Originally published on Forbes.com

Growing a mid-sized professional service firm, those with 25 to 100 staff, usually comes in spurts and stops, like a growing teenager. Growth spurts are very common for smaller firms that can add employees quickly, up to a point. The stops are akin to a teenager who eats like they have a hollow leg, but without getting taller. Then, all of a sudden, they shoot up two or three inches.

Most service firms I’ve coached over the years have gone through these cycles. They’ll rapidly grow revenues, headcount and service lines for a while. But then, mysteriously and usually for reasons the leadership simply cannot put their finger on, growth stalls.

After reflecting on more than 70 mid-sized professional service firms I’ve served, and after analyzing their growth trajectory and history of stops and starts, I’ve come to recognize a root cause for growth stall-outs. I call it TP35—or tipping point 35. Tipping point 35 usually happens around the time a service firm hires its 35th employee.

How I Discovered TP35

I began to see a correlation between headcount and stall-outs after analyzing numerous growth arcs for my mid-sized service firm clients. Here is a fairly common scenario. A founder or two launch a professional service firm and it slowly grows for several years. Then the firm hits its first growth spurt. The founders hire more staff to serve clients. They also hire sales and marketing teams to advance the brand. They adopt formal departments to operate “like a real business.” It seems everything is going well, but then growth suddenly dries up. Why?

If I use headcount as a metric and correlate it with growth, which I did for several clients, here is a relatively common trajectory I discovered:

• Employees 1-10: slow growth, lasting as long as seven years
• Employees 11-25: rapid growth, happening in 18-24 months
• Employees 26-50: slowing growth leading to a stall-out by the 50th employee

But here’s the important thing to note about this growth arc: Most of the firms that realized a slowdown between employees 26-50 did not have another growth spurt under their current leadership. Their revenue growth, service lines and geographic expansion topped out and they just couldn’t seem to get it going again. They actually had to change leadership to reignite growth.

By analyzing growth from the vantage point of headcount, I had an aha moment, an epiphany: Most firms began slowing down by the time they hired their 35th employee. There’s nothing magical about the 35th employee, and it wasn’t always correlated to a slow-down. But somewhere between employees 35 and 50, something very real had changed.

By their 50th employee, most of these firms were in full-on stall mode. This was true of firms from several different service verticals (tech consulting, registered investment advisers [RIAs], management consulting, architecture and engineering). It was also true of firms from all over the United States. So geography and industry vertical had to be ruled out as root causes.

There was something about that 35th employee that changed all these firms. Something happened that led to growth stall-outs. But leadership change typically reignited growth. What was the difference between the previous leadership and the new leadership? Why were the new leaders able to reignite growth when the previous leaders couldn’t?

Leadership Operating Model

I’ve come to believe the answer lies in the LOM—leadership operating model. The LOM is the set of practices and disciplines that leadership teams leverage to lead the business, maintain focus and drive growth. I’ve also been privileged to coach service firms with 50 staff that experienced growth breakthroughs, usually after leadership change occurred. The new leaders brought with them a new LOM.

I’ve begun to codify these practices and even share them here in several of my articles. Unfortunately, I don’t have room in this article to present an exhaustive list of LOM best practices. But I will discuss a few practices here that highlight how the two LOMs are distinctly different.

First, legacy leaders tended to have a “maintain-the-bus” mindset, while new leaders had a “drive-the-bus” mindset. This was most evident to me in the topics discussed in monthly leadership meetings. A maintain-the-bus mindset tended to focus on reporting the current status of departments and major events. A drive-the-bus mindset tended to focus at least 50% of their conversations around future-facing growth initiatives.

Second, legacy leaders often didn’t talk to staff about the future all that much, where they were going and how they’d get there. New leaders focused keenly on three core levers: BHAGs (big hairy audacious goals), mission (why we’re in business) and values (how we behave).

Third, legacy leaders, in general, were risk-averse and not inclined to try new things that might not work out. New leaders were risk-embracing. They expected that some of their growth initiatives would fail and they were okay with that because they also knew that some of them might just produce breakthroughs.

Fourth, legacy leaders talked about culture but new leaders focused on organizational health. This meant that new leaders were quick to spot and address behavioral problems inside the organization. They took action before things became acute.

Fifth, legacy leaders practiced behind-closed-doors arm-wrestling decision-making. They often couldn’t agree on the path forward, so the decision fell to the CEO. This also meant that the reasoning behind the decisions was often not communicated to staff. New leaders practiced a best-idea-wins decision-making model, which meant they could clearly present their reasoning to staff.

Sixth, legacy leaders assumed that staff knew as much as they did about the operations of the business, even as the firm formed information silos via departments. New leaders assumed the opposite. They practiced free-flowing information to be as transparent as possible with staff. This elevated staff trust and confidence in the leaders.

After analyzing these and dozens of other practices, I have come to believe that you don’t need to change leaders to reignite growth. I don’t think that’s necessary. But you probably do need to change your leadership practices.

About The Author

Randy Shattuck is a seasoned entrepreneur who works hand-in-hand with senior leaders of mid-size professional service firms to grow revenues, acquire clients, open new markets, increase profits and effectively position their brands.