Growth culture for SMEs

 
Will Railton
Follow Will
The aggregation of marginal gains – as put to great use by Britain’s Olympic cycling team – has applications for SMEs too
Gunnercooke’s Darryl Cooke tells William Railton what SMEs can learn from rugby and cycling coaches

WE DON’T keep time sheets. Instead, our clients agree a budget for our services before they sign on the dotted line, to eliminate unforeseen costs.” This is the kind of progressive thinking which drives Darryl Cooke, the founder of disruptive law firm Gunnercooke. “And I hate the philosophy of ‘if it ain’t broke, don’t fix it’,” he exclaims, addressing an audience of SMEs, alongside his colleague Joe Glass, inside Santander’s Breakthrough Box in Manchester last week.

But what advice can a law firm give ambitious small and medium-sized businesses looking to innovate?

CULTURAL SHIFT
“Culture drives great results,” says Cooke, citing former chief executive of General Electric Jack Welch.

But when you’re having to deal with so many competing demands on your time – especially in the early years – how are you meant to achieve this good culture? It requires a patient and fastidious leader, says Cooke.

He knows what he’s talking about. A former partner specialising in private equity at DLA Piper and Addleshaw Goddard, he founded his legal startup in 2010, disillusioned by the practices of traditional law firms and anxious “to change the way law firms serve their clients and treat their people”.

“As a leader, you are a force multiplier,” he argues. “Employees listen to what you say and if you vacillate, or deviate from a stated course of action, the ramifications can be massive.” It is vital for SME bosses to understand “the aggregation of marginal gains” as Cooke puts it, referring to visionary Olympic cycling coach Dave Brailsford, and how constant improvements to a business will galvanise employees and attract talent. “Ultimately,” he says, “people want to be part of something that is growing.”

Cooke has other ideas – inspired by sport – for getting your employees engaged in your growth. “On his first day as coach of the England rugby team, Sir Clive Woodward asked where his desk was,” says Cooke. Woodward’s goal was to professionalise rugby by going deeper than drills and lineout tactics. He sat down with the team to agree a set of rules, rather than imposing them absolutely. “By establishing a common culture based on a democratic constitution, the players gelled and were able to win the World Cup in 2003.”

UNDERSTAND NEW GENERATIONS
But the world is also changing fast. Cooke believes that businesses will encounter a sea change as milennials enter positions of power, something SMEs should recognise and be responsive to. “My generation has focused on buying a car and a house. But younger people want business to serve a higher purpose.”

In response to this trend, Gunnercooke has set up social business Inspire*, which currently gives 19 small charities free access to expertise from the corporate world and larger charities so that they can accelerate their growth.

GET A SHAREHOLDERS’ AGREEMENT
The other part of the discussion in Manchester concerned some of the legal issues that SMEs might face – particularly if one of the shareholders decides to sell up. “It is vital to have a shareholders’ agreement in place before you start any new venture,” says Glass. “This will protect your investment by establishing the rights and obligations of each shareholder, and will regulate any sale of company shares.”

It might sound like a technicality but, without one, the majority shareholder may sell their shares and leave a minority shareholder in the lurch. A shareholder might die, retire, or decide to leave the company at any moment, Glass explains, and these events must be provisioned for. “You need to contemplate the relationship between shareholders. Because people have different views about what they want from sale of their shares.”

IMPORTANCE OF LEGAL ADVICE
Glass also believes that SMEs should not underestimate the importance of legal advice. It can be indispensable, he argues, especially when a shareholder does decide to sell. Due diligence can be a particularly daunting part of the process. “The buyer’s lawyers will send you a questionnaire about 50 pages long. It isn’t difficult to answer, but the devil is in the detail.” The buyer is often looking for different information from the source material than the seller expects, Glass continues, and making a mistake could lead the buyer to pull out.

“What terms and conditions are your employees subject to? Will these be satisfactory to the buyer? Do you receive preferential rates from your suppliers which will expire after you leave? Has your business been involved in litigation?”, asks Glass. These are questions a company will need guidance on.