One of the disadvantages of small companies is that they lack big company mentality. Oddly enough one of the disadvantages of big companies is that they lack small company mentality!
Let’s unpack this notion.
Small companies have a number of advantages over large corporates. They are much nimbler and can respond quickly to client issues and opportunities that present themselves. Typically, people who own – or work in – small companies can make decisions on the spot, bend the rules when necessary, and have the flexibility to adapt and change when appropriate. Lower overheads and costs mean pricing is often competitive, and customers of small companies typically interact with the CEO or business owner directly.
But the challenge with small companies is that they lack a corporate mentality, and when you think like a small business owner, you are likely to stay a small business owner forever.
In order to grow, small businesses need to adopt some key corporate processes. One of the main distinguishing characteristics between different size businesses is the finance department. There are small companies that manage their key business numbers effectively, but sometimes there are examples of small companies that lack the financial expertise to truly interrogate their financial statements, understand financial ratios, break even points & profit margins. If you want your business to grow, you need to understand your key business numbers, or appoint an expert who can advise you on the financial state of your business on a regular basis.
Big corporates have clearly defined HR processes and structures. Roles and responsibilities are clearly defined, job descriptions are typically in place, and reporting lines are clear. Small businesses tend to fly by the seat of their pants and jump from one role to another, allowing room for mistakes, dropped balls, blame and excuses. No matter the size of the business, every person needs to understand their role and responsibility within the company, with key performance indicators and regular performance reviews.
Larger companies have systems and processes in place, without which they would not be able to operate efficiently. Small business owners may have processes in place, but they are more often than not in the business owner’s head rather than documented on paper. If you don’t document your systems and processes, you will be doomed to doing them yourself forever!
It’s not to say that big companies have all the answers. On the contrary, despite all the advantages of a corporate structure with massive resources and expertise, business growth can sometimes hamper a company’s ability to operate effectively. It’s here that big business needs to focus on regaining the competitive edge that small companies naturally have.
A major stumbling block in big corporates is the slow lumbering decision making process. Instead of a quick decision in the corridor, corporates often need motivations, project proposals, board approval, and meetings to discuss meetings before decisions can be made. Large companies need to empower employees to make decisions within certain mandates so they can be quick to respond to opportunities or queries.
Another challenge with big corporates is the accessibility of the CEO or business owner to customers. When you have a large company, you are relying on other people to liaise and service your customers, which may not always be the way you would handle things. People who earn a salary at the end of every month regardless of their performance and service ethic are less likely to care about the business as much as the business owner. One of the biggest challenges a corporate has is to find a way to motivate employees to think about the business and behave as if it is their own.
While big business has the luxury of hiring specific people with specific skills for specific roles, this leads to the disadvantage of pigeon-holing employees and breeding the “it’s not my job” mentality. As a company grows, it loses a competitive advantage of having “all hands on deck” to achieve a goal or solve a problem.
And finally, the bigger the company, the more bureaucracy and red tape. Systems and processes don’t cater for the exception to the rule. They tend to approach every challenge with a “one-size fits all solution” because “that is the way we do it” rather than adapting to each situation in a unique manner like small businesses are able to.
If you run a small business, it’s time to look at implementing the systems, processes and expertise that big business requires. And corporates need to analyse what competitive advantages they have lost in the growth process.Somewhere in the middle lies the best of both worlds.