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The Case For Small Companies
As Anthony McClure hangs up the phone, he's slightly amazed to
find himself turning down another VP of International Marketing position
with a Fortune 500 company. This is the second unsolicited offer in the
last two months he has decided to refuse. Why does he reject the money,
the power, and the perks that are beating a path to his door? He's
found his mission. Amadeus, a European training firm just getting a
foothold in the United States, has given him the opportunity to teach
executives how to reach their highest potential. As he sees his clients
changing their lives and corporate cultures through using his process,
he can't imagine a marketing position that would give him more
Gail McDonald and Mina Brown, a former HR VP and CFO respectively,
have recently incorporated a consulting firm called Transition
Resources. Their new company combines human resources and financial
acumen to help organizations undergoing major changes, such as mergers
or acquisitions, turnarounds, exceptional growth, and IPOs. Both of
these savvy executives have decided to use their expertise in a context
where they have greater control over their careers and personal time.
Jim Loffler, who recently joined RSP Manufacturing in California,
loves working for a small, fast-growing employer committed to
high-quality products and exceptional customer service. With great
enthusiasm he talks about "doing exciting things like inaugurating a
plant in Guadalajara where the President of Mexico was in attendance,
buying a plastics company and a sheet metal/stamping plant in Scotland,
being awarded 'Supplier of the Year'" and achieving recognition from top
management for his innovative work.
While these professionals come from a variety of backgrounds, they
have all decided to leave big corporations for smaller, more
entrepreneurial ones. All of them enjoy making a greater impact on
their companies' colleagues and cultures while charting their own
course, even though they must adjust to the decreased prestige and
resources inherent in a large organization. Although these executives'
transitions haven't been idyllic, they have no desire to escape to more
familiar territory. They are having too much fun.
People contemplating a move from a large to small company come in
contact with a number of myths and truths about entrepreneurial firms.
Most of the myths are perpetuated by stereotypes that are true in some
cases, but rarely universal. Others sound suspiciously like sour
grapes. While the truths aren't new, they have only recently been
discovered by professionals smarting from corporate downsizing, mergers
or politics. Below are some familiar statements about small
businesses. Which ones can you believe?
employ more people than big ones. Because small companies
attract relatively little publicity, their impact on the economy is
generally discounted. In 1995 the National Association of Women
Business Owners commissioned a study on women-owned businesses which
revealed they employ more people than the Fortune 500 combined.
Taken as a whole, small companies comprise a powerful, dynamic
economic community which makes a tremendous impact on both domestic
and global growth
pay lower salaries and provide fewer benefits than large companies.
This is true in many cases, especially with slow-growing,
family-owned operations. However, there are a number of small
businesses that provide equal or greater compensation packages than
their larger counterparts. Many entrepreneurs decide to start their
own companies because of the upside potential for income. While
going it alone may be riskier than working for someone else, if they
choose the right niche and succeed, they can reap handsome rewards.
Start-up companies funded by venture capital seed money generally
pay their employees well because they expect them to produce quick,
exceptional results. Quite often young organizations offer less in
cash compensation, but give their workers generous stock options.
As the corporation grows, executes an IPO or finds a buyer, these
options can be worth millions.
offer less security than large ones. Not anymore. Those
halcyon days of employment for life in large, patriarchal
organizations are long gone. Today, many entrepreneurs start their
own companies because they have been downsized or reengineered so
many times, they are determined to control of their own destinies.
They trust their abilities and decisions more than those of their
former employer. People who work in smaller companies with good
management generally feel more secure about keeping their jobs,
because they have a more personal relationship with the owner.
Small business owners will move heaven and earth to make payroll.
Most lay off people only as a last resort. Stockholder expectations
are not an issue for them.
have fewer opportunities for advancement. This is often true,
particularly in small, family-owned or stagnant companies. However,
fast-growing small businesses must continually add employees and
managers to keep pace with the demand for their products and
services. Because associates in these organizations wear many hats
simultaneously, on-the-job training is a mandate and continual
learning and increasing responsibility are requirements.
increased the business potential of small businesses. With
rampant downsizing and reorganization in large corporations comes
the opportunity for small firms to provide services that used to be
performed in-house. How many professionals do you know who have
been laid off, then return to their former employers as independent
contractors? Now that organizations are "going back to their core
businesses" and eliminating or reducing staff departments, small
firms that can execute these functions are in great demand. Ed
Rankin's company, Human Resource Solutions, is one of the 100
fastest growing small businesses in Dallas. He and his colleagues
have built a thriving consulting firm offering a variety of human
resource services to both large and small clients who don't have the
needed expertise on board..
Big companies have also become more interested in doing business
with smaller ones. They have found entrepreneurial vendors often
provide higher quality service for less money, because their staffs
tend to be seasoned experts with low overhead versus newly-minted
MBAs with inflated expenses. Many larger firms and government
agencies have internal goals for contracting with minority or
women-owned firms. Along with an increasing trend to outsource,
these affirmative action initiatives provide opportunities not
previously available to small businesses
are more interested in an employee's ability to produce results than
his specific work history or credentials. Most large
corporations rely heavily on education and experience requirements
as screening tools in their hiring and succession processes. They
want to put "square pegs into square holes." Many small company
managers tend to be more lateral thinkers when they are filling a
position. While they look for similar work experience, they may be
equally impressed with a candidate's enthusiasm and innate skills.
And they are often more willing to hire a career changer or
less-educated professional, if they think he can do the job. As
entrepreneurs they trust their own judgment and ability to see
often offer the opportunity to make a greater contribution to the
organization. Jim Loffler is particularly impressed by the
authority his company has given him to ramp up its tooling
department to a more sophisticated level. As the company adds new
plants, he is responsible for ensuring their tool and die design
meets quality, cost and efficiency standards as well. It would have
taken many years and a much higher management position for him to
have a similar impact on the large employer he just left.
are better at finding emerging niches, making quicker decisions and
moving ahead than their bigger brethren. Back when a much
smaller EDS had been a subsidiary of GM for a few months, a very
frustrated Ross Perot said, "If someone at EDS sees a rattler, he
kills it. If a GM manager comes across one, he puts together a
committee to discuss the situation." Small businesses tend to be
more creative, more nimble, and more aggressive in pursuing new
opportunities. They have far fewer layers of management and fewer
people likely to chant "if it ain't broke, don't fix it."
Entrepreneurs don't have the luxury or comfort of being king of the
jungle. As a popular motivational plaque says, "When a gazelle
wakes up in the morning, he faces two choices: He can either run
like hell or be eaten." Small businesses have a lot in common with