Leadership Training Can Pay Huge Dividends for Midsize Companies

Developing managers and leaders in middle-market companies is a far different challenge than in large companies, for a variety of reasons. In my work, I hear these three most often:

• Lack of resources: “We can’t afford to send our emerging leaders to business school.”
• Perceived lack of time: “We don’t have the staffing to send our leadership/management teams on offsites.”
• Not sure if it’s a good fit: “We’re not running Amazon here, and I don’t see how the leadership programs I hear about can address our problems.”

One can’t just dismiss these objections; they reflect real constraints and concerns. Underlying all three is the fact that middle-market companies are, by and large, thinly managed. They don’t have many layers of hierarchy and often rely on informal processes for talent management and development. And every leader, from the CEO down, has a full plate of daily responsibilities and not much capacity to take on tasks that don’t drive the day’s work forward.

But it’s important to overcome the objections — middle-market companies stand to benefit enormously from leadership development programs, and not employing them can cost them dearly. Designing and delivering a fit-for-purpose program doesn’t need to be out of reach.

Data from the National Center for the Middle Market shows a clear correlation between superior talent planning and company performance. But while leaders rate themselves high in their ability to identify and assess their best performers, they give themselves poor marks in four critical areas that leadership development programs address: succession planning, developing high potentials, identifying retention risks, and mapping and filling skills gaps.

In two decades of crafting and delivering leadership development programs mostly for middle-market companies, I’ve learned several lessons about how to design programs that work.

Design the program to address urgent problems. Sure, leadership development is an investment in the future, but it can also fix immediate problems. What appears to be a resource constraint — too little money, too little time — can disappear if it’s framed correctly.

We worked with a health care technology firm that was growing so fast that senior leadership resisted a development program for emerging leaders because of the time commitment. It took about three months of cajoling by both me and the HR leader to finally convince the CEO and CTO to give it a try. We began the program by focusing on one of their most pressing needs: Removing bottlenecks by giving managers the skills to take charge of projects from their bosses, thereby freeing up senior leaders’ time. The investment in leadership development actually freed up more time than it cost.

Focus on scaling, not just growing. Growth and scale aren’t the same. In general, we think of growth in linear terms: A company adds new resources (capital, people, or technology) as its revenue increases. By contrast, scaling occurs when revenue increases without a substantial increase in resources. Understanding this distinction helped the health-tech company view leadership development through a new lens.

Together, we developed two matrices. The first, an empowerment matrix, mapped the attainment of skills against the ability to take on new responsibilities. The second showed the capabilities of leaders in each department alongside the capabilities of the enterprise as a whole. Together, the two frameworks helped the top executives see how to align leadership-development investments with the company’s most pressing growth needs, which allowed top management to reduce the amount of time they spent supervising (working in the business) and increase the time they spent leading (working on the business).

Within the first six months of implementing these two frameworks, productivity spiked by 30%, and in a recent conversation with the CEO, he expressed that they’re now beginning to have a scalable model. Once the burden of working in the business had been substantially lightened, we rolled out the remaining elements of the program, which has helped the company exceed its revenue goals for the last three years.

Train in the real world as well as the classroom. Middle-market companies are rightly reluctant to “take people off the field” for development. We encountered that problem working with a discount retailer in the Northeast that was experiencing exponential growth. This growth was creating strain on every aspect of the business, from IT and logistics to merchandising and store management.

We worked with their internal learning and development team to build a program for high-potential leaders around the real-world problems the company was facing. Working with successive cadres of emerging leaders, we created groups that chose specific challenges the company faced, researched, and developed solutions, and presented them to the senior management team. We then supplemented the project work with classroom discussions of the leadership principles they were discovering and applying.

This real-world approach to leadership development, often used in big companies, is less common in the middle market but, ironically, more valuable there, because middle-market companies rarely have “reserve” management capacity to take on new initiatives — everybody has a day job. Smartly designed leadership development programs can actually create this kind of capacity, building an institutional capability at the same time that it builds individual skill.

Ensure that students win, too. With flatter hierarchies and leaner structures, middle-market companies have fewer promotions to hand out than big companies do, so it’s important to connect a leadership development program to internal career opportunities.

At the retailer, growth was so fast and the internal management pipeline so inadequate that the company had to look outside for the majority of new managerial hires. The leadership development program reversed that. The cross-functional projects exposed students to executives they might not otherwise have met — with wildly successful results: All of the alumni from the first class of the leadership program have been promoted to VP and above, and the majority of new executives are now internal promotions, even as they’ve grown from a bit over 200 stores at the beginning of the engagement to more than 1,000 stores today.

Pass on culture as well as skills and frameworks. The middle market is full of founder-led companies whose cultures are key elements of their connection to customers. As companies grow, those cultural traits tend to be diluted by process. Process may be inevitable; dilution is not. Bring leaders into the classroom to teach, bring in presentations by academics or outsiders, and, above all, tell stories. Just because a company is mature doesn’t mean it has to lose its character.

Once you’re ready to start developing your leaders, where should you begin your search? Major universities’ executive MBA programs can be excellent, but their cost, time commitment, and focus on challenges typical of large enterprises can make them a less-than-optimal fit for the middle market. Most community colleges have continuing education programs that have programming or workshops that can help. But if you want something that’s a great fit, start by reaching out to your network and find out what worked best for them. Remember that the most important consideration is that the program you choose is right for an organization like yours.