Most founders of growing SMEs can describe the moment when their organisation starts to feel different. In the early days, culture rarely needs to be defined. A small group of people work closely together, decisions are made quickly, and everyone is motivated by the same entrepreneurial energy that drove the organisation’s creation.
In most SMEs, culture doesn’t start as a strategy, it starts as the founder’s values in action. The founder’s outlook shapes how work gets done, how people treat each other, and how problems are solved. In these earliest stages, culture is rarely written down, but it is clearly understood.
In 1972, Larry Greiner introduced his model of organisational growth, describing the stages companies move through as they expand. Later revised to six phases, the model highlights a pattern familiar to many SMEs: when each period of growth eventually creates tensions that require a new way of operating.
When early culture no longer fits
What many founders discover at this point is that the culture which enabled the organisation’s early success, may not be the culture required for its next phase of growth.
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The behaviours that once created speed, adaptability and entrepreneurial drive can become harder to sustain as the organisation grows in size and complexity. This does not mean the original culture was wrong. Rather, it reflects a natural transition whereby the organisation is evolving, and the cultural foundations that supported its early stages need to adapt.
Organisations move from growth through creativity, to direction, delegation, coordination, collaboration and cooperation, and eventually through alliances. What begins as an entrepreneurial, founder-driven organisation gradually evolves into something more structured and distributed. While these transitions are often discussed in terms of leadership structures and management processes, they also reflect something deeper, in the form of a shift in organisational culture.
Founder-centric culture and identity
In many SMEs, culture initially reflects the personal values of the founder. The behaviours that are rewarded, the pace of decision-making, the tolerance for risk and the way people interact with one another, are often shaped by the founder’s instincts and priorities. Over time, these behaviours become normalised, forming the unwritten rules of how the organisation works.
Many organisations struggle to articulate the values that underpin this culture. Leaders may find it difficult to define them explicitly, but they usually recognise the behaviours they expect to see around them. These behaviours provide clues to the values that matter most within the organisation. At this stage, the identity of the founder and the identity of the organisation can become closely intertwined. Research by Melissa Cardon on entrepreneurial passion describes the concept of identity centrality.
Her work suggests that entrepreneurial passion is not simply an emotional attachment to a business venture; it becomes central to how founders see themselves. The organisation is not just something they lead – it becomes part of their identity. This fusion of identities can be a powerful driver in the early stages of growth, but it can also create challenges as the organisation evolves.
Block, Miller and Stevens describe a related concept known as Founder’s Syndrome, where the founder can unintentionally become a barrier to further growth. As organisations expand, new structures, leadership approaches and cultural norms are often required. For founders whose identity is deeply tied to the organisation, these changes can feel like a personal threat. As a result, founders may unconsciously resist the cultural changes needed to support the next phase of growth.
Scaling pains in growing SMEs
A common pattern can be seen in many growing SMEs. A founder who built the organisation through speed, personal relationships and rapid decision-making may suddenly find those same behaviours creating friction once the organisation reaches forty or fifty employees.
New hires may expect clearer roles, more consistent processes, and greater transparency in decision-making. What once felt like entrepreneurial freedom can begin to feel like unpredictability. Without recognising it, the organisation has entered a new stage of growth, but the culture has not yet adapted to support it.
Academic models and management frameworks often attempt to explain how organisational cultures operate. Johnson’s Cultural Web, for example, describes the symbols, routines, systems and narratives that shape how organisations behave. These models can be useful in helping leaders observe the visible aspects of culture. However, they often overlook a fundamental factor: the values held by the individuals within the organisation.
The psychologist Shalom Schwartz has carried out extensive cross-cultural research into human values, identifying ten broad values shared across societies and cultures. These values influence how people make decisions, interpret situations, and prioritise outcomes. Every time an organisation hires someone new, those individual values begin to influence the collective culture. An organisation made up of eight people will naturally have a different cultural dynamic from one of fifty, and the culture will shift again as the organisation grows beyond one hundred employees.
The challenge of aspirational values
This shift in values often mirrors the transitions described in Greiner’s growth model. In the early stages, cultures tend to favour values associated with entrepreneurial energy – independence, creativity, and rapid action. As organisations grow, however, different values begin to matter more, such as stability, coordination, and shared accountability. What enabled success in one phase may therefore create tension in the next, particularly if the organisation continues to reward behaviours that were suited to its earlier stage of growth.
When organisations attempt to define their values, the process often involves senior leaders coming together to identify them, or employees contributing ideas about what the values should be. The difficulty with these approaches is that the resulting values frequently become aspirational statements — describing the culture people would like to see, rather than the culture that actually exists. Employee engagement surveys rarely provide deep insight into the underlying values shaping behaviour.
A more useful starting point is to understand the values that are already present. A cultural audit, grounded in research on human values, can help organisations identify the patterns emerging within their workforce. By understanding which values are most strongly represented, leaders can gain clearer insight into the behaviours being reinforced, the types of individuals the organisation is attracting, and the potential sources of tension as the organisation continues to grow.
Culture is not something that remains static once defined. It evolves with every new hire, every leadership decision, and every stage of growth. Culture will change as organisations grow. The real question for leaders is whether they understand the values driving that change and understand the alignment of those values across their organisation at each stage of growth.
Amrit Sandhar founded &Evolve (formerly known as The Engagement Coach,) in 2015, and since then has worked with well-known UK brands including BUPA, ISG Construction, Asda, Dunelm, Chester Zoo and Network TV, by transforming workplace cultures, improving employee engagement and delivering top-class leadership development programs, to improve overall productivity of an organisation.
Underpinned by neuroscience and psychology to drive behavioural change, combined with his extensive experience in employee engagement and work culture, Amrit’s work uses a data-driven approach to identify the issues organisations are struggling with, to develop the right solutions to drive sustainable change.
Values-led, with a passion for developing people, Amrit believes that it is highly engaged leaders who drive better business performance, by getting the best out of their colleagues. In 2024 he launched the Values Alignment Index®, a revolutionary tool to provide businesses and organisations with the ability to measure values and to significantly improve productivity.
