01 Aug 2012  What Do YOU Think?

Should CEOs Worry About ‘Too Big to Succeed?’

Summing Up Is there a right size for a company? Jim Heskett's readers ponder his question: Can companies become too big to succeed?

 

Summing Up

Is There a "Right Size" for a Company?


This month's question of whether "too big to succeed" should be a larger worry of CEOs than "too big to fail" as usual produced more questions than answers (or agreement).

Tom Dolembo supported the thesis, citing as a cause the lack of sufficient organic growth as opposed to the growth by mergers and acquisitions. As he put it, "Toobigs are enormously complex, with massive, self defeating strategies at war within, producing a lower return." Phil Clark concurred, saying that "It is about people and relationships. Unfortunately, many corporate leaders focus on profits and the Wall Street drivers toward big business and profits. It has become the death knell for many corporations." Phil Harris, joining in, pointed out that there is nothing new here, reminding us that Joseph Schumpeter "called it 'creative destruction'" many years ago, the inevitable result of competition and entrepreneurship at work.

Others pointed that whether size and success are compatible may rely on a number of factors. Usman Ghani suggested that we need to know the goals and objectives, saying "then we can more considerately say how big an organization needs to be to accomplish the ends …" Srinivasan questioned whether size alone matters, pointing out that size has to be considered alongside such things as "conviction … focus … ability to create a culture of belonging." Kapil Kumar Sopory added that "Success and growth depends on a variety of factors of which greed is not one." Bruce Duncil opined that "… the first step is defining what are success and failure … And 'too big to succeed'? Let's not make this an excuse—and a euphemism for a different form of government intervention …"

Gerald Nanninga was less willing to accept the notion of "too big to succeed," setting forth several ways of scaling up a company to minimize the burden of size on management. As he put it, "… if you keep teams small, disperse people among multiple employers (through outsourcing), and give their jobs meaning, then overall size will cease to be much of an issue." Shadreck Salli agreed, commenting that "Any entity is designed to function at different levels/scale. Regardless of the scale, what warranties success is the adherence to effective management of all resources that surround that particular scale of operation."

Questions raised by Salli's and other of the comments include the following: Can leaders sense successfully when an entity is functioning at its proper level or scale? Or does ambition for continued growth drive them to take their organizations beyond that point in terms of size? Phil Clark posed the question, "Is there a 'right size' for a company?" If so, how do we know? How many companies that you can think of are right-sized? What do you think?

Original Article

Governments in the United States and Europe have been preoccupied with the question of financial institutions becoming too big to fail. But recent data points have me asking whether the relevant question should be whether financial (and other organizations) bear a greater risk of becoming too big to succeed.

The first data point is that several people have contacted me recently requesting introductions to leaders who have successfully taken their organizations through the size barrier of roughly a billion dollars in sales or several thousand employees without taking a hit in performance. This imaginary (or perhaps not so imaginary) barrier is not new. It has been a concern for years because it often necessitates a change in leadership and form of organization, something many founders and their organizations are unwilling to undertake.

The second data point is the firm belief on the part of several very successful leaders that a key to the success of a large organization is the ability to make it seem small to employees.

For example, Ken Iverson maintains that his company, Nucor Steel, should not have more than a couple hundred employees in any one of its minimill steel-producing facilities. He believes that potential economies of scale are outweighed by frictions and inefficiencies that accompany bigness. This principle has served Nucor Steel well as it has risen to the premier place in US steel making. Similarly, Arkadi Kuhlmann, in putting together ING Direct, a largely online financial powerhouse offering savings, mortgages, and other consumer financial products, is firm in his belief that great service depends on service centers employing no more than roughly 150 people--even if two are located with just a wall between them. This is part of a strategy that produced the fastest-growing financial institution in the US, one that its parent sold for about $9 billion just nine years after its founding.

