It is all about sustainability! Do companies grow sustainable?

By Hansjörg Mierke

Many small to mid-sized companies in the IT/Software sector face the challenge of how to position themselves on the market. This is an important question that needs to be reflected upon as it has a major impact on the sustainable growth of a company. Mercuri Urval and myself have a significant number of clients in this sector with long-lasting co-operations. As a result, a base for trust have been established and this topic is often discussed between the owners or decision makers of the companies and myself. Two main issues have repeatedly been raised and discussed:

  • Continuing as a small but flexible organisation and becoming a niche-player with specific solutions and/or products, or
  • Growing the business and competing with top market providers in their respective segment.

Answering this is not easy. On one hand, there are many niches already occupied, but on the other hand to grow a company requires investments and a long-term perspective to see if it is successful, as the success is not easy to predict.

Although the companies have discussed this intensively and all is based on a business plan so ensure success for each step, I have recognized that companies too often take a step backwards and stop all investments after a certain time. This does not only have an impact on the businesses' financial situation, it also has an influence on their employees. Employees often feel insecure, see no clear strategy and often feel uncomfortable. As a result, some are leaving the company and, often enough, it is the key players that do so.

A non-sustainable project!

In 2001 I came into contact with a small to mid-sized family owned business with 60 employees, who develops and operates IT and software solutions for the logistics industry. Their business idea at that time was well thought through regarding revenue and margin. As typically for such a company, all decisions were taken directly by the senior owner and all employees reported directly to him. Initially, this worked quite well. One of the company's targets was to grow either organically or through acquisitions. The decision was to go in both directions.

In the years 2002 to 2008, this worked well and the company grew, both nationally and internationally, and I filled many of the national vacancies during that time. Internationally, a new hub was established and employees from Germany were sent abroad. However, as it turned out they had little experience of the respective new cultures.

In 2004, the main question was how to structure the company for the future and how to reduce the operative impact of the senior owner. A plan was discussed to establish a Managing Director from outside who could take over a reasonable number of tasks from the senior owner. In the meantime, the company had grown to more than 100 employees. Although all scenarios were discussed and the right profile for an external MD was agreed upon, the co-operation between the senior owner and new MD failed. The senior owner was not ready to hand over responsibility. Consequently, the new MD had to leave the company and the company's processes did not change as envisaged. Therefore, all employees were still reporting directly to the senior owner even though the company had grown significantly.

In 2012 the number of employees reached 300, however, the organisational structure remained the same. A completely new set up was discussed with me, and the senior owner was ready to take a significant step back. A new organisational structure was established with clear and new reporting lines, a new compensation system and less operative impact from the senior owner. Consequently, employees were promoted, new employees were taken on and the company performed well with better results, a better culture and less fluctuation. In total a huge success, however with a financial and personnel investment. Nevertheless, it worked up to the point when the senior owner left his new leadership track and became involved in the operative business again. Frustration spread among the employees, people left and the well thought of strategy stopped.

Surprising outcome!

This example describes a typical scenario that I often observe. Taking the first step is not easy, altough in many cases companies are still achieving this step. Then the phase that many things are becoming better and the company is on the right track suggests: well done! The employees with their respective personality are the main actors who are driving this into the future and sustainably. However, I have often observed that people tend to fall back into old habits and a well-started way is stopped or completely abandoned. This is a matter of sustainability or better said: Non-sustainability.

In mostly all development scenarios, I discuss sustainability with my clients. What I have identified in the last years is that this is one of the most important pillars of all for success - for the company itself, the employees, the culture and the future. Therefore, do not stop a sustainable path:

  • trust the organisation,
  • skip your supposedly better ideas,
  • keep calm and really think of the future aims

And keep in mind:

It is all about sustainability- grow sustainable

Do you want to discuss the topic further? Please reach out to Hansjörg Mierke, Partner & Director at Mercuri Urval´s office in Düsseldorf