Few Employees Can Go the Distance

It’s been an unusual week. I’ve had at least four coaching conversations about employees whose jobs have outgrown them. On the one hand, it’s good news. It means that the companies are growing. On the other hand, it’s always tough to deal with an employee who has hit their maximum in performance. (See “You Can Go this Far, but No Further“.)

Ming the mercilessThere’s a saying that I’ve heard attributed to Sanford Sigoloff, the corporate turnaround professional with the sobriquet “Ming the Merciless” for his scorched earth cost cutting. I can’t find it attributed to him or anyone else, so I’m claiming it as my own until someone gives me a source.

“Every time you double the size of a company, 75% of the people who got you there won’t be able to come with you to the next level.”

It sounds cold, which is probably why I associate it with Sigoloff/Ming. No matter how uncomfortable or politically incorrect it is, it is generally true.

Before we get into debate about what “doubling” means, let’s just say that it is different things in different industries. It could be the number of customers or orders you handle, the number of employees, or the gross revenue of a company. For this discussion, let’s use revenue in a mythical distribution/services business, where the dollar volume is a reasonable yardstick for the general complexity of the business.

A competent founder can usually manage an organization up to around $5,000,000 in gross revenue. (See “The Secret to Growing a $1 Million Company by 5x“.) At that point, the business has typically outstripped his or her ability to monitor all of its functions. If it is going to double, the founder has to develop people who can work unsupervised, who can supervise others in task-based activities, and who understand the company’s culture and vision for the future.

For many, this is a stalling point. If the “best” employees have been selected solely for their personal productivity, they may not have the skills to get the work accomplished through others. There is a leap in personal development for both the owner and the employee. The owner may have a challenge in learning to delegate. (In such cases, the owner is part of the 75% who can’t grow.)

The next doubling, from $10,000,000 to $20,000,000, requires that these people can do more than merely supervise. They have to be able to identify and teach others to work unsupervised, and communicate the culture and vision downstream. “Just watch me!” no longer works, since their span of management has grown beyond one-on-one training.

From $20,000,000 to $40,000,000 and beyond, the delegation and decision making is pushed even further away from the founder. Now his or her key people have to teach people how to teach people. Training the trainer is another category of skills, and one that relatively few people can do well.

If we use simple arithmetic progression, one of the four key workers at $5MM will be a great supervisor at $10MM. Perhaps two or three of the ten supervisors at $10MM will have grown into real managers at $20MM, and a small handful of managers will have developed into executives when the company reaches $40MM.

It sounds cruel, but anyone who has run a growing company knows that it’s true. As much as we value our best employees at each stage, most can’t maintain the “key employee” designation for the whole trip. They may still be in your organization, but only at the level where they reached their maximum performance capability. Trying to drag everyone the distance is really the crueler alternative.

Categories: Entrepreneurship, Leadership, Managing Employees, Strategy and Planning... Bookmark this post.

2 Responses to Few Employees Can Go the Distance

  1. Jim Marshall says:

    Other factors beside $ growth can impact “key employee” status. Among them are supervising a business when it starts multiple locations…which often occurs in businesses under 5 million….

  2. Mike Wright says:

    The owner should definitely consider this when hiring and selecting people for development, or they will have telling problems in achieving planned growth.

Leave a Reply

Your email address will not be published. Required fields are marked *