Third is a piece of newly published research. In it, Robert Arnott and Lillian Jing Wu analyzed market capitalizations of firms in the US over a 59-year period, concluding that "top dogs," those with the largest market caps in their industries, underperform in a majority of cases the average stock in their respective sectors over the next one-, three-, five-, and 10-year periods. In fact, "top dogs" enjoy that status, on average, for less than 10 years. Their "subsequent (five-year) performance is roughly as impressive as the prior (five-year) overperformance."

Extending their study to Australia, Canada, France, Germany, Italy, Japan, New Zealand, and the U.K., the researchers conclude that "The Top Dog performance shortfall is both larger and more reliable than it is in the United States." This is just the latest of several studies that all point roughly in the same direction.

How then, do we explain the predominant view that we must avoid fostering financial institutions that are too big to fail? Is there a high probability that they will instead become too big to succeed? Of course neither prospect is particularly inviting.

But if a growing body of data supports the notion that bigness is not necessarily good, particularly for customers and investors, should leaders of such large organizations, regardless of industry, be contemplating plans for systematically divesting assets or businesses? Does this suggest an entirely different approach to bigness on the part of regulators, academics, and others? Instead of "too big to fail" should we be worried about "too big to succeed?" What do you think?

To Read More:

Robert D. Arnott and Lillian Jing Wu, "The Winners Curse: Too Big to Succeed," Social Science Research Network, Organizations & Markets: Structures & Processes in Organization eJournal, Vol. 4, No. 54, July 17, 2012, website address: ERN@publish.ssrn.com

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Comments

    • Anonymous

    1) I recall an economics text book from 1977 (approx.) saying International Harvester, Inc's. main concern was becoming too big, thereby attracting Gov.t regulation and anti-trust action. By the time I re-reviewed the text book in the late 1980's International Harvester was bankrupt, split up and sold. 2) I think GM fell into a similar trap in the 1960s through 1990, ending in bankruptcy and government bailout. Therefore, my concern is the simultaneous combination of "Too Big to Fail" and "Too Big to Succeed". This leads to business failure and public expense to support jobs during the transition.

    Companies should focus on creation of "value" and Governments should focus on consumer protection (creation of "good"). Examples of this in my mind are Bell / AT&T and Microsoft.

     
     
     
    • Tom Dolembo
    • Founderr, Newnorth Institute

    Most "toobigs" exist not because of organic growth but consolidations, rollups which were transacted to take advantage of synergies, which often proved elusive. CEO's know this embedded culture war is unwinnable. They build a parallel structure mimicking a hot smaller company. The major bungling, or crimes, depending on the point of view, in US financial companies were often committed by these smaller, isolated, flexible units in foreign markets. Toobig CEO's often allow their highest risk trades in their smallest, darkest units, essentially risking everything through relatively loosely managed young counterculturists.

    Breakdowns, rather than breakups, will probably become the norm. Toobigs are enormously complex, with massive, self defeating strategies at war within, producing a lower return. It is impossible to manage these companies, and the frustrated CEO builds a sideshow, lets it run with the risk, to leverage assets otherwise stuck in the structure.

    We are experiencing the international financial equivalent of Garrison Keillor's "Lake Wobegon Pontoon Boat Races." Expecting everyone in these enormous, unwieldy companies to be above average simply defies logic. Managing around it is often catastrophic.

     
     
     
    • Phil Clark
    • Clark & Associates

    If employees become marginalized (company too big to keep the personal touch) the corporation suffers. It is about people and relationships. Unfortunately, many corporate leaders focus on profits and the Wall Street drivers toward big business and profits. It has become the death knell for many corporations. It would have been the death knell for many more over the past few years if their had not been intervention. Too big to succeed is likely the more relevant viewpoint.

    The questions to ask is, Why does a company have to be large and controlling to succeed? Is there a better model for everones best interest for survival? We talk about small businesses being vital for our workforce. Then when one becomes successful a bigger company buys them out with friendly or hostile takeovers. Doesn't make sense. I guess it is survival of the fitest. We like eating our young?!?!?

    Is there a "right size" for a company? Not sure. I expect that varies. Yet, somewhere we have lacked the ability to know when that point has been reached and have marched blindly over the cliff, usually at a tremendous loss of the employees involved.

