Best of Big and Small

Feb 19, 1996

A lot of firms in our business are going through some serious introspection. And if they aren’t, they probably should be. Change is occurring at an accelerating pace. Yesterday’s hot firm may be a dog today, and today’s hot firm could easily be one that you’d never heard of until a year or two ago. Whether you’re just starting your firm or trying to make your established firm more successful, my advice is the same: organize and operate your company so that it combines the best elements of big firms with the best aspects of small firms. And, of course, try to avoid the disadvantages of each. What do I mean? Organization structure. Big companies often have too many layers in the hierarchy, which bogs down decision-making. And they have too much separation between management and the worker bees. They do, however, usually have a very clear chain of command. Small companies tend to have fewer layers and, as a result, can often make decisions quickly. Yet, small firms may not have clearly defined roles and responsibilities for everyone, and employees of small firms may feel that their path to advancement isn’t readily identifiable. The answer— If you are a large firm, don’t give the “big guys” too many trappings of success that will lead to an “us-versus-them” culture. And don’t feel that everyone has to be involved in every decision. Name who makes what decision and make them accountable for results. If you’re a small firm, define the reporting relationships for everyone. And even if someone has responsibility for a certain functional area of the business as one of many roles, define the structure in writing and show that person’s name in the box. And both firm types should emphasize career paths based on responsibilities versus titles. Communications. Large firms have established channels and processes for getting information out. It comes out on schedule and if you are supposed to get it, you do. They also tend to have too many of these communications and too many meetings. They wait to communicate important information to employees until a meeting is held, which makes no sense. This frustrates the entire staff whose time is being wasted. Small companies, on the other hand, too often have no schedule or process for handling communications. They also tend to have fewer meetings because the owner or owners don’t think they need a lot of input. So some people are left out of the loop. The answer— All firms should use more electronic communication and less paper. This means having a functional computer network, of course. And meetings should be planned, but limited in frequency, length, and content. Office facilities. Large firms tend to have much nicer offices for managers and executive staff than for everyone else. And they often concentrate these people in one part of the building, or worse, in a separate building. On the other hand, a visitor would likely see a well-organized, successful-appearing firm that instills confidence that the firm is a low-risk choice. Small firms tend to have lower budget offices with less œdifferentiation between the principals and everyone else. Their problem is that these small offices are often dark, cramped, and appear disorganized. The furniture looks worn, the carpet may have holes, and wires are coming out of the ceilings. Not to mention that many need a thorough cleaning with a stiff brush. The answer— If you’re a large firm, spread your managers among the rank-and-file professional and technical staff. Cut down on the size of personal work spaces for people at the top. And don’t feel compelled to immediately put someone in an office just because he or she becomes a manager. Small firms should get past the myth that organization, neatness, and decent office space all connote “expensive” to their clients. They need to get daily janitorial service, trade in those mismatched metal desks with Formica tops for new, grey laminate ones, replace the carpet, and change all the burned-out light bulbs. They should also make darn sure the reception and conference room areas are always clean and ready for unexpected visitors. Accounting. Large companies have lots of profit centers and, as a result, can slice and dice the pie any way they want to see where money is being made and where it’s going. The problem is that all this information reinforces internal competition and may cost a lot of money to collect and analyze. Small companies tend to have minimal accounting data, which doesn’t create internal competition, but can make tracking financial problems a lot slower and more difficult. The answer— I have yet to go into a large company that couldn’t use a more streamlined accounting system. The profit centers being tracked should match up with the organizational units as they are set up. Small companies should do the same. And they should make sure they aren’t under-accounting and, as a result, letting problems go on too long before confronting them appropriately. Nepotism. Large companies tend to prohibit related employees to work together, or even anywhere in the company at any level. Small companies are often riddled with employees who are married to each other, are part of the same family (often of a founder), or have been working there for a long time. The answer— I’ll upset a lot