Tipping points have been described as a moment of rapid change, when people’s behavior mysteriously shifts in a new direction for reasons that are hard to explain. Every service firm I’ve coached over the last 25 years has experienced tipping points. Most produce positive outcomes. But there is one tipping point I’ve seen that can become a huge barrier to growth if it is not anticipated and addressed intentionally.

Most mid-size service firms can grow consistently and often what feels like effortlessly up to a point. Usually, in my experience, something changes about the time they hire their 35^th employee. I’ve come to call this TP35 (Tipping Point 35). Once an organization hits TP35, an almost imperceptible shift takes place and it becomes more debilitating with time. Here are the changes that usually occur right around the time a company hires their 35^th employee.

• Communication with the entire company becomes much more cumbersome and challenging.
• Information doesn’t flow as quickly or easily as it used to as evidenced by leaders sometimes being the last to hear about certain events.
• Competing ideas for where the company is going and what the company is trying to achieve show up in subtle, and sometimes not so subtle, ways in meetings and conversations.
• Certain behaviors and attitudes that are not helpful become much harder to spot and more difficult to address.
• Silos form between different teams, like finance, marketing, sales, delivery and others.
• Proliferation of client contracts and engagement phases make it much more challenging to track overall client satisfaction.
• Frustrations mount as people begin to say about other teams—I just wish they would do their job—as if they know what their job is.
• Rolodexes run out. In some instances, organic growth stemming from the networks of key people is no longer consistently yielding new clients, leading to feast-or-famine cycles. In other words, they’ve come to the end of their rolodex and have no more people to call on.
• Leaders openly disagree. For some firms, leaders struggle to agree about an array of important topics, which means decisions are delayed and once made, often poorly implemented with little gusto.

This Is An Internal Problem, Not External

You’ll notice that most of these issues are related to the internal operations of the business, not external factors like the market, industry or even the economy. In my experience, this is the fundamental nature of the problem. Something serious has changed inside the business and the leaders are struggling to figure out what it is and what to do about it. This does not mean that as leaders they’ve failed or even lost their mojo. It simply means that the Leadership Operating Model that worked yesterday is no longer effective for the business they run today.

So here is the heart and soul of my message. If you want to reignite growth or prevent stall-outs in the first place, you need to upgrade your Leadership Operating Model because you’ve outgrown the old one. That’s why growth has stalled out or why it will stall out—because of your leadership model. I’ve seen this time and time again.

A Leadership Operating Model that produces consistent growth up to the 35^th employee will usually yield slow growth by the 50^th employee and be in full-on stall-mode by the 60^th employee. 

Why does this happen? Most firms with fewer than 35 employees can operate with an ad hoc leadership model. There are so few people that it’s relatively easy to be in contact with each other, to have meaningful dialogue and to quickly establish priorities and resolve problems. That’s pretty much how one of my former companies operated.

As a leadership team, we met weekly to discuss our operations, problems, wins and goals. In between those Friday meetings, we also spent time in each other’s offices and had informal dialogue. There was a lot of brainstorming and creative idea generation.

But as we grew, silos formed, informal dialogue dried up, schedules got tighter and we faced more problems, as a leadership team, than we knew how to solve. Once we added a couple more offices with employees in remote locations, things really changed and not for the better. The fun was gone.

Unhealthy competition between leaders started to take over. Politics ensued and pretty soon, our Friday meetings were spent trying to make sure our departments didn’t look bad. Optics became more important than results. TP35 had taken over and we didn’t even know it.

The Antidote To TP35

If TP35 stalls growth and degrades the fun factor, what do you do about it? The best solution I’ve seen is to upgrade your Leadership Operating Model. This has to do with the set of practices you use to lead the business, including:

• Who is on the leadership team and how they came to be there.
• How aligned you are, as leaders, about the future.
• How often you meet, what you talk about and where you focus your energies.
• How you make decisions and establish priorities.
• How you communicate goals and values to your staff.
• What you will, and will not, tolerate behaviorally.
• How you handle strategic planning and what happens when thing don’t go to plan.
• How you practice accountability for leaders and the rest of the team.

Mid-size service firms that intentionally craft their Leadership Operating Model for their new reality put themselves in the best position to keep growing and break through to their next level. Those who ignore TP35 are probably doomed for stall-outs and very slow growth. Please don’t make this mistake.

More Insights Here

I discovered TP35 after analyzing the growth arc of more than 70 mid-size service firms, those with 25-100 employees. The lessons learned from this analysis form the backbone of the counsel I offer in a free eBook called Ten Strategies For Mid-Sized Professional Service Firms To Break Through To Their Next Level. If you liked the ideas presented in this article, I know you’ll love the eBook.

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.