     
     
     
    • Usman A. Ghani
    • Chairman, ConfluentC, llc.

    As characteristic of Jim, he has again aptly reframed the question and repositioned points to ponder vis-?-vis research data. We need to define success transparently and view functioning from that perspective. Goals and objectives are thus primary to such considerations. Then, we can more considerately say how big an organization needs to be to accomplish the ends, (without of course excluding emergent opportunities).

    An important aspect of organizational size is whether we are seeing it from an absolute people-count or revenue-dollar count? Or, are we considering this from a relative perspective of industry-players or market-span. Strategy and organization design considerations would be different and drive distinctly from these two standpoints. Research too has to be reported as longitudinal or cross sectional or hybrid for one to derive valid comparisons.

    CEOs who wish to create sound organizations today as well as leave legacies for tomorrow - while considering both these perspectives - would also pay attention to the underlying company culture, delineating it and deterring its dilution. A fundamental underlying dynamic of successful organizations is its maintaining a resilient, sound, strong culture that remakes itself over time and allows for change by stakeholders and their values.

    So, alongside size and success, CEOs should worry more about the underlying culture. Personal meeting with Steve Jobs obsessed passion for an innovative culture at all costs; he did not make a huge organization. Lou Gerstner considered redefining business in a fast-changing landscape and integrating (not balkanizing) the company; he in fact did (re)make a large organization and saved an American icon. And, they both built strong cultures.

    Contemporaneously, at ExxonMobil, Rex Tillerson's team has redefined it as an Energy company (not just oil and gas) has widened its scope growing the size. Lockheed Martin's Robert Stevens has instilled the learning leadership spirit that defines their growth at every space in the company. ADM's Patricia Woertz strives to relentlessly build competitive invulnerability. DuPont's Ellen Kullman insists on learning as the growth and development imperative.

    You might ask, what about the financial sector? I think companies in that sector that are strategizing on service and differentiating on quality are growing, but these are not too many. They are on the leading edge of the normal distribution curve of this sector. And, their value, volume, and size are growing. One thing Jim forgot to mention: service excellence complements and supplements value. But he remembers to teach this to us at HBS!

     
     
     
    • shadreck saili
    • UCT

    From a glance it sounds very correct that companies/institutions can become too big to succeed and that CEOs should worry about that.

    I however have somewhat an opposing view. I feel the notion of "too big to succeed" is a myth. In my view the topic under discussion is a planning/ design issue of an entity and maintenance of such an entity. Any entity is designed to function at different levels/scale. Regardless of the scale, what warranties success is the adherence to effective management of all resources that surround that particular scale of operation. Short off that results in the need to re-plan or re-design or re engineer. The re-planning or re-designing or re-engineering would be in many forms including creating sub entities or revisiting the business growth rate and this is part of management function.

    In my view CEOs should therefore worry about balancing resources to achieve the optimum level of management of whatever size the entity they manage and not focus on the "too big to succeed myth". If the optimum cannot be achieved, then revisit the operations. I would ask which is what "too big to succeed" or "too small to succeed"? These are mere comparative terminologies thus legends.

     
     
     
    • Gerald Nanninga
    • Principal Consultant, Planninga from Nanninga

    Three points to consider when dealing with size:

    1) The size of the project team is more important than the size of the enterprise. As we saw with Nucor, keeping the business units small takes care of a lot of the size issue.

    2) Workers don't have to be employees. In today's networked, outsourced economy, you don't have to have everyone become employees. Between outsourcing, independent contractors and other such methodologies, you can build a large team of people who actually work for quite a few different companies. Apple and Nike don't seem to be suffering much from outsourcing their manufacturing. We are becoming more like movie studios, which bring together a diverse team from diverse companies for a project and then separate after the movie is made.

