How you tend to your workplace culture can make or break a growing business.
Growing pains? You’re not alone. According to data from the U.S. Bureau of Labor Statistics, about 20 percent of small businesses fail within their first year. By the end of their fifth year, roughly 50 percent of small businesses fail. After ten years, the survival rate drops to approximately 35 percent.
We studied the experience of employees in 1,276 small-medium sized companies to explain what derails a business during expansion. The data represents the experience of half a million people from 2014-2019.
We identified what small and medium organizations must address to survive scaling their business: fairness.
At companies that don't monitor employee experience when scaling, measures of impartiality take a nosedive. More than community, camaraderie, leadership behaviors, integrity and 20 other areas of organizational culture.
The good news
Our research pinpointed three aspects of fairness in company culture that are critical to growth readiness. Here's what you need to act on and how to do it.
1. Workplace politics
When a growing business does not carefully manage its organizational culture, the workplace can become tense. In this scenario, we found that more employees report that coworkers and managers use politicking or backstabbing to get things done.
“Take time to understand what might be causing the perceptions of politics,” recommends Julian Lute, Great Place to Work® Strategic Advisor. “Be clear about the expected process to get things done. Redirect conversations that are ‘behind someone’s back’ to face-to-face conversations.”
2. Handing out promotions fairly
As a company expands, employees can be suddenly promoted to positions that didn’t exist before. The process can feel arbitrary and unfair to employees who missed out.
“Make the criteria for promotions clear,” says Julian. “Have regular development conversations with employees, with clear milestones and goals. Give people equal access to stretch assignments and expansion of duties.”
Managers can also communicate qualifications and the track record of employees they promote. "For employees not chosen, give candid feedback that they can use in their development plan,” Julian adds.
3. The perception that managers play favorites
Communication becomes more challenging as teams grow. People can feel disconnected and “out of the loop.” In smaller companies, people have more opportunities to be heard and more authority. The introduction of more structure and hierarchies for decision-making can breed feelings of favoritism.
“It boils down to perceptions of opportunities,” explains Julian. “Make sure you are giving all employees access to the same benefits.” Leaders should also divide their time equally among staff. “Make time to connect with everyone on your team. And keep 1:1 time sacred for each person,” says Julian.
Managers should also check how they are addressing workplace conflict. Show employees you are committed to creating a fair workplace for everyone by dealing with challenging employees. “Ignoring disruptive behavior can look like favoritism,” explains Julain.
Perceptions of impartiality can falter as a company scales. Once trust is broken, with every additional employee added, it is exponentially harder – and more costly – to regain that trust. Business leaders must monitor workplace culture to ensure their company is ready to grow.