Middle Market Companies Have Unique Leadership Challenges—Here’s How to Tackle Them
The middle market plays a critical role in driving the economy, representing about one-third of private sector US GDP and employing some 48 million workers. Given their relatively small size, it’s not unusual for a middle market company to aspire to double or triple revenue in the short to medium term.
Achieving ambitious goals like these requires high-performing leaders at all levels. Time and again, research has shown that strong leadership correlates to strong business results. For example, a McKinsey study found that organizations with high-performing managers outperform their peers many times over when it comes to total shareholder returns. Yet, leadership development is one area where middle market businesses often struggle.
Time, Budget, and Other Obstacles Stand in the Way
Developing effective leaders can be challenging for any organization, but especially middle market companies. They tend to have lean management structures, with fewer managers accountable for more areas of responsibility. That often leaves managers stretched thin, with less time to devote to their own development or to the development of their teams. And with a combination of aggressive growth goals and constrained resources, middle market companies often believe they can’t devote the time or budget to build the skills of current and future leaders.
While effective leadership is essential at all levels, first-line managers play a particularly important role in a middle-market company’s performance. They’re the primary link to the employees who work on the production line, provide customer support, or deliver professional services to clients, for example. And they’re charged with translating the C-suite’s strategy and vision into practical execution, ensuring the right work is done in the right way.
Front-line managers often struggle in their roles, typically because they’ve been promoted from an individual contributor position with little preparation or training for a role that requires a different skillset and focus. When a subset of those managers eventually moves into general manager or vice president roles, the challenges only propagate. Now, these managers are tasked with thinking more long term, holistically, and strategically—without the training and support to make that leap.
The Consequences Are Costly
Without targeted training and development opportunities, middle market leaders often encounter difficulties like these:
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They find it tough to delegate, so they hold on to some tasks and micromanage their direct reports on those tasks they’re willing to give up.
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They struggle to transition from their previous role, so they revert back to doing the work they’re comfortable with.
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They don’t have the skills or experience to provide constructive feedback and coaching, so their direct reports fail to receive the support and development they need.
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They’re unsure how to lead a team, so they don’t develop the High Value-Creating Teams that are vital to delivering value for the organization’s many stakeholders.
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They might lack experience collaborating, so they avoid doing it even when it’s crucial to achieving company-wide goals.
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Because they’ve been successful in their previous role, they’re reluctant to ask for help for fear it will look like a sign of weakness.
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Since they’re juggling many responsibilities, they tend to focus on their daily to-do list and don’t take time to consider what support they need to succeed.
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At the senior leadership level, they may find themselves working with a board for the first time, without the skills to navigate the inherent complexities.
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When problems like these surface, the consequences reverberate far beyond any one manager’s team or operating area. The effects permeate the organization, manifesting in ways like the following:
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Turnover increases as employees find they’re not getting the role and career development opportunities they need. This is especially problematic at a time when businesses across the board are struggling to find talent.
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Morale declines, usually due to micromanagement, poor communication, insufficient direction, and lack of team building.
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Customers become dissatisfied due to high turnover in customer-facing positions, lack of service continuity, missed deadlines or deliveries, and other performance issues.
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In the face of these cascading problems, the company may miss its growth targets.
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Overcoming the Challenges
As middle market companies struggle to balance the need to grow rapidly with the demand to contain costs, investing in leadership and development may fall far down the list. Yet, given the strong link between the quality of an organization’s leaders and its financial performance, high-growth middle market companies can’t afford not to make leadership development a priority.
Best practices like the following can help middle market companies begin to build and nurture high-performing managers and leaders, even within the constraints of time and budget.
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Identify the competencies your leaders need to succeed. Then map those competencies to the associated behaviors and skills. While every manager role is unique, some common leadership skill areas include relationship building, decision-making, performance motivation and coaching, and communication. Interviewing skills are also essential for those who are new to the hiring manager role, to mitigate the risk of inherent biases like relying on first impressions, confirming what they already believe, or preferring candidates who are like them.
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Take a phased approach to providing training. When a fast-growing services provider needed to equip up-and-coming leaders with the skills to succeed in their new roles, our team developed a six-phased approach that helped ease time and budget challenges. A train-the-trainer approach allowed GMs and VPs to have a hand in their own first-line managers’ development.
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Leverage the power of 360-degree surveys. These tools give leaders insight into how others in the organization view them, which can help identify skill gaps or ineffective behaviors.
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Create a culture where vulnerability is accepted. Anyone who is new to a role (not just managers) should feel comfortable asking for help and support. That starts by creating an environment where employees are encouraged to build bonds with colleagues based on mutual trust.
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The Leadership Advisory Practice at Odgers Berndtson helps organizations discover and develop leaders, strengthen value-creating teams, and prepare for what’s next. Learn how our highly experienced assessors and coaches can help you and your team make a positive impact on your organization and those around you.