Does size really Matter

These are among some of the questions asked by Forbes magazine Contributor, Mike Myatt in an article on company growth and size. 

It’s a given that an enterprise that is not growing is declining. And it is well understood that businesses are not maintained – they either grow or fall into decline. Growth prevents irrelevance and obsolescence, growth affords opportunity, growth attracts and retains talent, and growth is the most certain path to sustainability. 

But there’s a caveat to the aforementioned statements. According to Myatt, they assume healthy growth. The flip side to that is growth for the sake of growth, growth by default and not by design, growth for the wrong reasons or at the wrong times, and growth in the wrong areas can create corporate ruin. 

An interesting observation about this subject is that as a company grows, it tends to become slower and less able to do many of the things that made it successful in the first place. Additional layers of management and more formalized systems can slow the decision-making process to the point where it becomes unable to respond quickly to changes in its environment. Another common characteristic of companies as they grow is a tendency to become more risk averse in an effort to meet conservative financial targets or protect share price. 

So what is the optimum size for a company? Does it depend on industry? There are obviously some industries like consumer electronics where, no matter how large a company is, it can’t survive without the ability to quickly adapt to, or drive, changes in the market. 

"Size must be underpinned and augmented with many other characteristics, disciplines, and attributes in order to be a meaningful measure. Size must add value – not dilute it. Size should never outpace capability, and size should not be a substitute for quality.” 

Myatt in his article makes it clear that size in and of itself, is not intrinsically a good thing. He contends “Size must be underpinned and augmented with many other characteristics, disciplines, and attributes in order to be a meaningful measure. Size must add value – not dilute it. Size should never outpace capability, and size should not be a substitute for quality.” 

The myth of bigger is better makes for a nice sound bite, but is rarely the case. Experience suggests that when girth alone serves as a badge of honor, it’s often brandished as a justification for shortfalls is other areas. The bottom line is this – it’s not whether or not to grow, but how to grow. 

Growth doesn’t demand the sacrifice of values, quality, or culture – it should enhance all three. Growth should be led by design, purpose, intent, and with great focus. It should never be allowed to spin out of control, or to become the sole, or even the top priority. 

For too long, we have become obsessed with the idea of growth as the focus of a business. Every company has the ability to improve flexibility and adapt to changes in its environment. Size does not need to be a deterrent to change. 

Success in the years ahead will require the ability to drive and adapt to changes quickly and effectively. The world is changing at such a rapid pace that the organizations that are unable to adapt will not be competitive. Developing the capability will demand increasing attention to things like the speed of new product development, flexibility of processes, implementing and upgrading information systems. This in itself will require organisational transformation. It must be remembered however that company transformation will be largely determined by the quality of leadership. You will hardly see growth in a company guided by stagnant leaders. Put another way, it’s impossible to sustain a budding enterprise, when leadership fails to develop and grow. 

Should you go big or go home, or does quality win out over quantity? The corporate fascination with size has been as intriguing as it has been perplexing. Is empire building and the pursuit of category dominance a healthy thing, or the corporate equivalent of the road to Perdition? 

Friday, January 9, 2015