Friday, April 27, 2007

Large Companies - New Equation of Big Company Behavior

Start-up time is to dog years as enterprise time is to human years. Start-ups move 7x faster as the urgency of the next fund raising, competitive threat, cash position, etc... drive Herculean efforts.

A familiar start-up complaint is that the contrast in cadence (btwn small and nimble and big and slow) is incredibly frustrating. The time it takes to negotiate on OEM deal, partner with, sell to...large companies is often maddening.

Yesterday, over coffee with a great entrepreneur I heard the frustration summed up in a moment of brilliant wit.

The entrepreneur argued that:

an individual's competency x company size = a constant

In essence, the bigger the company, the less competent the people.

Now, we all know that there are many smart and hard-working people at large companies. There is, however, also a common malaise that somehow limits the ability of large companies to make decisions, to move quickly, and to be productive.

Many of my friends work at large tech companies and frequently complain of the siloed thinking, the blackbox decision making, the inability to make decisions, and the frustrating inability of the company to harness the collective energy and initiative of the group.

Why?

What is it about size that limits effectiveness? Why do people feel so powerless in large company settings and so frustrated?

While there many reasons, I see three core drivers

  1. incentives
    1. the incremental compensation that accrues from initiative is not worth the risks and costs of fighting the corporate inertia
  2. politics
    1. a preponderance of energy is invested in internal battles
    2. companies and individuals have finite stocks of energy
      1. employees of large companies spend more energy on internal issues than on external customer facing and value-creating issues
  3. dead wood
    1. large companies become safe harbors for mediocrity
    2. middle management gluts the system and limits the ability of the young and the restless to advance
    3. the Wall St "up or out" culture ensures the young hard chargers always have room to advance and that seniority and tenure are no guarantee of protection
While the "constant" above is certainly extreme and unfounded - it underscores the failing of many large companies to provide exciting career choices to younger go-getters and a suboptimal use of talent, resources, and energy.

2 comments:

  1. Big Company Guy (For Now)1:45 PM

    Very good that you point out that the equation is "certainly extreme and unfounded." I'd add pretty arrogant. By the same logic, everyone who works for the government is incompetent? No doubt managing well in a large organization requires a different skill set. But it's a necessary skill for most leaders who seek to change industries, economies and nations.

    Keep the good entries coming!

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  2. Will, I generally love reading your posts. Agree with your points in this one too, for the most part. Your entrepreneur is certainly arrogant and probably hasn't heard about intrapreneurship. See my post for an alternate viewpoint on this topic:

    http://pitch-roll-yaw.blogspot.com/2007/04/big-company-vs-startup.html

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