The mid-market transition: What really matters?

Pretty much all the companies Catalysis gets to work with are going through a transition - or several transitions at once. The ownership structure is shifting due to investors arriving or exiting; leadership may be changing from founder-led to team led as new executives are promoted or hired; growth is likely pushing the company into a new size bracket; consequent growth pains usually cause a transition towards greater formality in systems, processes and structures; new geographies, products and client types create additional complexity.

Against that background, we thought it would be interesting to see what data - from hundreds of team and organisational questionnaires - could tell us about the most frequent challenges and growth constraints described by managers going through these transitions. In addition, Catalysis analysis and recommendations from fifty recent team and organisational strategy projects can tell us something about the universe of possible approaches to addressing those constraints. Clearly, in aggregating scores from many companies we are losing the distinct ‘fingerprints’ of each individual case but gaining a sense of the most frequently experienced issues.


The challenges teams face

When we work with teams, we ask them about 31 possible sources of challenge and complexity which may consume limited management team bandwidth. The table below lays out the top ten perceived issues (the scores are shown to show relative values only).

We may note that:

  • Many of the highest scores relate to concerns about how to generate higher levels of sales both overall and in various particular forms (new customer groups, channels etc).

  • It is striking that strengthening second tier management features so prominently, probably because of top teams feeling over-stretched and unscalable. An echo of that is found in the emphasis on building out the top team itself.

  • That leaves three topics (the influence of technology, making major initiatives happen, improving cross-functional effectiveness) which is each a multi-dimensional subject.


Internal constraints on growth

The large majority of companies Catalysis deals with are excited by the external opportunities they face – but find that their biggest difficulty is how to release internal constraints to pursue those opportunities. The points below are those where teams have scored internal elements below a level of basic effectiveness.

A few observations:

  • Very few companies (most of whom are privately owned when we meet them, as well as some early stage VC/PE backed ones), seem to get much value from their governance arrangements.

  • When it comes to strategy, most companies feel that they have plenty of insight into their markets but admit that the crystallisation of that into a coherent roadmap and executable plan is lacking.

  • Growth company teams tend to struggle with prioritisation and bandwidth, including giving enough time to build team effectiveness and bandwidth. In other words, they are often too busy reacting to find ways to become more proactive and less stretched.

  • Issues at organisational level are multiple and various but cross-functional collaboration and communication are frequently cited, as are capacity and capability gaps.


Where managers may need development

We ask senior teams about their perceptions of where they might need development (see blue-coloured questions below) and where the next tier of management could benefit (grey ones).

The table suggests that:

  • Senior leaders are often settling into bigger roles while also coping with the expectations of investors. That provides a neat focus for individual and team coaching.

  • Those leaders identify a wider range of development areas for their direct reports which suggests a need for more collective skills training and learning.


Constraints identified by Catalysis

When working for investors, Catalysis reports findings across individual, team, organisational and other issues. The table below applies weighted scores to RAG ratings to show relative highs and lows.

This analysis suggests that:

  • Although the differences aren’t huge, we are more likely to point to question marks with FDs and People leads than, say, Technical heads or CEOs. The high deviation in scores for FDs implies that we see a wider range of capabilities than in other areas.

  • At team level we are often impressed by the skills and qualification of team members – but more concerned about weak team structures, team bandwidth and the readiness of a second tier to step up.

  • Considering organisational level issues, we rarely see strategies which look fully formed and executable, or experience of governance which make the transition to investor involvement easy, and we have question marks about overall scalability.

  • The team and organisational issues we point to largely echo problems noted by the management teams themselves.


Dealing with the constraints

Spotting issues isn’t the clever part for teams, investors or Catalysis: finding pragmatic solutions to what are often persistent constraints is. To get a sense of the ‘toolkit’ Catalysis advisers reach into, we carried out an analysis of 50 recent projects to see what we felt were the vital few recommendations which could make a real difference. The table below segments those punchlines by frequency across 345 suggested actions.

What is striking is that:

  • Adding resource and capability into the top team is the most frequent approach – but only represents a quarter of all recommendations. Included in that is the frequent need to redefine role boundaries.

  • Sharpening strategy, priorities, planning and pacing is powerful because it addresses the easiest addressable cause of bandwidth gaps. Finding ways to build the second tier is another key approach, although rarely a quick fix.

  • Bringing clarity to who is in the top team - and can therefore be included in accountability for collective goals - is critical. That is supported by creating a practical cadence for handling operational and medium-term issues.

  • Building organisational effectiveness is likely to involve a mix of addressing bottlenecks in specific functions but also addressing cross functional systems/processes and organisational mechanisms.


Conclusion

Most of the results above will be unsurprising to anyone who has been around growth companies. But what can be surprising is the unstructured way these consequential and chronic issues are often approached. Some Chairs and some investors are skilled in handling a wide range of these problems: many, however, are not.

For those who want to get better, there aren’t easily accessible playbooks relevant to these kinds of companies. Reading books about (mostly American) unicorns is exciting but can feel unrelatable for the UK/European companies we work on. Likewise, much of the management literature is based on the experience of very large companies.

Over the next months, we will share thoughts on how some of the most salient can be addressed in practice and we have plans to create a handbook for investors, Chairs and CEOs.


Get in touch

If you would like to find out more about how we work with investors and leadership teams, feel free to ask us for introductions to clients who know us best.

Previous
Previous

The mid-market transition: Addressing top team bandwidth constraints

Next
Next

Just one of those things – or an avoidable mistake?