the business ladder

By Fabio Del Piero (First published 15.04.09)

Small is beautiful. And in business, small is back. After decades of business ideology that led the world toward giant entities, expansion, consolidation and frantic cost-cutting through economies of scale, the importance of the small or medium sized business in strengthening the economy is once again being closely scrutinised.

As the saying goes, “size isn’t everything”. Across the West, this nasty recession is spelling the end of the rush for constant expansion and huge turnovers (not necessarily profits!) according to the ‘bigger is better’ orthodoxy. Cavalier, even blind eagerness to buy up rivals at an inflated price drove waves of mergers and acquisitions (M&A) activity, and created groups that may appear imposing but are a triumph of image over substance.

Indeed, insiders familiar with the balance sheets of many large corporate entities warn that a surprising number of well-known, ‘global’ names are so wasteful, so highly indebted, that in reality they resemble a house of cards wobbling in the evening breeze. It’s only the intangible buoyancy of their ‘brand’, their strong name, a mystique earned in a more efficient era, which allows them to roll over their loans and keep from going under. These enormous names are so famous, goes the thinking, that surely they’re ‘too big to go down’. Tell that to former retail giant Woolworths and the thousands who lost their jobs there…

Corporate models focusing on size at any cost have had their day. Yes, they contributed to economic expansion around the globe (though critics have pointed out that much of it was illusory growth fuelled by debt). But, at any rate, such models are no longer applicable to every situation, for various reasons. Large can and often does mean extremely inefficient and wasteful, as anyone who has worked for a big corporation run according to the above model knows well.

From endless stationery over-orders and ‘disappearances’, to expensive efficiency-monitoring systems, to clumsy bureaucratic procedures, to time-wasting chatter and long cigarette breaks… most people are familiar with the problems. Typically, employees have little or no stake in the companies they work for, feeling and acting like mercenaries, just waiting for their paycheque at the end of the month. They feel no enthusiasm, no sense of ownership in a large corporate that treats them as faceless ‘human resources’ rather than real people, shows no loyalty, takes them for granted, and demands longer hours for less pay and benefits, all while stifling their creativity and freedom. Therefore few workers are eager to be efficient and make sacrifices for the company’s benefit, and sick days become an extension of the annual holiday allowance. These problems stem from structural growth that occurs without the correct management strategies and systems in place to ensure both that employees feel valued and that the overall business is set up efficiently.

In these conditions only the very strongest big companies, those with the fewest faults and inefficiencies, will manage to thrive. Many of the weaker ones are already taking desperate measures: you need only look around to see how insolvencies and cutbacks are leaving gaps both on the high street and in the wider global market.

But it’s precisely these gaps which are proving an invitation for smaller, independent businesses to exploit, whether new start-ups or existing entities, offering greater scope for individual creativity and enterprise along with the greater freedom of running your own outfit. Where fresh thinking is needed, savvy people with new ideas, drive, creativity and a good eye for spotting opportunities can take advantage. Of course the grass roots entrepreneurship movement needs support from government, business lobbies and the media in order to take it to the next level of practical application by individuals, new start-ups and established companies – which is why it’s encouraging to hear predictions or exhortations that successful small and medium sized businesses will be the ones to lead the nation, and the world, out of recession eventually.

Despite the challenges, now is the time for small entrepreneurs to release their ideas and ingenuity. Even though finance can be hard to obtain in tough economic times, there are extremely profitable lessons to be learned and extremely profitable experience to be gained. There is no better time to learn discipline and maximum efficiency than when you are running businesses on a tight, even shoestring budget.

In pursuing this objective I believe in helping those who are interested in enterprise to seize their chance, by learning to be independent, weigh up risk and reward, exploit opportunities effectively, be more efficient, develop commercial awareness, sell more, spend less and build a positive organisation – one that others will want to be part of, to share in your success.

 

© Copyright 2009 The Business Ladder (UK) Limited

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