"Managers do things right, while leaders do the right things." - Peter Drucker
The importance of great leadership in any organization cannot be overstated. It is my belief, however, that strong, intentional and authentic leadership in small to mid-sized organizations is even more vital. This article will discuss 7 reasons why small company leadership poses somewhat unique challenges and provides a set of pitfalls that small company leaders should avoid.
Scaling Challenges: As small companies grow, they face the challenge of scaling operations effectively. Leaders must strategically plan for growth, which involves understanding when to introduce new roles, when to invest in technology, and how to maintain company culture during growth.
Resource Limitations: Small companies often operate with limited resources—be it financial, human, or technological. Leaders must be adept at budget management, prioritizing expenditures, and often need to be resourceful in leveraging what they have more effectively than larger companies might need to. Great leaders are able to overcome, change, and adapt in order to win. Average and less successful leaders talk about what could have been "if only....".
Talent Retention and Recruitment: Unlike larger corporations with well-known brands, small companies typically struggle more with attracting and retaining top talent. Great leaders in small companies must create a compelling vision and a strong company culture that motivates existing employees and attracts new ones.
Agility and Quick Decision-Making: Small companies need to be agile and responsive to market changes to survive and thrive, which can be challenging. Leaders must make quick decisions often with limited information. This requires a high level of market awareness, decisiveness, and the ability to take calculated risks.
Visibility and Influence: In a small company, leaders are highly visible and their actions directly influence the company's culture and morale. Great leadership involves setting a positive example, being approachable, and actively engaging with all team members. A little bit of effort goes a very long way. When you have a great leader, this works well for the organization. Bad leaders will destroy positive momentum and drive good talent out of the organization.
Less Formal Structures and Processes: Small companies may lack the formal structures and processes of larger organizations, which can lead to inconsistencies in how work is done. Effective leaders need to establish clear guidelines and ensure alignment without stifling the inherent flexibility that can be a small company's advantage.
Personal Touch: In small companies, leaders often have a more direct relationship with their employees. This can be a double-edged sword; while it can lead to a more cohesive and motivated team, it also requires leaders to be adept at managing relationships and sometimes having tough conversations.
Some people are just naturally drawn to the small company culture and they eschew being part of a large organization. Recruiting and retaining these folks is straightforward. However, more people would rather be part of a well known brand, or a large company with great benefits and income security. Recruiting and retaining these people is much harder. A technique that I have used when leading teams in small companies is to find those people with raw talent, knowledge, and skills who were lacking the requisite experience to get hired at the larger companies. I would bring them on and train them up with the understanding that at some point they may want to leave to go somewhere else that can offer them more. What I have found is that when I behave as a servant leader and offer myself as a trainer, mentor and coach and encourage/facilitate their growth, they will typically stay. Investing in people is a long term strategy that can help drive improvements in employee retention. In an article posted in the Yale Ledger, the author relates that "Valued employees who feel supported are more likely to stay with a company long term, which is beneficial in all aspects of business, from productivity to building a great reputation in the industry." (Why Investing in People Should Be a Top Priority for Businesses – Ledger, n.d.)
According Matt Gavin with the Harvard Business School, authentic leaders have high standards of integrity. They take responsibility for their actions, and make decisions based on principle rather than short-term success. (Authentic Leadership, 2019) Managers do things right... Leaders do the right thing. Authentic leaders are wired differently. They seek to connect with their team to unite them around the mission and purpose of the organization rather than focusing only on the bottom line or a meaningless metric. Authentic leaders drive the success of the business while also focusing on their own social and ethical values. Their team members see them for who they are and love them for it. (“Authentic Leadership,” 2024)
Each and every day, we have the opportunity to demonstrate to the world who we are as leaders. In a small company, the responsibility to perform as an invested and authentic leader cannot be overstated. Leaders must stand up and lead from the front or they run the risk of doing irreparable harm to the future of their organization. If you are a leader in a small company, we would really like to hear what you think about the importance of Small Company Leadership. Please comment below.