August 2005 Insight Newsletter

Leading In Small Versus Large Organizations

Leading in small or large organizations presents the same challenges, but in varying guises, so they can feel quite different. Even in very small organizations there can be problems due to unique personalities that are always found in one form or another. Knowing how to lead all sorts of people well is essential.

Many Issues, But One Dominant

Personalities create one type of obvious, but unavoidable challenge. Imagine a boss in a three-person office having an affair with one employee without admitting it to the third person, who inevitably finds out anyway. This produces in miniature a wide range of “communication,” personnel and usually management problems as well, as the individuals dance around the issues. I’ve often used this example to show how every size of organization can face problems. People get it. Even basic human issues require considerable leadership skill to handle while maintaining productivity.

The single greatest challenge, however, is the typical owner’s belief, often shared by everyone else, that the owner (or in not-for-profits the CEO) should decide everything and perhaps even manage every role personally. This is a common disaster. By not knowing how to delegate or lead those to whom work is assigned, many leaders of small operations confuse, demotivate and ultimately lose their best people. Again, this happens equally within units of big organizations when the boss can’t delegate.

Even small operations depend on many people. There’s always an accountant or bookkeeper, perhaps a lawyer, sales person and many other roles that may be outsourced or hired in. Either way the challenge of how to lead each one effectively remains the same. How well this works depends on each individual involved and on their skills as well as the boss.’ The five keys of effective leadership are the same for everyone: being positive, being open, honest and transparent, researching to find the best strategies and building effective habits… while sustaining balance among all these factors.

To be effective, as you “hire” people (or invite them onto your Board if you have one to worry about), you need to recognize this as choosing partners and then involve your growing team closely in how your business develops. At the beginning there’s relatively little confusion as to who’s the official leader as long as you remain sole owner/operator. It’s understood who will lose most if things don’t work out. It’s your business, an extension of you. You and the work are identified as one.

From that point the skills of effective leaders develop in different directions. Recognizing it’s always a mix, there are essentially two ends of the spectrum. One involves employees who are more like full partners, recognizes their opinions count a great deal and that in some sense “it’s their business, too.” The other brings on staff and even Board members almost exclusively as competent contractors. You employ them to do specific things. They offer the odd suggestion, but these arise purely in their areas of expertise. You expect great support, but no on-going participation in overall business decisions. In the latter scenario, you remain a one-person show. Studies show the latter tends not to work over time as situations change and different skills are needed. Few people are capable of making all decisions required through different stages and guiding everyone alone through changing markets, which is the norm today. We need at least some “partners.”

“When debate fails to occur, the solution will always be weaker than it could have been.”
– Business Author, Thomas Isgar

Every Employee A Participant

A true leader works to get the best from employees at both ends of the spectrum, both those who want to be closely involved and the “contractors” who just want to do their jobs and go home. The goal is to get everyone psychologically engaged, but no one expecting to be consulted all the time or putting up resistance. Human resource research shows fully “engaged” employees produce far better results. But how do you retain them and keep them engaged without making them feel like voting partners on every issue?

Leaders must develop this key balance to be most effective. Oddly when you aren’t the “boss” according to the organization chart, you can achieve this more easily. You aren’t psychologically hooked to ownership. People in big organizations may learn this from being exposed to it constantly.

Non-owner leaders or high contributors respond best to the feeling they’re making a valuable contribution… and the belief it will be recognized. We love to see our ideas implemented and for them to produce results. A very large part of leadership in organizations, both large and small, is to encourage people and give them recognition (financial or otherwise) when their initiative produces results. The most powerful recognition of all is using a person’s idea and giving them credit. It’s far more powerful than money and keeps them contributing. If you’ve been treated this way it’s easier to see how to apply it to others when you become an owner-operator.

Of course, organizations can’t take up every suggestion, but many hardly try. Letting one or a few leaders make all the decisions produces a pool of robots who become increasingly unhappy and withdraw from making suggestions or contributions.

Most leaders have the skills for working with others, incorporating some of their ideas and giving credit if they’re used. But it means giving up some of the “sole ownership” attitude about solutions and becoming a more “humble” leader as Jim Collins calls it in his excellent book, Good to Great. If you regularly invite participation, people soon realize their input may not be used every time – that you ultimately have input from lots of sources – and they understand that. But if it’s never asked for, used or credited, they become passive, resistant or both fairly quickly.

This can be a major communication hurdle for many leaders, but especially for those who need to slowly let go of being the sole decision maker in a business they’ve started so they can develop their organizations. As businesses (or teams or divisions in large organizations) expand, leaders have to change most of all – from purely “doing” to encouraging, coaching and explaining. Learning to use the five key skills makes all the difference.

When To Make The Transition

Making the transition from boss to leader smoothly is the greatest challenge of all. There’s no set time. At some point growth dictates it, but that may arrive at 5 or 10 employees, 35, 80 or even more. Practicing the right skills from the very beginning makes the transition easy. When the leader no longer feels a personal relationship with every single person and can’t be in touch closely with what they’re doing, it becomes a necessity not only for the top leader, but for any supervisors or managers as well.

Unfortunately many leaders go on feeling they have personal knowledge of everything and everyone long past the point where they do. They think their close associates won’t mind if the boss decides everything. Disasters are common.

If your business can work with just you or a small team making decisions for a bunch of loosely connected, interchangeable independent contractors, you can remain basically a one-person show. When it needs suggestions, full cooperation, understanding and participation by staff, then you’re into the transition regardless of organization size. In between there’s a bit of flexibility to decide which direction to choose and find advice or coaching if you need it.

For further reading on organizational stages try: