The 150 Employee Crash: Why Growth Can Break Your Business
Is your growing business starting to feel chaotic? Are crucial tasks slipping through the cracks? In this episode, you will learn the telltale signs of a business struggling to transition from relationship-centric to process-driven operations and why these surprising challenges often emerge around the 150-employee mark.
We unpack the "Dunbar effect" and why maintaining strong relationships becomes exponentially harder as your team expands. We break down the common symptoms like role confusion, overwhelmed managers, a shifting culture, and a breakdown in accountability.
You will understand why this seemingly arbitrary number can be a critical turning point and what proactive steps you can take to navigate this growth phase successfully.
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The 150 Employee Crash: The Challenges of Scaling a Business
The initial upward trajectory of a growing business is often fueled by excitement and a sense of limitless potential. However, this exhilarating phase can sometimes give way to unexpected turbulence. You might find more tasks slipping through the cracks, and the once-straightforward process of getting work done now demands significantly more effort and coordination. If this scenario resonates, you're likely navigating a common point in the journey of business expansion, a phase where the challenges of scaling a business become increasingly pronounced.
At Revela, we've seen firsthand the impact of these organizational shifts and understand how difficult they can be to navigate. On a recent episode of The Leadership Hustle podcast, Andrea Fredrickson and Michelle Hill shed light on the unique growing pains in business that often emerge as organizations approach and surpass the significant 150 employee mark. Growth and structure is needed to sustain success, prevent strategy misalignment, reduce role confusion, and decrease accountability issues.
Why 150 Employees Can Be a Tipping Point
Why does the employee count in the range of 100 to 150 so frequently present unique hurdles for growing organizations? As Fredrickson highlighted, this phenomenon is closely linked to the well-documented "Dunbar effect."
This research suggests that individuals naturally encounter cognitive limitations in maintaining a large number of strong, trusting relationships, with an estimated cap of around 150. In the context of a flourishing company, this cognitive constraint has profound implications for organizational dynamics.
Smaller organizations often thrive on a foundation of close personal relationships. The founder typically knows most, if not all, employees, and communication flows organically through these established connections.
Fredrickson explained, "...when you have a company…here's the owner, they started and there's so much that happens where they may have put some layers in, but all the relationships and all the things that are happening inside the business is relationship-centric and not process-centric." This relationship-centric approach, while effective in the initial stages, often lacks the inherent growth and structure required to support a larger, more intricate organization.
As the employee count climbs, relying solely on personal connections for seamless coordination and task management inevitably leads to breakdowns and the emergence of growing pains in businesses. While 150 isn't a rigid, unbreakable ceiling, the range between 100 and 150 employees frequently acts as a trigger point where these challenges of scaling a business become significantly more pronounced. This range necessitates a shift towards more formalized business growth management strategies.
Identifying the Growing Pains in Your Organization
Recognizing the specific signs of these growing pains in businesses is the crucial first step towards effectively addressing them. Fredrickson and Hill explained several key indicators that can signal your organization is at this critical juncture, often stemming from a lack of growth and structure.
Role Confusion
One of the earliest symptoms can manifest as an over-reliance on specific long-term employees rather than clearly defined roles and responsibilities. As Fredrickson illustrated, "There will be phrases like, oh, you know, Jackie over in accounting, she'll take care of that for you. She knows how to do all that." While Jackie may indeed possess the necessary historical knowledge and expertise, this informal system becomes increasingly problematic and inefficient as the company expands and evolves.
Hill further clarified this key element of role confusion, noting that even when responsibilities shift to new individuals, old habits persist, with everyone still defaulting to the person who previously handled the task. This disconnect, she explained, leads to inefficiencies, duplicated efforts, and ultimately, a higher incidence of errors. The correct individuals are often bypassed.
Overwhelmed Managers
The role and responsibilities of managers also undergo a significant and often challenging transformation during this scaling phase. In smaller companies, managers typically oversee small, tightly-knit teams with relatively straightforward and well-understood responsibilities. However, as Fredrickson pointed out, "...when you get into a much larger group, the manager gets overwhelmed because now it's a process of they're still holding on to what they were doing before…They're not handing things off to who should be doing those things."
This struggle to effectively delegate tasks and adapt their management style to larger, more complex teams can lead to managers becoming significant bottlenecks in workflow. It can hinder effective decision-making and slow down crucial operational processes. As Hill noted, this issue can be significantly exacerbated by a lack of clearly defined decision-making authority at various levels within the growing organization, contributing to accountability issues.
Burnout and Lack of Ownership
The detrimental combination of overwhelmed managers and pervasive role confusion can significantly affect overall employee well-being and engagement, frequently leading to increased burnout rates. Unclear roles and overly centralized decision-making can diminish employees' sense of ownership over their work and its results.
Fredrickson further elaborated on this critical point, saying, "...the employees don't feel like they have ownership of it. So then there's not that personal accountability..." This erosion of personal investment can lead to decreased productivity, a decline in proactive problem-solving, and an overall increase in employee frustration.
Culture Shift and Silos
The close-knit, collaborative culture that often defines the early, agile stages of a startup can also undergo significant and sometimes problematic evolution as the company scales. As Fredrickson observed, "...you'll hear things like, we're not like we used to be. Our company is not the way it used to be." While cultural evolution is natural, neglecting to intentionally foster a cohesive and collaborative environment in a growing organization can create damaging silos between teams.
Hill illustrated this internal division by explaining that teams tend to cling to familiar small-scale practices within their own units, rather than operating as a unified whole. This leads to a breakdown in the cross-organizational relationships that once existed, creating a sense of disconnect and a lack of coordination between departments. The lack of effective cross-functional understanding and seamless collaboration can severely hurt overall operational efficiency and innovation across the organization.
Accountability Issues
In smaller, more tightly integrated organizations, accountability issues are often minimal due to close working relationships and direct, often informal, oversight. However, as companies scale and become more complex, this implicit accountability can significantly erode.
As Fredrickson clearly stated, "When the company gets bigger, accountability kind of just disappears into the fog...I didn't know I was supposed to do that. No one told me I was supposed to do that." A lack of clearly defined responsibilities, coupled with unclear reporting structures, can lead to a "not my department" mentality.
This is where critical tasks fall through the cracks simply because no one feels directly and explicitly responsible for their completion. The breakdown of accountability is a significant challenge of scaling a business without adequate business growth management.
Structure and Strategy Misalignment
Ultimately, these various growing pains in business can build up to a significant misalignment between the company's overarching strategic objectives and its actual organizational structure and operational processes. As Fredrickson described this critical disconnect, "Strategy and structure are out of sync...we have conflicting priorities... duplicated effort... things that are falling through the cracks... it's not working as one team…We're not rowing in the same direction."
When individual roles are unclear, inter-departmental communication is isolated, and accountability issues persist, it becomes exceedingly difficult for the entire organization to effectively and efficiently pursue its stated strategic goals. Hill further emphasized this critical point, noting the common tendency for middle management to become overly focused on the immediate needs of their direct reports, often at the expense of broader cross-functional collaboration and strategic alignment.
Building a Scalable Future
Navigating the challenges of scaling a business requires an awareness of the potential growing pains that emerge, particularly around the 150-employee mark. As organizations transition from relationship-centric beginnings, the need for robust growth and structure becomes crucial to avoid issues like role confusion, escalating accountability issues, and strategy misalignment. Recognizing these symptoms is the vital first step toward building a resilient and scalable future.
At Revela, we understand the complexities of scaling and offer tailored strategies to address these very growing pains in your business. Explore how our expertise in business growth management can guide your organization towards sustainable success and listen to the rest of The Leadership Hustle podcast for additional advice!
About the Hosts
Andrea Fredrickson
Andrea Fredrickson is a thought leader and consultant at Revela, an organization based in Omaha, Nebraska specializing in the development of leaders, culture alignment, and business strategy for private and family businesses of all sizes. Revela is one of the region's most experienced thought challengers, helping individuals and companies find their greatness. Andrea has built an amazing team by believing that fundamentally people want to be successful and become better versions of themselves.
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Andrea has degrees in education, management, and business. She is the author of Insight Unseen; How to lead with 20/20 business vision. She helps people see things differently, self-reflect, and never stop looking for ways to improve themselves on a personal and professional level. Andrea has spent more than 30 years researching and developing methods to help people communicate and lead more effectively.
When Andrea isn’t working with clients, you’ll find her spending time with her family & friends and making memories by exploring new cities.
Michelle Hill
Michelle Hill is a master facilitator and coach at Revela, an organization specializing in the development of leaders and aligning the culture of privately held and family businesses of all sizes. Revela is one of the region's most experienced thought challengers, helping individuals and companies find their greatness.
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An ambitious leader, Michelle has the natural ability to create forward momentum to build teams and get results. She inspires others to look within themselves and to challenge the status quo. She helps create high-performing environments. Michelle brings a diverse background: operations, employee development, and sales in the steel, hospitality, and consulting industries.
Outside of work, you will see her competitive side engaged in her daughter’s sports and ISU athletics. She loves life, her four-legged companions, and captures all the moments through her camera’s lens.
TRANSCRIPT
Andrea Fredrickson: Are things starting to fall through the cracks in your business? Is it just that much harder to get the work done than it ever used to be? On this episode of Leadership Hustle, we're going to talk about why that is and why 150 employees is a special number. Hello, and welcome to the Leadership Hustle for executives whose companies are growing fast and need leaders who are ready. Hi there, and welcome back to this episode of The Leadership Hustle. I'm Andrea Frederickson.
Michelle Hill: And I'm Michelle Hill, and we're back together again.
Andrea Fredrickson: And we're going to do something a little different than what we've done before. And we're going to do a two part topic. And this topic is specifically geared toward the companies that are starting to notice that they're struggling with things falling through the cracks, and people not knowing for sure what rules they're going through or what rules to follow, or who's supposed to do.