Decisions are increasingly made through an emerging leadership team rather than by the founder alone.
That transition is both rewarding and uncomfortable.
The reward is that the organisation becomes capable of operating through leaders and systems rather than relying on the founder’s daily involvement. The founder gains freedom from many operational responsibilities and the business becomes more sustainable.
The discomfort is that the founder’s influence changes. The founder must increasingly trust other people to make decisions, solve problems and lead their teams. That requires restraint as much as action. Leaders who are continually overruled eventually depart or stop leading.
A second transition is taking place at the same time.
The founder can no longer think only as a recruitment business owner. They must become a manager of the whole organisation.
Understanding consultant performance and productivity remains important, but it is no longer enough. A founder choosing to lead a business of this size must be capable of understanding and interrogating the financial and operational performance of the whole organisation. Profit and loss. Cash flow. Balance sheet management. Debtors. Forecasts. Organisational capability. The questions become broader because the organisation itself has become broader.
The founder is still responsible, but no longer capable of, personally controlling everything. The role is increasingly to lead through an emerging leadership team while understanding the business well enough to guide, support and challenge that team.
Building an organisation
Businesses of this size can become highly successful organisations.
The founder’s attention should now be directed towards building an efficient, well-managed business that performs consistently without requiring constant intervention. Leadership capability continues to develop, but the founder will often continue filling gaps while experienced people grow into broader responsibilities.
This is frequently an inefficient stage of growth. The organisation begins investing in specialist capability and adding to the cost base before it has fully grown to support the increase. Finance, HR, technology, compliance, marketing and operational support all become more important, yet the business is rarely large enough to justify every specialist role internally. Founders therefore make deliberate choices about which capabilities to build internally, outsource or access through advisers.
Maintaining profitability requires careful judgement. Shareholder wealth remains important, but so too does reinvestment. The objective is not simply to minimise cost. It is to build an organisation that is capable of consistently delivering high-quality outcomes while remaining commercially disciplined.
At this stage, improvements in equity value become more evident. Consistent profitability at this scale demonstrates that the founder is no longer the sole driver of performance. Buyers increasingly recognise that the business is becoming an organisation rather than an individual practice.
Preparing for executive leadership
Growth beyond this point requires another change in mindset.
The founder is no longer just building teams. They are building an organisation quickly, with intensity, that is capable of supporting larger teams and pushing through this period of inefficiency.
Leadership appointments become some of the most important decisions in the business. The people being developed today must be capable of leading a significantly larger organisation tomorrow. Some will grow with the business; others will not. Refreshing leadership capability therefore becomes part of responsible leadership rather than a sign of failure.
Planning also becomes more disciplined. Growth can no longer rely on momentum or the founder’s instinct alone. Organisational structure, financial capacity, technology, client strategy and leadership capability all need to be developed ahead of demand. The business begins investing for the organisation it intends to become rather than the organisation it currently is.
This is also the point where the founder’s own capability must continue growing. The business will rarely outgrow the founder’s understanding for long. Leaders who continue learning usually continue growing their organisations.
What this means for the founder
Is this the most significant time in an organisations’ growth? It shouldn’t be. But this period of an organisation’s development brings more anxiety and concern for many founders because of the fundamental changes needed in their method of operation.
Over many years we repeatedly observed the same pattern. Businesses grow beyond twenty people, but where the founder does not successfully adapt to the larger and more complex organisation, the business gradually returns to a size that once again sits within the founder’s span of control. In practice, that often means falling back below twenty people.
This article is part of HHMC’s Appropriately Corporate series for staffing and recruitment business owners, exploring growth, leadership, valuation and transaction readiness. If these issues are relevant to your business, we would be pleased to continue the conversation.
