Because of their size...

Surprised by the recent spate of colossal blunders by so many large companies? Well you shouldn’t be. The evidence has been mounting for some time now. Like the dinosaurs, many large corporations are moving along an evolutionary dead end path. Today the promises being made that economies of size make ever larger businesses ever more cost efficient, aren’t being fulfilled. Quite the reverse. Increasingly corporate mergers are crashing. Forbes Magazine researched all the corporate mergers in the 1990’s decade and reported that 83% of them lost money for their shareholders.

Why is this so? Think about how modern technologies are continuously eliminating the advantages (economies of size) that large businesses once held; i.e. think personal computers, fax, the internet and the world wide web, smart phones, spread sheets, self-publishing, robotics, etc. And this trend is accelerating. At the same time the frequently overlooked “diseconomies” of size are becoming ever more obvious. Large numbers of employees require a command and control management structure. This inevitably creates problems of employee motivation producing inefficiencies, often large in scale. Adding to such problems are ponderous decision-making, distracting political infighting up the chain of command, enormously wasteful spending practices and inevitable breakdowns in the lines of communication. The “make money/grow bigger” paradigm that drives large businesses, focuses attention on short-term profits to the detriment of long-term success. This creates the climate for poor decision-making that leads to Chapter 11 bankruptcies (think automobile and airline industries), failed mergers (think AOL-Time Warner or Daimler-Chrysler), financial collapse (think Lehman Brothers or AIG) and the “cutting corners” problem (think BP oil fiasco). These are now fixtures in the daily news – bouts of chapter 11 bankruptcies, draconian layoffs, financial bailouts, etc. Also significant is that old adage that ”power corrupts” as it applies to executives in large organizations (think Enron and WorldCom executives). These factors have led large companies to seriously disrupt our economy with devastating social consequences. The large business model is fast losing its validity as a desirable engine for our economy. It is time that it be challenged. Become part of that challenge.