of people by saying this, but I believe that large companies are on the right track. Nepotism is often harmful to both relatives and non-relatives. Where I see rampant nepotism, I also tend to see low morale. In cases where it is allowed, the company runs a risk of alienating two (or more) of its related employees if it upsets one. There’s also the problem of employee perception that relatives of owners and managers get special privileges, even when they don’t. That’s hard for everyone to deal with. If it does work, it seems to be when there are vast differences in the levels of the related staff, such as a father who is COO and a son who is a field technician. Financial performance data. Large firms tend to be unafraid to give employees information on how the firm is doing overall. The problem with large companies is they give too much information. Employees and managers are inundated with reports they may not understand. The attitude is, “It’s all there somewhere,” but it takes too long to find it. Small companies tend to keep employees in the dark. No one knows the budgets of the jobs they are working on. No one other than the owners knows if the firm is making a profit or what the backlog is. œ The answer— Large companies should continue to give everybody financial information on the firm and projects, but clean it up so employees can find what’s critical at a glance. Small companies need to get over the idea that competitors will hurt them if this information gets out. Employees will act more like owners when you don’t hide anything from them. Proposal tracking— Large firms too often track every nickel of proposal expense and charge it to the specific project’s job number. They also know exactly how many proposals go out, what each costs, and the results in actual sales. The problem is that all of this information takes a lot of time (and money) to collect, and no one seems to use it. And in rare cases, it completely distorts the firm’s accounting by allowing people to charge time to job numbers that aren’t real jobs yet, and show this time as billable. In a worst-case scenario, this junk actually shows up as unbilled work-in-process, which distorts the firm’s entire sense of well-being. Small firms do very little tracking. They don’t load up their information system with proposal time tagged to specific projects. Nor are they aware of their hit rates, what they are selling, or much else about marketing. The answer— Unless you have an awful lot of work with government clients that requires you to distinguish between marketing time charged to specific projects versus “general” marketing, you’d probably do better to stop tracking per-proposal marketing expenses. It’s too often a way for employees and management to kid themselves about what they are really getting done each day and, as a result, what’s really happening in the business. Proposals made, success rates, and sales data should be tracked, however. And the macro view of what it’s costing the firm for marketing versus what its getting back in terms of sales should be monitored continually! Ownership. Large firms tend to separate management from ownership. They often have lots of shareholders, and buying stock in the company is done more from a rational investor viewpoint than from an emotional perspective that they are now a “member of the club” that makes all decisions. Large firms, therefore, are concerned about providing returns to shareholders that they can see in their bonuses, dividends, and equity growth. Small firms don’t usually pay a lot of attention to this. They confuse ownership with management. Every owner may sit on the board, and the board makes decisions from the color of paint to be used for the bathroom partitions to whether an extension should be granted for a technician on maternity leave. The answer— Big firms are on the right track. Confusing ownership with management is a killer in a small firm. Make the stock valuable as an investment instead of filling all of your management slots with owners just because they are owners. Have a broader base of ownership and some strict rules about how the stock is valued, as well as bought and sold. And don’t allow your owners to cross any organizational line to grab resources they want just because they are owners. I could go on, but you get the idea. Combine the best elements of big and small firms and you’ll get a company that is organized, responsive to its clients, adaptable to its environment, fast on its feet, and able to grow continuously. Don’t think about any of this and you’ll end up with a firm that peaks and then declines. Believe me, we’ve seen it! Originally published 2/19/1996

About Zweig Group

Zweig Group, a four-time Inc. 500/5000 honoree, is the premiere authority in AEC management consulting, the go-to source for industry research, and the leading provider of customized learning and training. Zweig Group specializes in four core consulting areas: Talent, Performance, Growth, and Transition, including innovative solutions in mergers and acquisitions, strategic planning, financial management, ownership transition, executive search, business development, valuation, and more. Zweig Group exists to help AEC firms succeed in a competitive marketplace. The firm has offices in Dallas and Fayetteville, Arkansas.