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In Business, Does Size Matter?

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Conventional wisdom says that startups and closely held companies should be far more nimble, less bureaucratic, and less political than large corporations. But that's more myth than reality. In the real world, small businesses are just as likely to be poorly run and dysfunctional as big enterprises. Perhaps more so.

I was just commiserating with a friend about the company where she works. “It’s hard to believe such a small firm can be so screwed up,” she said. “You’ve heard of silo mentality between departments and divisions? We have silos of like one or two people. It’s nuts.”

“Size doesn’t matter, at least not when it comes to organizational dysfunction,” I said. “There are great leaders, lousy leaders, and everything in between. Big or small, they determine how their companies function … or don’t.” 

As with everything in business, it’s all about whoever’s running the show. It’s about their experience, their issues, and most importantly, the culture they create and reinforce as the company grows.

Just so we’re on the same page here, company culture is just like any other type of culture, more or less. It’s how people generally behave: the norms and rituals that propagate throughout an organization, either organically or purposely. It’s how a company functions. How things get done … or don’t.

And size really doesn’t matter. A positive culture can be defined and reinforced as a company scales just as readily as a negative culture can take hold in a tiny firm run by a maniacal control freak.

Intel, for example, is a ridiculously well-run company that, in many ways, is more nimble and adaptable than competitors a fraction of its size. That’s primarily a function of the management style of Andy Grove, whose famous mantra, “Only the paranoid survive,” has come to characterize the chip giant’s culture.

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Grove ran Intel during its most formative years as it grew to become a broad product company and then transitioned to one focused on PC processors. Intel’s been the world’s biggest semiconductor company ever since – for two decades running.

Meanwhile the opposite is true of Intel’s stodgy neighbor to the north, Hewlett-Packard. Former CEOs Carly Fiorina and Mark Hurd did a great job of streamlining and reorganizing what had become a sluggish behemoth, but the HP Way that had been so effective in the company’s youth has been lost amidst the constant downsizing and chronic board dysfunction. 

When it comes to startups, there’s a very good reason why VCs scrutinize the management team before investing. After all, what’s left when those groundbreaking new products don’t turn out as planned, as is so often the case? That’s right, the leadership team and the culture they built.

Founders usually create company cultures in their own image. And that’s what determines how managers and employees alike behave and whether they have what it takes to make it over the long haul.

Facebook has taken on Mark Zuckerberg’s mantra of “move fast and break things,” also known as The Hacker Way. If you’ve ever used Facebook – and who hasn’t – you’ve pretty much seen Zuckerberg’s personality at work. And that hasn’t changed as the company has grown.

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Likewise, from the day it was founded 21 years ago to the present, even with 150,000 employees and counting, Amazon has always been a lean, mean and brutally competitive company. That’s courtesy of founder and CEO Jeff Bezos.

And enormous as it is, I don’t know a single company in Silicon Valley that’s more focused and less bureaucratic than Apple. The tech giant has hardly any processes, and yet it somehow manages to continue to focus on doing only what it does best. Both were fundamental principles of founder Steve Jobs.

That said, entrepreneurs and executives are only as effective as their experience and capability allow. Nobody is perfect and everyone has issues. Who we are and what we’ve experienced in life inevitably influence how we do things – our behavior. And those factors have an enormous effect on the cultures of the companies we create.

Show me a management team made up almost entirely of folks who have never worked anywhere else, and I’ll show you a company that’s not likely to scale well. Their methods may work for a while, but once competitors learn their tricks and that formula stops working, they will likely have a tough time breaking out of their own status quo.

A more experientially diverse team, on the other hand, will be less likely to become trapped by their own inertia and less prone to groupthink. They will generally be more effective at adapting to changing market conditions.

In addition, companies will usually take on the dysfunctions of their founders or leaders. And that effect can be far more pronounced when a company is small and closely held than after it’s had some time to mature and grow.

These days, everyone thinks they’re better off as entrepreneurs. And conventional wisdom says that smaller companies are better to work for than corporate giants. Both are myths. You can achieve personal fulfillment and career success working for big companies, small companies, your own company, or any combination thereof.  

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