The big little company dilemma
A question that the directors of every growing company should constantly be asking themselves is, how should we organise ourselves? The answer, which has almost become a business school mantra, is that companies on a growth path should be big little companies and not little big companies.
Small growing companies, runs the standard advice, should think, behave and work like a big company. Then as the business does grow the big company culture is already embedded. This appears to be good advice: as noted in my thought piece on transition points, companies too often falter, or fail, or drop back to being smaller entities at a critical moment in their development. If a company has too many short-term fixes rather than brand-new ways of working to meet the changing and growing requirements, then the inconsistency of those fixes will cause the business to falter, lose profitability and work their motivated entrepreneurs to a point of deep stress.
A finance director of a well-known high-street brand remarked that his company had the procedures of a corner shop. Those situations can simply make people walk because they are put under so much pressure right across the organisation, not just in the finance function.
As a result business advisers who work with growing companies that have the procedures of a small organisation will often walk into the business and say: "This isn't right; this company should have big company procedures." The adviser will then try to retro-fit large company procedures to those enterprises which intend to be big. Their viewpoint is that if the company intends to be a large business, then it should be like one now.
The problem is that companies which take that advice end up with procedures which are simply too big for their current position. The advice invariably comes from executives and advisers who have worked in much larger organisations. The result is companies have a level of control and overheads which slows the business down and introduces an unnecessary and unsustainable cost.
While such a bureaucratic burden is spread across many people and a large turnover in a large organisation, in a small company, even if it is growing, the burden naturally falls on fewer shoulders and smaller revenues.
The introduction of these big company procedures can also undermine morale among long-serving and trusted employees. They are often bemused, indeed insulted, by the introduction of these new and unnecessary procedures. At the same time the owner/managers may not be used to, or able to manage, the new procedures and the expensive managers brought in to make these newly introduced systems work.
We've seen a company introduce Oracle Financials at the wrong time: far too early in terms of size and culture. Another company rushed ahead with recruiting executives with large company backgrounds. The process ended badly whereas a more subtle and careful recruitment policy may have worked.
So while this may appear to be the right way forward to avoid the big little company problem, too often the end result is the equivalent of a small boy wearing an oversized jacket that actually belongs to his big brother. He may grow into those clothes one day, but for the moment they are so big and heavy he can't actually run.
In corporate terms this inability to run equates to lost profit, reduced energy and stress on small management teams. What at first sight appears to be really good advice can turn out to be a significant stumbling block. Indeed it can be more of a problem than if the company was just left to outgrow its procedures and systems.
The first step should be to reflect on the real cause of the business's preliminary success. Once that is understood, it should be possible to go ahead and make changes with confidence. The secret is then to make changes to procedures one at a time rather than rushing through a whole raft of changes. Those changes should be accompanied by a roll-out plan which ensures that the impact of those big company procedures is understood. Don't attempt to swallow all of the change in one go. The guaranteed result will be severe indigestion.
Also by Peter Charles