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4 Critical Differences Between Large Companies and Small Ones

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This post originally appeared on THEsmallCOMPANYBLOG.

Over the last three years writing about small companies, many of my friends, colleagues and fellow bloggers have questioned my decision to draw such a hard distinction between small companies and their larger counterparts. I regularly receive emails like “Is working for a small company really that different?” and “Aren’t good management techniques the same for all companies?” but have not bothered to prepare a response. Until today.

With the above in mind, the following post will outline the four (4) most critical differences between big companies and small ones. Please be warned: this article not based on any sort of worldwide study or market survey. It is based on more than 17 years of first-hand experience working for companies from $2 million in annual revenue to $25 billion (that’s billion with a ‘b‘). No matter what size of company you work for or hope to work for some day, I believe you will find some value here.

Difference #1: The People

Far and away, the most significant difference between a small company and a large one lies within the mix and variety of people who work there. At a small company, the employee mix is both diverse and inconsistent. Small companies are home to people who are always happy, people who are always mad, and people who ride the emotional roller coaster. There are people who never talk, people who always talk, and people who spend most of the day with at least one foot firmly planted in their mouth. Small companies are loaded with unattached twenty-somethings, divorced grandparents, and middle-aged people with kids—all with unique needs, unique motivations and personal lives that ultimately spill over into work.

Contrast this to the employee mix at a larger firm. As an organization grows, employees begin to homogenize to the point where any outward ‘personality’ that exists among individuals is eventually eliminated. Cultural expectations are set, groups begin to form, and people who no longer fit the big company ‘mold’ are forced out. In fact, by the time a company breaks the billion dollar revenue mark, it actually becomes difficult to tell people apart as individuality is replaced with company-enforced conformity. Employees buy the same clothes at the same stores, watch the same TV shows, and play in the same company-sponsored sports leagues as the people they work with.

Difference #2: The Environment

When you hear the phrase “big company,” the one word that immediately comes to mind is structure. Structure in the form of policy manuals, comprehensive job descriptions, HR handbooks, management hierarchies and jam-packed meeting schedules. By the same token, hearing the phrase “small company” almost always invokes the opposite impression: a complete lack of structure.

In contrast to a large firm, at a small company it is rare that a new employee will start on Day 1 with an accurate job description; and if they do, the description is almost always outdated after the first month. There are a distinct lack of policy manuals and work instructions, and formal meetings are only held in emergencies or for issues related to long-term planning. Also at small companies, the most effective employees are the ones who take risks, and learn to circumvent the management hierarchy to get things done; whereas at a larger firm, more value is given to employees who complete their tasks within the rules and without exposing the company to unnecessary risks.

Difference #3: The Money

To cut right to the chase, the critical difference in the way money is treated at big companies versus small ones can be summed up in one sentence:

Spending money that comes directly out of someone else’s pocket changes everything.

Big companies might have stockholders, but small companies have OWNERS. Owners, by the way, who have no problem chastising an employee for spending an extra $10 per night on a hotel during their last business trip. Knowing that every dollar you spend comes out of an owner’s bank account makes working at a small company unnecessarily stressful—especially for departments like Marketing and Sales. Also, small companies are full of opportunities for employees to become upset and disillusioned about finances. Have you ever been asked to tell your employees about a company-wide wage freeze, only to have the owner drive to work a few weeks later in a new Mercedes? Small company managers have.

Difference #4: The Politics

At a big company, you usually don’t have to worry about working for multiple bosses or married couples. You are also rarely forced to deal with relatives of the CEO, ownership teams who have been friends since college, and spouses of executives who ask for your help with a side business. But at small companies, these things are both commonplace and expected. The relationships, social circles and histories at small companies often make them a nightmare to navigate politically—making the shelf-life of even the best managers a mere four or five years at the most.

Comments? Questions? Feel free to reply to this post.

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November 17th, 2010 at 7:33 am