18/05/2026
Culture shock: How small businesses can protect their values as they grow
By Donald Lindsay, Chief People Officer at FreeAgent
Ask any small business leader about the hardest part of scaling from a micro business to a small and medium-sized enterprise (SME) and you might expect to hear about cash flow, funding or customer acquisition. But new FreeAgent research shows a different story – nearly a third (32%) say maintaining company culture is their biggest challenge, placing it above the ability to continue to pay employee salaries (31%) and compliance (26%).
Growth is exciting, but with it comes a higher headcount which can create more complexity and more potential for the values and ways of working that made a business successful to get lost along the way. Culture is not a ‘nice to have’, it’s the backbone of sustainable growth. When it’s strong, it helps businesses to retain talent, streamline workflows and navigate uncertainty. Conversely, when in decline, the cracks quickly show in employee performance, engagement and trust.
Why culture becomes fragile during growth
When a business grows, the very things that made the culture – close-knit relationships, easy communication and shared history – become harder to maintain with the shift becoming noticeable as teams increase from a handful of people. In a company of five or six, decisions can be made quickly around a table but when the headcount reaches 15 or 20, processes start to formalise and leaders can struggle to keep everyone aligned. This sudden scale-up can come as a shock and be difficult to manage if leaders have not prepared their existing teams and new hires for what’s ahead.
In a competitive market, businesses often feel pressure to fill roles quickly and looking for the best cultural fit, alongside the required skillset, can slip down the list of priorities. While having the right experience is important when hiring, skills can be taught; but a misalignment of culture is harder to fix. Some employers may even take a conservative approach to hiring, favouring candidates with proven track records and potentially hiring fewer workers, especially from groups like young or less experienced staff – and this is likely to become even more prevalent with the introduction of the new Employment Rights Bill, which increases the costs and complexity of employing staff.
Even when new hires are brought into a business, onboarding can often miss the mark. Too many employers focus on getting people up to speed with systems and processes but neglect to immerse them in the ways of working and the values that drive decisions.
Leaders can also falter by assuming culture ‘just happens.’ In reality, it needs constant reinforcement, through the language used when talking to teams, and the standards set in everyday decisions. For instance, if a company claims to value transparency but managers withhold information from their teams, employees quickly learn that secrecy is the norm. Or if collaboration is a stated priority but only individual achievements are recognised, people will naturally compete rather than work together. When everyday behaviours contradict stated values, culture erodes quickly.
Practical steps to keep culture strong
Too often, culture is only discussed when something goes wrong, which frames it as an issue rather than a priority. To avoid this, businesses need to take deliberate, visible actions. One of the most powerful ways to protect culture is to define it early, ideally while the business is still small, and ensure that those values are upheld through all stages of growth, no exceptions.
At FreeAgent, our three founders shared common values and ideas, which were then complemented and enhanced by the first employees that they personally hired. Those relationships and conversations evolved into formal company values – many of which still guide us today.
Once a company has these strong, deep-rooted values, hiring then becomes the multiplier. When new people share the values, and in turn hire others who do, the culture sustains itself far beyond any one person’s direct influence. Onboarding is crucial to this, as new hires need to learn not just what the company does, but how it works, the rituals, decision-making styles and priorities that shape daily life. Sharing the stories and milestones that shaped the business helps people see themselves as part of something bigger from day one and understand the beginnings and drivers of the culture.
The strongest cultures are those that are easy to live, clearly understood and naturally passed on. Culture needs to be embedded in the systems people already use. Linking company values to career progression frameworks, so it’s felt rather than preached, can be a good example of how to put this into practice while keeping it lightweight; culture that feels like another task on a to-do list is less likely to stick.
To recap, culture is not static – it will shift as your business grows, your market changes and new people join. The goal is not to preserve it in amber, but to protect its core while allowing it to adapt. Done well, scaling doesn’t dilute culture, it strengthens it, embedding your values into the systems, habits and relationships that define your organisation.
Think of this transition, from running a small, hands-on team to leading a growing business, as moving from being a “builder” to being a “gardener.” You can’t control every detail of growth, but you can create the conditions for your culture to thrive, providing the right structures, values and environment so it grows in the direction you want.
Original Article: HR News
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