It’s a question often asked, how do smaller businesses attract, retain and incentivise the talent that will help them move into the next phase of growth? It is also an issue that Panoramic frequently addresses in its support of small and medium sized businesses.

In the following article, Panoramic looks at how this issue has impacted its portfolio and how it has worked with investee companies to meet the challenge.

Recruitment

Building a strong management team is one of the key elements of any successful growth plan. Young, entrepreneurial businesses are generally still very much the preserve of the original founder or founders, who are often performing multiple roles as CEO, finance or technical director, key sales person and everything else in between. This can make for over reliance on particular individuals, and as the business grows, it can also mean that core functions do not get the dedicated support that they need.

This is one of the risks that we look to mitigate when we become involved in a business. At Captify, where staff numbers have grown from 11 to 50+ in just 18 months, one of our main objectives has been to work with the two founders to build a management structure around them than can support the business’ exceptional growth. This has led to the appointment of a new COO, Head of Ad operations, Sales Director, CTO, and Head of Product and the company has recently hired a CFO to support the incumbent finance manager who was appointed when we initially invested.

We tend to play a role in the recruitment process at the late stages of an interview process, providing an objective opinion on the candidate, their cultural fit and most importantly, their ability to grow with the business. At Dog Digital, for example, we were able to introduce a potential CFO to the business with whom we had previously worked. His experience in fast growth, private equity backed businesses and the enhanced level of financial rigour that he has applied has helped the business to develop from one site with 35 staff to a network of multiple offices with nearly 70 people employed.

Internship programmes have also proved to be a very successful way for our investee businesses to develop strong talent. There are currently several initiatives underway in our portfolio: Dog Digital has developed close links with one of the UK’s finest art schools and 9 of Captify’s original 11 employees, who remain core to the business, started as interns.

Incentivisation

Another key to retaining good people is to ensure that they are properly rewarded and incentivised.

This can be a challenge for any young business in growth mode when the focus is on growing revenue and managing the cost base. People that have the right skills and experience to take the business forward may be leaving established well paid positions to take a risk on a growing enterprise – so, how do you make the offer sufficiently compelling? It often means taking a creative approach to remuneration tied to the opportunity for long-term value creation.

For example, EMI options provide long-term tax incentivised ownership for employees and can be tailored to align with business goals (e.g. at a certain sale value, after a set amount of time). We work with our portfolio to ensure that such schemes are set up correctly and aligned to appropriate goals. Following both our recent exits (Solfex and Cascade), a significant number of staff have benefited from six-figure tax efficient payouts as a result of being granted options both before and during our period of investment.

Bonus plans are also utilised to bridge the gap between ongoing salary/cash costs and alignment of reward with company success.

In smaller businesses, it is possible to create a culture where people work hard but have the opportunity to progress quickly and take on significant responsibility. In this environment, it is possible to offer motivational benefits and incentives and businesses that we back have offered their staff “perks” such as additional days off for a birthday, overseas trips for good performance, unique Christmas parties/celebration events – even dinner at the Houses of Parliament!

Retention

Lastly, having found and motivated the right people, how does a fast changing business ensure that their people remain committed? Arguably the retention of good quality staff is as important as their recruitment.

The disruption caused by losing an employee can be significant in a small business, while the process of recruiting and integrating a replacement can make for high costs and lost time.

Across our portfolio, as with any business in growth mode, new opportunities arise as a result of expansion. Opportunities offered to employees include living and working overseas (Asia and Europe) and becoming part of a senior management team early in a career – with all the excitement that comes with new challenges.

One of our key roles is to ensure that investee businesses put in place disciplines that can easily fall away during periods of rapid growth. Communication is one important example and an essential element of managing people, particularly future leaders of the business.

Succession is also important. One of the most common exit paths for an incumbent management team is via a management buyout led by the next generation and therefore time and money spent developing this group of people can often by repaid significantly.

Panoramic’s track record:

Across a portfolio of 9 companies, employee numbers have grown by almost 150 or 95% since our investment.

Panoramic advisory board member Jim Calder has run an executive search business for 15+ years and was instrumental in recruiting a chairman for Dog Digital.

Barrie Jackson joined Dog Digital as Chairman shortly after our investment bringing with him long experience of working in Asia with International Beveridge Holdings (owner of some of the worlds largest drinks brands)

Panoramic advisory board member Tony Lochery originally joined Cascade as interim Chairman and formed such a strong relationship with the CEO that he stayed for the duration of our investment and exit.

Panoramic introduced Mark McDavid, former MD of Aunt Bessie’s, to Heck following our investment last year where he took up the position of Chairman.