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The Six Disciplines Blog


Friday, December 13, 2013

The Small Business Advantage

Those who have worked both in small and large organizations have a much better appreciation for how fundamentally different large companies are from small ones. Each has its strengths, and the savvy small business owner understands what those are and takes advantage of them aggressively. They include:

1. Connecting People to Purpose

People are creatures of emotion and reason. The best performers want to belong to an organization that’s on a mission, and they need to see how they’re contributing to that mission. Small businesses have an enormous advantage in their ability to help people connect to the purpose of the organization, AND enable them to see that what they’re doing is contributing to that purpose in a meaningful way.

This importance was hammered home to me in a lunch meeting with “Sandy,” who recently moved to a much larger organization. She commented, “It’s just not the same. I feel like a number. It seems like nothing I do will make a real difference in anything. And if it did, it probably wouldn’t be noticed.”

Another businessman understood how to use this advantage. He set up a 50% profit-sharing program in which a portion of the profits was retained by the employees themselves and the remainder was given away by the employees to charitable causes. This small team was one of the most productive, spirited and lively groups I’ve ever known.

2. Effective Communication

Someone wise once said, “The biggest problem with communication is the illusion that it has taken place.”3 The larger the organization is, the greater this illusion becomes. As organizations grow, communication challenges grow, as well; in fact, they grow dramatically faster (exponentially) than the organization headcount does. To illustrate this, the following table shows that when there are only three people in an organization, there are three possible communication combinations (persons A&B, A&C, or B&C). However, if you grow a 3- person organization to 25, there is an 8-fold increase in the number of people but a 100-fold increase in the communications combinations! A 100-person organization is 33 times the size of a 3-person organization but 1650 times more complex from a communications perspective.

Organizations respond to this increased complexity by creating business units, divisions, departments, groups, etc. In other words, more layers. When you add to this challenge the fact that experts believe that 55% of communication takes place through nonverbal body language, it becomes clear how great an advantage it is to be able to gather everyone together in one place quickly and easily.

3. Timely Decision-Making

Decision-making is also dramatically different in smaller organizations. As organizations increase in size, the leadership team moves from generalists to specialists who are responsible for a particular business area. Because top decision-makers in a larger organization are more insulated from the day-to-day activities of the company, they no longer have the first-hand knowledge to make decisions without the input of several other specialists. The result is slower and often lower-quality decisions.

In small businesses, however, there are fewer decision-makers, and they’re so close to customers, employees and daily operations that they can get a sense of whether a decision is right or wrong very quickly.

4. Customer Intimacy

In smaller organizations, a much greater percentage of employees work with customers directly. This includes the leaders in the organization, who frequently are still involved in closing sales or supporting clients. This kind of closeness to customers means the people in the company know customer issues and they can spot changing market needs earlier. And because their decision-making is more timely, they can act on those trends earlier.

5. Attracting Team Members

Small businesses don’t have to take a back seat to larger organizations when recruiting top people (and they shouldn’t). The advantages already discussed-connection to purpose, effective communication, timely decision-making, and customer intimacy-when explained very carefully to all candidates, can provide a great draw to the most talented prospects. It’s important to recognize that many people who haven’t worked in large companies may not understand these advantages. Yet for people who are experienced in larger organizations, the advantages will be obvious and often quite welcome.

The point of all this isn’t that small businesses are better than big businesses, but that they’re different than big businesses. And learning to leverage differences is what competitive advantage is all about. Yet many small businesses don’t consciously develop strategies that use their advantages. As you read on, you’ll begin to see how the Six Disciplines Methodology helps small businesses systematically take advantage of their strengths.

-From Gary Harpst’s Six Disciplines for Exellence

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Since 2005, the Six Disciplines blog offers posts about performance excellence, strategy execution, business coaching, leadership development, innovation, and business process improvement. This blog has received prestigious awards for leadership and management and has been syndicated by several major media sources.