In a 30-year career, 20 of them with Enterprise Ireland, Karen Hernández says she has never come across a company that has scaled beyond the capability of its people. “Through my work with Enterprise Ireland client companies, I regularly see organisations reach a point where future growth depends less on market opportunity and more on the strength of their leadership, people and organisational capability.”
Hernández is senior HR & OD specialist with Enterprise Ireland’s leadership, talent and skills department and has worked with over 1,500 companies over the years. “Many business leaders still view people primarily as a business cost or resource,” she says. “However, in my experience the most successful companies view people differently. They recognise that their people are at the very core of the business and that their skills, leadership capability and ability to adapt will ultimately determine whether the company can scale successfully.
“No company can scale beyond the capability of its people and leadership team. “As organisations grow, leadership capability, management systems and organisational structures need to evolve alongside the commercial ambitions of the business.”
She identifies a number of common challenges faced by scaling SMEs (small and medium-sized enterprises). The first of these is what she describes as the “CEO bottleneck”. This occurs when too many decisions continue to flow through the founder or CEO.
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“What initially helped drive growth can eventually begin to slow it,” she notes. “It becomes critical when the owner-manager is in their 60s or older and wants to leave the business but find that they can’t. They can’t sell because they haven’t built a team capable of running the business after they leave. If something happens to them, the business can be gone overnight.”
Similar to the CEO bottleneck, another frequently occurring issue is an over-reliance on key individuals. “Many SMEs have a small number of people the business feels it cannot function without. While this may appear to be a strength, it can create significant organisational risk.”
A lack of leadership depth is another common problem. “High-performing technical specialists are often promoted into management positions, but nobody is born knowing how to manage and lead yet they are expected to do it.”
Companies sometimes become victims of their own success, with growth outpacing organisational design. “Companies can find themselves operating with organisational models designed for a much smaller business,” Hernández says. “When we go into companies, we look at the organisational structure and help them to redesign it to suit their growth strategy. That might mean developing new functions or adding new roles to the leadership team.”
Addressing these challenges by hiring in capability is not really an option for SMEs, she points out. This is because firstly, the tight labour market means suitable talent is very thin on the ground and secondly, they can’t compete with large corporates on salary.
“It’s very difficult to recruit in today’s market,” she says. “SMEs can’t rely on external talent. It’s not always there and if it is, it’s going to be expensive. They need to plan and prepare for growth. It can’t be done on the fly.
“The most successful companies we work with have a strategy in place for structure and capability building. They increasingly invest in growing capability from within, rather than relying exclusively on external recruitment. They view investment in people capability in the same way they see investment in equipment, technology, innovation or market development.”
That investment in internal talent has other spin-off benefits. “It’s a huge motivator for staff,” says Hernández. “Developing internal talent and moving people into different roles allows them to reach their potential and increases the chance of them staying with the organisation. It becomes part of the employer value proposition and helps with both retention and recruitment.”
Enterprise Ireland provides a range of supports to assist companies with their capability needs. “Our team of talent specialists work one-to-one with businesses to understand their scaling growth needs from a people perspective and help them build the right structures to scale successfully.
“We offer a number of training supports including the Leadership for Growth executive development programme for CEOs, the Dynamic Leadership for CEOs and senior leadership teams in SMEs who are preparing for growth and international expansion, the Spotlight on Skills strategic workforce planning programme for senior leaders with responsibility for business growth and organisational capability, and the Company Development Fund which supports businesses in making longer-term investments in organisational capability.”
According to Hernández the businesses that will thrive in the years ahead won’t necessarily be those with the biggest workforces or the largest budgets. “They will be the organisations that deliberately build leadership capability, strengthen their management teams and invest in developing their people ahead of the need. In a more complex and competitive world, capability is no longer simply a HR issue – it’s a business-growth issue.”
