Biggest Challenges for Mid-Market/ Middle-Market / Mid-Sized Companies

The global credit crunch in the last two years has hit companies in all sectors of the economy. However there is one sector where the impact has been unusually significant and that is with mid-market companies. These companies provide a significant number of jobs in the economy. However these companies tend to make changes more slowly that their competitors who are larger public companies and the smaller, often mom and pop type businesses. In the US and Canada these mid-market companies have also struggled to keep or secure additional financing to cope with the credit crunch.

According to a white paper prepared by IBM titled The Enterprise of the Future: Implications for Mid-size Organizations published in February 2009, it was stated that “mid market leaders must cover a much wider front and cope with much greater uncertainty. They must ‘master complexity’ … for everything is important and change can come from anywhere”.

In times of significant change, especially times of adverse change, it is often very difficult for mid-market organizations to make changes. Picking the top three issues is crucial. In the good times the most common strategies for mid-market companies to focus on, according to a study by Deloitte Consulting, are: revenue growth; strengthening the management team; and new products. However in the tough times the top three (according to research by BRS JUMP is the focus needs to be on: rethinking the pricing and product/service offerings; better utilization of key assets; and streamlining decreasing overhead costs to ensuring the long term future for the business. However these strategies require more planning and detailed costing information than is readily available in many mid market organizations.

Gridlock is a common situation in Mid-market companies. It is often easier for the managers to do nothing than deal with conflict amongst shareholders or leaders on key issues. In the good times, doing nothing can work well. The delay means more time to gather information and in some cases the challenges go away on their own, or someone else solves the problem for the leadership. However gridlock is fatal for a mid-market company in the tough times. They have to change to survive. So the leadership of a mid-market business has to constantly address what will change and the associated timing and consequences.

In tough times only the leadership can make the tough choices and these choices have major consequences. The leaders of mid-market companies find they are making decisions that can mean survival or death for the business. The toughest issue to understand is that not making a choice leads to failure of the business and yet making a choice is not a guarantee of survival but just another leap of faith. While the leader would like to take cover from the storm, the challenge is to help the leader to see the benefits of making changes to ‘dance in the rain’ rather than ducking for cover.

Leaders of mid-market companies often worry more about the general state of the economy or industry trends than focusing on keeping key customers happy. Losing a key customer is often the worst thing that can happen to a mid-market company as many of these companies are dependent on a few large customers for most of their revenues and profits. As mid-market companies are often caught by surprise at losing a key customer, they are slow to adapt that they do not have the financial resources to turn things around in time.

What happens when the CEO becomes so focused on short term issues and misses the need for a change in direction or does not know which way to turn? As the key role of the CEO is the keeper of the vision and direction for a mid-market business, the lack of vision or short term focus can seriously impact the business. When this happens the CEO needs to get assistance to reset the direction or step aside to let a new CEO take over. However the ego and other issues in replacing the CEO are significant in mid-market organizations as they often have a thin management team and a weak governance system to make sure a CEO is supported or replaced.

Leaders of mid-market organizations often need more outside help than leaders of larger companies during tough times, as the workload increases dramatically when they are dealing with unusual circumstances plus these mid-market companies often lack the management depth to be able to delegate the extra work.

Stuart Morley MBA is a world renown expert to mid-market companies during their reorganizing phase. Find more information on his website reorganizing Middle Market Companies which includes video clips, articles and order his recently co-authored book.