    There are two advantages to this. First, it allows people to work for small contracting firms where the bonds are strong, rather than a big corporation where bonds are weak. Second, it allows firms to focus on their strengths. It's the non-strengths where size is your worst enemy--hoards of employees in a part of the firm nobody cares about. Send that work to people where that work is important to the employer, like ADP or Sodexo.

    3) The size of the unengaged pool is more important than the size of the total employee pool. Gallup research has shown that engaged employees are far more productive than unengaged employees. If jobs are defined meaningfully and people are treated with respect and are given jobs that make them feel needed & special, then size is much less of a negative factor.

    In conclusion, if you keep teams small, disperse people among multiple employers, and give their jobs meaning, then overall size will cease to be much of an issue.

     
     
     
    • Anonymous

    Success of any organization depends upon the type of market and market structure along with consumer base. Too much Diversification without proper analysis may cause problem but 'Too big to succeed' is not true'. Investment decision should be made more carefully in case of such organization as brand name and image is also associated.Although it is difficult to manage such organizations but that can be done by working upon the organization design and structure.

     
     
     
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited

    It is a fact that over ambitious companies seeking quick growth and entry to the big club succeeded only when their groundwork was flawless. Success and growth depends on a variety of factors of which greed is not one. Total concern for all stakeholders, high ethical values, sound short and long term planning, regularity of performance reviews, concern for environmental and socio-political factors, growth duly matching available resources, etc. are some of the determining factors. Once there is upward growth, the various wings must well-knit operationally. Reputation should never be compromised and all should be careful to ensure this. In India, we have Tata, Reliance, Wipro, Infosys, ONGC, etc. which are too large and still have been growing well. World over, examples can be cited of many such successful groups.

     
     
     
    • Srinivasan
    • Director, HP

    "Too Big to Succeed" or "Too Small to be viable and scalable"... such statements seem to represent that size alone matters. I do not think it's size alone that matters. Here are a few things that make success or failure (in the long run): 1. Conviction and Persevering excellence 2. Having a focus 3. Ability to create a culture of belonging. 4. A system which can share the ups and downs together with the employees.

    However - all of the above are becoming a bigger and bigger challenge for large listed entities - where success of CEO is measured in quarters.

    How many CEOs would have got away with the interesting Steve Jobs statement about "Market Survey for the new iPhones?", when he retorted "How can you do a survey when the customer has no clue of how this is going to impact him/ her?" Are they large @ Apple today - yes... but will it be that way 10 years down the line - well it depends on whether they retain the same culture (I think - in letter and spirit)... It's not easy when you have grown that big many a times...

     
     
     
    • Ravindra Edirisooriya
    • Accountant 08/13/12, Midwestern Small Business

    Professor Heskett has provided three good data points to demonstrate the existence of the problem. Professor Heskett's question "Should CEOs worry about 'Too Big to Succeed?' " lead us to shed light on the inner working of a public (market capitalized) corporation, which points to the answer to his question. Major stakeholders of a public corporation are shareholders, lenders, management (executives), workers (non-managerial employees), suppliers, distributors, sellers, buyers (consumers), and the free society (new technology, markets, public systems, tax base, public goods, environmental responsibility and philanthropy). Management is responsible for setting up and meeting the corporate short/long term objectives. Let's assume the corporation has strategically achieved economies of scale that allows addressing market variances with minimal cost. Also, assume that the corporation is competently managing the organizational innovation process (development, application, launch, growth, maturity and decline) and it is a mature (most competitors have comparative products/services in the making or already in the market) corporation.

    Economic literature tells us that not all economists agree that profit maximization is the main corporate objective (goal). Top competing corporate objectives are maximizing sales and the managements' personal goals for the corporation as long as a satisfactory profit target (forecasted by internal/external market analysts) is reached. Most CEOs (top management) of public corporations are highly incentivized (by the board of directors) to achieve short term corporate objectives sometimes at the expense of long term corporate objectives. The CEO may lead a corporation to short term success while perusing his/her personal goals seeking corporate perks (stock options and etc.) to be won.

