Big Business Bad?
Think Piece: Big Business Bad?
Do large businesses actually work? Is there something innately ineffective about a big infrastructure, scale, volume? Are small businesses simply better? Are they more flexible, adaptable, profitable?
Middle market businesses account for just 2.3% of UK enterprises. And yet they account for 16.2% of the country’s output. Each employee in a mid-sized business (50-249 people) is responsible for more than £122,000 of output, compared with just over £100,000 per employee in larger companies.
These figures published in last weekend’s Sunday Times should not surprise any of you working for a big company…especially if you’ve ever worked for a smaller one. In medium sized companies employees can see the direct impact of their behaviour on the business. Equally, the bosses can too. There is nowhere to hide.
In addition, employees must be multi-skilled. Silos are less likely to form and teams tend to be cross-functional. In order to stay in the company, staff must be willing to work in different departments as they move up the hierarchy, meaning they have a broader understanding of the business.
Decisions can be made fast in smaller companies. Staff feel they can directly impact direction and strategy. They can be heard. Most staff will be customer facing. They never forget the connection between their wages and the customers they serve. They realise how important the customer is and the significance of losing him.
Even large companies with small subsidiaries see some of these benefits. Whilst big decisions may be made at head office, the small subsidiary has more autonomy and develops its own culture.
What all of this shows is that businesses benefit from an entrepreneurial culture. Where people are given power, autonomy, a voice, influence, flexibility, direct access to the customer and where they can see the connection between their actions, every part of the business and their pay packet they are more productive. In a medium sized business of 50 people, this difference accounts for £1,100,000 in output.
If this same sense of entrepreneurialism could be reproduced within large companies, imagine the difference it would make.
Inevitably big business wants to know the secret of medium-sized business success. £22,000 per head could be transformational when multiplied by 1000 employees. And what about 10,000?
What most large companies are not willing to do is to take the risks that medium-sized businesses take. They want all the benefits of “small” and none of the costs. Medium-sized businesses are always in a state of flux. Losing one major account can be the death of a medium sized business.
Also, big business doesn’t necessarily want people at every level in the organisation to have an input in to decision-making, to be heard, to have influence. That’s a lot of people with conflicting opinions (especially when those opinions conflict with those of the board).
And, big business tends to promote people for their stability, their effective communication skills, their attention to detail and their loyalty. Entrepreneurial businesses need more dynamic, radical, maverick thinkers. Big business would have to completely re-think its talent management system if it were to ensure these types survived the corporate ladder.
With new technology meaning medium-sized businesses can serve international markets, with access to mass marketing opening up to even those on a small budget and with a hunger on behalf of consumers for something new, different and even cheaper, medium sized companies can now compete in the same marketplace as big business.
Unless large companies learn lessons now from their smaller competition, they could eventually become defunct.
