Growing a business without compromise – Case Studies

A soaring headcount may be a symptom of success but it can also create some serious problems. Nick Britton asks leaders of fast-growing companies how they have expanded rapidly without sacrificing the culture that made them successful in the first place.

It’s become fashionable to talk about company culture, but few are as passionate about it as Tim Ogle, CEO of mystery shopping business Retail Eyes.

‘We’ll fight long and hard to preserve our culture,’ says Ogle. ‘I would even sacrifice a per cent or two on our bottom line, because our success is directly attributable to the team we’ve got here.’

For Ogle, whose business has at least doubled its headcount every year since it was founded in 2003, profitability comes second to the culture. It’s not that surprising to find his recruitment priorities are equally unorthodox.

He explains: ‘Our primary concern is how new recruits will get on with the rest of the team. To put it another way, are they a “Retail Eyes” person? That comes before anything about their experience or education.’

To do this, Ogle introduces potential hires to his employees through formal and informal meetings. He’s upfront when it comes to questioning too, asking about hobbies and interests, and holidays and pets, in an effort to gain an understanding of the person’s character.

Clearly, successful recruitment is a prerequisite for growth. But according to Stuart Hearn, a partner at plusHR Consulting, you have to go further.

‘With rapid headcount growth, there is often so much focus on getting people in the door that companies don’t think enough about what they’re going to do with them,’ he says. ‘Induction, training, mentoring, even job descriptions can all be neglected because there’s so much effort being put into recruitment.’

The dangers of formality

At the same time, the need to introduce more formal procedures can threaten to stifle the company’s existing culture. Hearn adds: ‘When an HR person joins and starts to put formal processes in place, staff can feel that the vitality the company once had is being replaced by bureaucracy.’

If integration isn’t handled early on, it can be an arduous process to go back and try to bring everyone together. Amy Smith, a recruitment manager at digital post-production specialist Framestore, says that the company has expanded from 270 to 770 staff since she joined in 2003 and the impact on its culture has been marked.

‘It’s not one of those businesses that has formalised a company ethos,’ says Smith. ‘Historically, we’ve come from small roots and the chief executive wants to maintain a family feel. That becomes increasingly difficult when you have a company of nearly 800 people.’

Smith asserts that, despite a carefully thought-out induction process, the company hasn’t quite got a grip on integrating its new recruits: ‘There is more we can do; a lot of people in the business don’t know who the CEO is.’

Part of the problem, maintains Smith, is the project-driven nature of the work. The deadlines have been intense as work was produced for films like Harry Potter and the Order of the Phoenix, leaving little reason or time for people to communicate.

Keeping everyone happy

Then there’s the logistical challenge of team building activities. Smith says that the company still holds a Christmas party, but an annual party in the summer was scrapped as numbers grew.

She concedes that, to an extent, Framestore’s culture has become the victim of its remarkable growth. ‘When we got to about 450 staff, [the summer party] just got a bit unmanageable,’ she explains. ‘At that point, we were working on more high-profile film projects, and our deadlines were more difficult to manage.

‘At the moment we are talking about whether it would be feasible financially to do it again. We’re also looking at having more presentations to the whole company from the chief executive, so that people can find out what work other areas of the company are doing.’

Brand communications agency Gyro International has 450 employees. Richard Perry, regional vice-president, appreciates the challenges that come with a larger organisation, but is keen to foster an atmosphere of informality.

He says: ‘The CEO still sits in the middle of the office, so when a new graduate joins us they can go up to him for a chat on day one. Of course, that gets more difficult as the headcount increases.’

Gyro’s emphasis on culture even drives its acquisition strategy, claims Perry. ‘We would never look to acquire a company that didn’t align with our cultural values. Of course we get a good feel for that when we meet the management team and the staff, but we also talk to their clients to make sure they remark on the target company’s energy and passion for the marketing business.’

Growth by acquisition clearly presents different challenges to the organic route when it comes to managing an influx of “new” staff, but the question of culture is still key, argues Ian Tomlinson-Roe, partner at the HR services arm of professional services firm PricewaterhouseCoopers.

‘One of the biggest barriers to the success of an acquisition is the non-alignment of cultures,’ he says. ‘Organisations typically don’t spend a lot of time understanding the culture of the target company, or their own. As a consequence, they fail to identify what needs to change.’

He observes that a successful “alignment of cultures” should take into account reward structures, performance management, terms and conditions of employment, and the overall structure of the combined organisation, as well as more intangible issues such as communication style.

He adds: ‘Cultural differences become very real as soon as the acquiring organisation starts to communicate with the employees of the acquired organisation.’

Suspicious minds

If you don’t get a grip on the thoughts, feelings and basic operating procedures of a newly acquired business, expect trouble. The fears and anxieties of staff and management in both organisations are guaranteed to surface, according to Hearn of plusHR.

‘I was recently involved in the merger of two large record companies in the UK,’ he reveals. ‘As is common with media companies, they both had a family feel.

‘We spoke to people on both sides. Company A was saying, “It’s a complete whitewash – we’ll have to change the way we do everything.” But when we spoke to Company B, people were saying exactly the same about Company A.’

In this situation, Hearn recommends structured meetings and workshops. The worst possible thing you can do is take everyone for a drink: ‘Going to the pub sounds like a good idea, but people get drunk and all their anxieties come out. Often the group separates into two sides and people won’t talk to each other.’

Fitting in

Gyro International’s approach to integrating acquired agencies is designed to smooth over such rough edges. Says Perry: ‘We have an integration plan that takes 180 days, to give people time to get up to speed with our procedures. After that time, if it’s appropriate – and only if it’s appropriate – the name on the door changes to Gyro.’

Similar principles seem to apply to a very different kind of business, 75-year-old accountancy firm Titcheners. Roy Ashton, who bought the business in 2002 with four staff, has now built it to more than 100 mainly through acquisitions.

‘With any business, it’s the people that really matter,’ he says. ‘If you don’t handle that right, you will lose the skills within the business you’re acquiring as staff depart – and then ultimately you’ll lose clients.’

For Ashton, how to handle incoming employees and partners is a key consideration even before the deal is signed. ‘We focus on that quite clearly, asking: “What are people’s skills? Where do they fit into the equation? And what can we do to make them feel good about the merger?”

‘We offer more training opportunities and, as a larger organisation, chances to do more diverse work. For those who want it, we can help people build client-winning skills, which are quite rare in accountants. Even if the training that people want is not related to their work, we would help because if we’ve got more satisfied staff we’ve got a better business.’

The approach seems to have paid off. Apart from those who retired or relocated for personal reasons, Titcheners has only lost one employee from the six firms it has acquired.

Ultimately, the need to preserve a company’s culture along with its core values, such as excellent customer service, may provide a justification for limiting growth. At least it does for Jamie Vaughan, the MD of outsourced call centre company V2 Communications.

He set up the company in the wake of the dotcom crash and says he’s learnt a lot of lessons since then: ‘Growth is encouraging and good, but it also needs to be controlled. I’d rather go light on staff than take the wrong person.’

Nick Britton

Nick Britton

Nick was the Managing Editor for when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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