    A public corporation is especially vulnerable between maturity and decline (do corporations acknowledge that they are in decline?) in its innovation process. It may acquire new businesses as a substitute for the drying well of internally generated innovations. New business acquisitions may not (be feasible to) be integrated to the main business in the most synergistic way (compared to) a newly launched corporation could do with its products or services. Business diversification could bring in a new business (or businesses) without the necessary in house management skills to create a competitive advantage. The CEO could lead a corporation to short/long term success with business acquisition or diversification.

    American history tells us how our public corporations never truly wished for competition in the market place: the birth of anti-trust laws to prevent corporations from (excessive horizontal integration) monopolizing markets. Vertical integration can reduce upstream raw material/part supply disruptions and increase the availability of downstream distribution channels. However, vertical integration prevents corporations from changing their product lines and production processes in the short run in response to changing market conditions and external environment. The CEO could lead a corporation to short/long term success with horizontal and vertical integration.

    Banks (financial institutions) especially have a short time horizon by the nature of their business (mostly short term lending and debt obligations) and they are subject to a high failure rate (S&L crisis) if mismanaged. The CEO (of a large financial institution) will strive to be "too big to fail" as an insurance (paid for by the free society) against the risk of failure by leveraging their contribution to the free society as an essential public system.

    CEOs' above actions could lead a corporation to be 'Too Big to Succeed". When making these decisions, should the CEOs worry about "Too Big to Succeed"? It depends on the CEOs ethical/moral responsibility (agency problem), leadership skills, risk profile, business/market insights and being at the right place at the right time (some good luck of the draw)!

    Looking at London Olympiad (XXX), the face of (world) human gene pool (biomass) seems to be thriving! However, July 2012 is said to be the hottest month (in recorded human history) and widespread (crop withering) drought at least in the USA. Curiosity successfully landed on Mars (after 7 minutes of terror and 71 points of possible failure) looking for past life, building blocks of life, elements and exploration: one small step in the right direction. "We have a new particle consistent with Higgs boson ..." (DG of CERN): Higgs field adds mass to everything and it is a positive step towards proving the string "theory" (a unifying "theory" of physics) which could lead humans to the next wave of technological inventions. A celebrated British Cosmologist said Higgs boson will never be found experimentally! Also, he famously said that the belief of heaven (or afterlife) is a "fairy story". Physicists have proved the existence of paired electr ons (entanglement) which combined with their idea of a multi-verse (multiple universes) does open the door for an earthly heaven (or heavenly earth) in another universe (pointing upward may not mean much). Also, physicists say the nature of universe is shaped by 35 cosmological constants, making all types of universes possible. However, the latest question in science (theoretical physics) is "Why does GOTT exist?" We humans have come a long way from the days that we thought the earth was the center of the universe. However, nature is betting against us humans' infinite survival (what is an acceptable MTBF for us humans unless GOTT has other plans?) as it had done with all other species that traversed this earth before us. Albert Einstein gave us humans the idea that problems cannot be solved by the same thinking that created the problems. So, what (how?) should change? A colossal decision for us Americans and the world: American presidential election is up in the h orizon. I was watching and listening (on TV) to the closing ceremony of London Olympiad (XXX) and hope you did too: "... imagine all the people ... sharing all the world ..." John Lennon.

     
     
     
    • Bruce R. Duncil
    • CEO, Alderon

    In these questions we may very well be looking at both sides of the same coin.

    "Too big to fail" has become a euphemism for "we can't afford to let this thing go bankrupt".

    It typically has NOT meant that a company can reach some size where failure is no longer possible. I submit that failure - in this case failure of a company to achieve its business goals and therefore no longer remain in business - is always possible.

    At least that is true in a free-market economy. The euphemism, however, becomes a real operational concern in an economy - or a business - that is not operating on free market principles. Government intervention always begets further intervention.

    It is a matter of course that we must periodically assess ways in which our company's size - and plans for expanding or contracting - can make achievement of success more or less challenging.

    Often the first step is defining what are success and failure. These are certainly dynamic and highly dependent upon the strategy. Scenario planning and risk management are key elements in determining how we get from here to there.

