The Common Problem
Every growing organisation eventually reaches a point where the leadership habits that produced its early success stop being sufficient for what comes next. Larry Greiner, writing originally in Harvard Business Review and revisiting the argument twenty-six years later as an HBR Classic, described this as organisations moving through phases of growth — creativity, direction, delegation, coordination, collaboration — each of which ends in a crisis brought on by the very practices that solved the previous one. Managers, he wrote, “experience the irony of seeing a major solution in one period become a major problem in a later period.”
London makes an unusually good place to observe this, because the city holds an unusually wide range of organisational ages and ownership structures within a single, dense market. A firm founded in the 1850s and a firm founded eighteen months ago can be recruiting from the same talent pool, competing for the same office space, and facing what is recognisably the same underlying leadership transition — yet the transition looks almost nothing alike from the inside.
How It Presents Differently
In institutions with long precedent. London concentrates professional and financial services organisations with genuinely deep institutional histories — firms where partnership structures, seniority conventions and decision-making norms were set decades before the current leadership arrived. Here, the constraint rarely looks like an absence of structure. If anything there is too much of it: precedent for almost everything, and a leadership culture where deviating from precedent carries real reputational cost. The leadership challenge is less about building new mechanisms and more about recognising which inherited mechanisms were built for a market, a regulatory environment or a competitive set that no longer exists, and are now being followed out of habit rather than judgement.
In recently scaled organisations. London’s density of professional and financial services activity — the largest industry group in the country’s business register — sits alongside a genuinely large concentration of younger, fast-scaling businesses in technology, professional services and adjacent sectors. These organisations carry the opposite problem. Early leadership habits were built around a handful of people making most decisions informally, often correctly, because they were close enough to everything to do so. Growth erodes that closeness faster than the habits adjust. The leadership challenge here is usually not a shortage of precedent but a refusal to build any — a lingering belief that the informal approach that worked at twenty people should still work at two hundred, because it worked so well for so long.
In multi-generational and family-owned firms. A third pattern sits between the two. London’s traditional trades, manufacturing pockets and long-standing family businesses often combine genuine institutional memory with leadership succession that has not kept pace with the organisation’s growth. Authority here is frequently personal rather than structural — vested in specific individuals or a specific family relationship rather than in a role — which means that as the organisation scales beyond what one generation of leadership can personally oversee, the transition is entangled with questions of succession and identity that neither the precedent-bound institution nor the recent scale-up has to navigate in the same way.
What Actually Explains the Variation
The differences are not really about sector. They track two underlying variables: how much unwritten precedent already exists inside the organisation, and where the authority to change that precedent actually sits.
Edith Penrose’s classic analysis of firm growth argued that a firm’s rate of expansion is limited less by market opportunity than by the capacity of its existing management to absorb and direct growth — what she called the managerial constraint. That constraint plays out differently depending on the starting point. An organisation with decades of precedent has abundant management capacity in the narrow sense — people who know exactly how things are done — but a scarcity of appetite to direct that capacity toward doing things differently. A recently scaled organisation has the opposite problem: high appetite for change, but genuinely limited management capacity, because so few people have been through more than one stage of the organisation’s growth.
Ronald Coase’s foundational analysis of why firms exist at all — coordinating economic activity within an organisation rather than through a series of market transactions — offers a related lens. Coase, who studied at the London School of Economics before the paper that would eventually win him the Nobel Prize, argued that firms exist because organising activity internally can be cheaper than negotiating it afresh through the market each time. Precedent, in this reading, is not simply inertia; it is the accumulated cost-saving of not having to renegotiate how decisions get made every time a new situation arises. That is precisely why it is so hard to dislodge in an established institution, and precisely why its absence is so costly in an organisation still building it from scratch.
Family and multi-generational firms sit at the intersection of both dynamics: the accumulated precedent of an established institution, combined with a concentration of authority in specific people rather than distributed structure, which is closer to how a much younger organisation is typically run. The leadership challenge is not a smaller version of either of the other two — it is a genuine combination of both.
This has a practical implication that is easy to miss. Advice calibrated for one context frequently does the wrong thing in another. Guidance aimed at scale-ups — build more formal decision rights, document what used to be informal — can land as bureaucratic overcorrection inside an institution that already has more formal structure than it can productively use. Guidance aimed at established institutions — question inherited precedent, distribute authority more widely — can be actively destabilising for an organisation whose entire early success rested on a small number of people making fast, informally coordinated calls. Neither is the wrong instinct in the abstract; both are wrong for the organisation that does not fit the profile they were written for.
Where this shows up
This perspective is read through the London setting. The London market page brings together the related Perspectives, and the Markets page places London alongside the other business hubs.
Questions worth considering
- Which of the organisation’s current leadership habits were deliberately chosen, and which simply survived because nobody has had reason to question them yet?
- Where does the authority to change how decisions are made actually sit — and does that match where the organisation is now, or where it was when the habit was formed?
Your team is facing similar challenges?
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