Courtesy of Advisors Excel
By Kim Peters and Sarah Lewis-Kulin
October 17, 2017

There’s no rest with success. Once a small business begins to grow, its team soon faces a fresh set of challenges that will shape its prospects for years to come.

“Expansion can be a terrific motivator. But the revenue generated by each employee often declines when headcount goes up,” said Chinwe Onyeagoro, president of Great Place to Work. “Leadership decisions made early in a company’s growth are critical to building a culture that stays competitive as the organization scales.”

Preserving Culture Pays Off

The Best Small & Medium Workplaces, recently announced by Great Place to Work and Fortune, treat hiring and day-to-day management with extreme care. A growing business will offer less access to its founders and fewer opportunities for recognition than early employees are likely used to. Many co-workers also confront additional bureaucracy and a less obvious impact on the company’s overall success as their organization becomes more complex.

Across hundreds of businesses surveyed by Great Place to Work, employees’ scores for executive effectiveness, innovative behaviors and fair treatment were among the fastest to decline as companies increased in size. This is where growing SMBs can grab an advantage: While their competitors struggle with lower productivity, great employers can keep team members giving their all by focusing on leaders’ credibility and a workplace that people love to join each morning.

  • Surveyed companies in the top quartile for executive effectiveness experienced median year-over-year revenue growth of 26%, three times faster than peers.
  • Businesses in the top quartile for innovative behaviors—another area where scores tend to drop with increased size—reported 23% median revenue growth. That’s also three times faster than peer companies.
  • On an index gauging whether organizations offer a great place to work for all employees, regardless of who they are or what they do, the top quartile for fairness grew revenue 3.6 times faster than companies at the bottom.

“This is why your values should inform every decision you face as the organization grows,” said Onyeagoro. “Stay plugged in to your employees’ experience at all levels, and resist the temptation to compromise on culture in the rush to fill new management roles.”

At Best Workplace Qualbe Marketing Group, for example, leaders keep their decisions grounded by conducting yearly “stay interviews.” Like exit interviews, these check-ins gather feedback on areas where managers can improve. Said one employee, “Qualbe really cares about its employees as individuals. As a result, there is never any game-playing or sucking up, but people work well together for the good of the company and not just personal gain.”

Keeping the Team Together and Moving Forward

Establishing a great workplace early on has benefits on the other side of the balance sheet, as well. Turnover costs money. Success can make employees recruitment targets for larger competitors, and team members can be more tempted to leave if their workplace is in the midst of rapid change.

Fortunately, the tight-knit environment at most SMBs gives them an advantage. In Great Place to Work’s analysis, a genuine connection among co-workers was one of the largest drivers of retention at smaller companies—much more so than at large ones. Employees at businesses with fewer than 100 co-workers were 63 times more likely to plan a long-term future at their companies if they described them as a great place to work.

Leading SMB employers realize just how critical camaraderie is for keeping their people engaged. Top-ranked small employer Reltio, despite rapid growth, still makes time for Halloween pumpkin carving, quarterly volunteer projects and its annual picnic and bocce tournament. The data management organization also ensures all team members are kept up-to-date on the company’s quarterly goals and direction.

This focus on the details matters. Only 3.6% of people at mid-sized employers, and 1.5% at small companies, planned to stay with their businesses if they said they’re not great places to work. (A larger share would stick around at a large organization they didn’t love.) This underlines the value of a fulfilling, high-trust culture at SMBs that will pay off handsomely in employee retention and revenue growth as they scale.

GPTW

Kim Peters and Sarah Lewis-Kulin are Executive Vice President and Vice President respectively, at Great Place to Work, the longtime research partner for Fortune’s annual list of the 100 Best Companies to Work For and other best workplaces lists, including the Best Small & Medium Workplaces.

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