    And "too big to succeed"? Let's not make this an excuse - and a euphemism for a different form of government intervention at taxpayer expense!

     
     
     
    • David Physick
    • Consultant, Glowinkowski International

    We do seem in thrall to global conglomerations that dominate particular sectors, e.g Google, Disney, Exxon etc. The "too big to fail" question has gathered ferocity through the recent turbulence in the financial services markets. I am old enough in the UK to remember Midland Bank, once biggest in the world until it tried to eat and digest Crocker Bank and had to be saved by HSBC rather than a government or, more accurately, the taxpayer on Main Street, USA or in the UK, "the man on the Clapham omnibus". We have allowed this leviathans to develop; we give them our custom, this gives investors the confidence to invest. If we don't want ponds (markets) dominated by big fish, we have to take our business elsewhere and allow creative destruction to prevail. Where do I shop, Asda (part of Wal-Mart)? Why? Convenience, price, my shop is well managed and staffed. Where do I buy my books and CDs (yes, I'm old fash ioned in that sense of liking my reading and music to be tangible)? Amazon. Perhaps the most sinister and pernicious issue within the "too big to fail" debate is the increasingly incestuous link between politics and business. Who governs who?

     
     
     
    • Dr. Phil Harris
    • Founder and Principal, AGG Academy of Entrepreneurship

    "Too big to succeed" is not new. Schumpeter (1975) called it "creative destruction." Monopolies can achieve cost advantages, but lose their connection with the consumer and fail to meet the consumer's needs. Monopolies fail to create solutions consumers want. Louis Brandeis, one of America's most notable chief justices, also recognized the problem when companies get too big they become inefficient and rest on their laurels instead of competing for business (Savino, 2009). Why is everyone just starting to wake up now?

    Competition is what makes capitalism work because it forces companies to become more efficient. Remember Adam Smith's (1904) "invisible hand?"

    References

    Savino, D. (2009). Louis D. Brandeis and his role promoting scientific management as a progressive movement. Journal of Management History, 15(1), 38-49. doi: 10.1108/17511340910921772

    Schumpeter, J. A. (Ed.). (1975). Creative destruction from capitalism, socialism and democracy. New York: Harper.

    Smith, A. (1904). The wealth of nations (5th ed.). London: UK: Methuen & Co., Ltd.

     
     
     
    • Yadeed Lobo

    It depends on how many degrees of separation exist between an employee and the CEO.

    One potent question which every CEO could use as a barometer might be taken from either Bill George or AG Lafley or JJ Irani at Tata or any other authentic leader.Can he/she make the time to take every person through a personal induction of the company's values on the first day of joining or perhaps join them for a morning tea? If the answer is No, then it means that they are getting to big to succeed. In the post industrial internet world with digital natives real as compared to virtual face time still counts.

    People anywhere appreciate the small things, even personal acknowledgement of an email. Something akin to Popkin's low information signalling theory, we are all human and being genuine can go far more than any quantum of performance bonus.

    From a financial economics perspective, statistical analyses can change depending on the analysis window. If one desires outsized returns then getting in pre-IPO placements would be useful as research has shown that IPO's tend to be underpriced and the first day returns are exhorbitant( except in the case of Facebook).

    I think it boils down to the passion you see in the CEO. If he is willing to put in the long hours and engage in MBWA( Managing by Wandering Around), then market capitalization should not matter( as in the case of P&G )he/she will succeed. Warren Buffett often refers to this passion when he mentions the investment in BSNF railways or Goldman Sachs.

    So perhaps regulators should include a new performance measure when they say too big to fail - whether the CEO is passionate ( about the business) or just plain old greedy!Once we manage to figure out a baseline for passion then perhaps we might see less large enterprises failing.

     
     
     
    • Rebecca Mott
    • Project Manager

    Rather than the size of the organization, let's talk about the level of accountability within the organization. As the organization grows, holding people accountable becomes an increasingly difficult task. Underperforming mid-level managers can "hide" within the organization and senior managers become tolerant of "average" performance.

