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Sunday, January 10, 2010

Why do big companies suck?


Sent to you by Leo via Google Reader:


via Scott Berkun by Scott Berkun on 1/6/10

(Note: In a new series of posts, now called reader's choice, I'll write about whatever people submit and vote for.  If you dig this, let me know if the comments, and submit your ideas and votes).

Before thinking about companies, it's worth noticing that many things suck. For movies, books, websites, the bar is pretty damn low. Suckage is everywhere. And this is true regardless of size – many small companies suck and medium ones too.  The real question then is why, if at all, do big companies suck more than smaller ones?

I have to say, I'm not sure that they do, certainly not when I put my selfish consumer hat on. I own a Honda Civic, an Apple I-Pod and a Black & Decker cordless drill, three good products made by three very large corporations. These products are relatively cheap, very well made, and part of what I'm buying is faith the company will be around in five years if I need repairs or other support for these things.  A smaller company probably couldn't provide low cost, high quality, products and promise they'd be around in the future.  When I fly I'm glad my airplane is made by Boeing or Airbus, and not some local startup company run by people working from their garage.

I'm not a fan of big in general, but there's a case to be made that many excellent products come from big companies, some of which could never be made by smaller ones.

But there are some things that tend to happen when companies get big that are bad – and that's what I'll explore in the list below.

Why big companies suck:

  • The soul has left the building – All big companies start as small companies. But by the time a company hits the 500, 1000 or 50000 person mark, many of the people who made the small company successful have left, and their spirit left with them. You can have a financially successful company that is mostly banking on the ideas and successes of people who left years ago, but whose middle-managers take credit for what was mostly inherited the day they were hired. When things go bad, none of the 'leadership' has any of the tools required to fix, rebuild, or recreate the pattern of success that started it all.
  • Obsessive Optimization – When you have 5000 employees, or $500 million in revenue, fractions become significant. A .5%  increase in revenue is not a small thing, it's a big thing. It can be bigger than many companies' entire revue. And as companies age the culture looks to optimize and refine, eventually to a point where the good things that led to all the success have been whittled away. Managers at big companies often have more incentives to minimize costs, than to find new business or develop new ideas since minimize costs or optimizing an existing process are cheaper wins that show results in the short term. In an optimization centric culture, the myopic love of short term wins can makes long term improvements, which often require short term sacrifices, hard to pull off.
  • Addicted to bureaucracy -  I travel a great deal and visit with companies of all sizes. It's fascinating to visit places where there are 20 people doing work I know is done by 3 or 4 at one of their competitors, often with better results. It's bizarre to see smart, senior people who have forgotten it's possible in this universe to make things happen without talking to a committee, filling out forms, or doing extensive market research. The bigger a company gets the more dependencies there are between decisions, which makes it natural for committees and approvals to grow in number.  I get that. But it's typically easier to add processes than it is to remove them. Over time bigger companies accumulate process, it gets inherited, and no one can even imagine a world that's lean or efficient. Big companies should have dedicated process simplifers, senior people who just run around, point our areas that can be leaner or simpler, or where line level employees should be more autonomous, to keep this tendency in check. Or once a year every manager should be forced to
  • They believe their own bullshit - Any large group of people functions because of shared beliefs, but ther are both positive and negative kinds of belief. The negative kinds are the ones that involve lies, distortions of truth, and a lack of perspective.  Company all-hands meetings can feel like politica rallies, where  a reality distortion field prevents any valid questions of the company from being mentioned, and all bad news or mistakes are whitewashed away. When you're banned from using competitors products, even when they're better, or not allowed to critique and criticize decisions even when they're dumb and bad, it gets harder and harder for good ideas to rise because real thinking is prevented. When the party line is BS, the wise start to keep their mouth shut, and look for other jobs.
  • The Peter Principle – When you have several layers of management it's entirely possible the manager isn't contributing much, and the line level employees are mostly self-sustaining. If a manager inherits a successful team, a team self motivated to improve, and it does under his management, he may very well be promoted for simply being around at the right time.  There are many bad reasons people get promoted, and it's more likely to happen in bigger companies, where there is more ambiguity about who is contributing what.
  • It's hard to fire people - Big companies get sued more often because they have more money. And on the day a small company gets it's first law suit for wrongful termination, or discrimination, everyone runs the numbers and concludes it's cheaper, on paper, to prolong the process for firing people and increase the amount of paperwork about employees managers must create, than it is to lose lawsuits.  Performance evaluations, mid-year reviews, and all of that are heavily (but of course not entirely) motivated by lawsuit prevention and defense.
  • Corporations can be psychopaths - In 1886 the U.S. Surpreme court ruled that corporations were entitled to the same protections as people. This was a big deal. It made it possible for executives to make decisions on behalf of a corporation that were illegal, or ethically questionable, without being directly liable for them, and gave constitutional rights to entities that were not people.  Combined with the motive for profit, there are lines big corporations are lead to cross that no indivudal ever would, since the entity of the corporation is held responsible, and not necessarily the individual leaders.
  • Status quo / Follower mentality – The bigger a company gets, the more it's main attractive power for new employees is job security, rather than opportunity to grow, learn or take risks. The Innovator's dilemma is real, and leaders who have big sucess are often the last to recognize when it's time to move on. For anyone interested in progress, risk taking, change or growth potential, a large company is incredibly frustrating, as the dominant psychology is one of play it safe and political correctness. A running joke at Microsoft used to be that the best way to get a product idea to ship at Microsoft was to have a competitor do it first.

The list can go on I'm sure – what did I miss?


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