    I think the problem lies in where the energy of the executive management team is. Larger companies tend to have an executive management team that is more outwardly focused. They fail to spend sufficient time challenging leaders, from the top down, and actively driving for results. The smaller the corporation, the easier it is for executive management to "touch" each organization.

    In summary, I believe the dynamics are much deeper than size. Leadership style and the energy of the executive management team also play key roles.

     
     
     
    • Vatsal Vaishnav

    Where is the evidence that bigger is better? In an era where organisations are undergoing technological and financial revolutions, we need to be agile, flexible, innovative and fleet of foot, not a monolithic "Good to Great".

    When an organisation achieves size and scale, it must infuse systems or culture where people can learn and perform best with a degree of autonomy and moral practices. Also an environment of competition within an organisational structure can bring ideas, innovation and value-creation. If such is philosophy doesn't percolate, then some day the bubble will blast, and "too big to succeed" will be witnessed.

    On path to achieve bigger & bigger, many organisations feel that all businesses are pretty much the same and are driven with mere set of same management rules. They also believe that - if they can read financial statements then they can manage anything. However, the fear of change - is also one of the factors among those guys at top - they look any change as threatening, and having the "status quo" is the only safe harbour. They don't like to allow "bashing bureaucracy" in decision making or evaluating opportunities through "horizontal management" systems because they are ground-breaking.

     
     
     
    • Dr. S. M. Sapatnekar
    • Medical Director, Karmic Lifesciences

    Too big an organization has the streghth, institutional memory, mobilizable resources and reserves. So, if there is a major threat to existance of an institution, there is better sustainability. But then, big organizations are least efficient in a dynamic macroenvironment. Smaller institutons remain flexible, agile and efficient. The advantages of such an organization increase after growth. Yet at some stage, Law of diminishing returns takes over. Time cost of communications, hierarchies, interpersonal relationships, ritualism in the name of Standard operationg procedures - make an istitution less flexible and less adaptible. Can we combine the advantages of small and large organizations? In a Corporate World, yes. Instead of a single huge organization, multiple companies controlled by a holding company have better sustainability. The holding company can buy, sell or merge one or more companies and remain alive in difficult times a nd earn more during better times. There is no insecurity of collapse, even if there is major push back by economy or fraud. For discharge of Sovereign functions, the Institution called Government in any country is a necessary evil, despite its known limitations of beaurocracy, corruption, nepotism brought in essentially due to unmanageable size. With various checks and balances, all Governments try to overcome this drawback. Borrowing analogies from Life Sciences we know that Dinosaurs perished - they had costly metabolism. In spite of wide spread pollution, the cocroches survive - eagles are endangered. Every multicellular organism is highly organized; cells, tissues, organs and systems. Nature has very smartly made the Kidneys of millions of neurons - instead of one single nephron. Thus a central body exercising control over multiple diverse structural units is a better sustainable model that can deliver its mandate retaining its core values and choosing to inflate or defl ate; converge or diverge; acquire or sell; revert back or move forward to survive and progress over the decades.

     
     
     
    • Margie Parikh
    • Lecturer, BK School of Business Management

    While size does count as an important contingency, it is acknowledged that in turbulent times, we need more than size to succeed in the short run and survive in the long run. Simon March, in his seminal article described the traps of success. Those have nothing to do with size. The mantra now is, a firm has to exploit its existing capabilities while developing future ones, it should be efficient while remaining flexible, it must serve existing customers while developing products and services for emerging ones. Those who fail at this will fail, small or large.

     
     
     
    • danish akhtar
    • student, indraprasth institute of manadement

    exactly. look always for big but under control that you can keep safely.

     
     
     
    • brenda fish

    The key indicator of success or failure is not size but rather the presence or absence of love. Love can be defined as passion, respect, ethics or all the above. When a company is too big and the employees are too distant from the company's mission, and are just working for a paycheck, and have no love, the company or government or church or institution will fail.