Does Size Matter?...By Director Wayne Hall

May 3, 2010

Now that I’ve got your attention, I think that it’s fair to say that most people involved with any type of business feel that growth is good - and a logical extension of this belief seems to be “the bigger the business, the better”.

Certainly, when you get to the end of any period - a month, a quarter…or the year - it is a nice (and, I daresay, comforting) feeling to have increased sales and operational activity. No more is this sense of achievement felt than in the business music industry, with it’s mix of subscription and recurring forms of billing, collections (in the case of many juke box operators) and services, because the increase usually represents the successful accumulation of more clients and “sites”.

(From a personal perspective, for a great part of my working life I accepted, without too much thought, that growth accompanied an increase in size of a business (and visa versa)…so if physical things like staff numbers and space requirements were increasing, it followed that things must be getting better…)

But is it necessary that growth and size should run hand in hand…and does it follow that bigger naturally means better?

Like just about every other market on the planet, the business-music market is a dynamic one. Change has enveloped the way music is created, licensed, distributed and managed, resulting in a host of new ways of doing business. Many artists now manage themselves and their music “rights”…privately owned licensing “houses” (especially in the U.S.A. & Europe), broker publishing and recording deals...niche manufacturing companies build juke boxes and music systems…and software developers design online and on-premise music management platforms. All relatively new to the scene, and all carving out their respective market niches alongside the “established” operators.

As one would expect in a dynamic market, along with the survivors we’ve also seen many of these new businesses come and go - just as we’ve seen some of the more established businesses contract, and in some cases, wither and die.

So essentially we have a market offering up a great range of business examples for “study” - from the single-person “start-ups” trying to make their way, to the more established players trying to work out how to maintain growth.

I take the view that you can learn a hell of a lot by studying other people’s businesses…and it strikes me - after speaking with owners, managers, staff and clients of the various types of businesses within our industry during the past decade - that not only do many of us see growth and size as positive, interchangeable features, we also give little thought to their impact.  

So for the sake of provoking some thought and hopefully controversy on the topic, here are just some of my observations:

• Different personality types will work better in different sized business. For example, as business size changes from small and intimate to medium and “specialised”, some good performing people struggle to adapt and, consequently, their performance deteriorates. Likewise, other personality types prosper.
• Often, “change” people - staff and management who prosper in dynamic growth environments - struggle once the business settles down into it’s operational phase.
• All sorts of personal, operational, administrative and client-support dynamics change as business size hits around 6, 12, 18, 24 and 30 plus staff numbers. The means of communicating, organising, accounting for expenditure, managing staff and client expectations (and much more) have differing demands as these business sizes are encountered. Many businesses get “stuck” at these various sizes, despite the fact that there seems to be opportunity for growth. This can be incredibly frustrating for all involved and can play out destructively.
• As per the preceding point, the number “6” seems to be the magic number. There should be one “organizer” at least for every six people.
• As a business moves from small to medium in size, evolving a departmentalised approach still seems the best way to deliver all round accountability in terms of efficiency, client support and staff development. One of the pitfalls of departments, though, can be the “us versus them” syndrome, along with a build-up of bureaucracy between departments.
• Individuals in growing business often lament a loss of closeness and team work. The challenge is to maintain this.
• Managers in growing business are often challenged with “letting go” and delegating, so that they can spend time organising and developing staff, and not “doing”. Many cannot deliver this condition.
• Longer serving technically-oriented people often gravitate or are thrown into management positions to which they are not suited.
• Business which become “established” and “stable” - the very condition they have been striving to achieve - run the risk of becoming stale in a dynamic market. The challenge is to maintain a focus which delivers the stable operations, while at the same time generate ideas for growth.
• Following on from the previous point, owners and managers will often be frustrated that staff - whose strengths and work habits centre on delivering focused, stable operations - do not come up with new ideas…or when they do, they cannot implement them. Understandably, this can be confusing for staff. The best example I have seen in overcoming this conundrum is to have people (full or part time) whose focus is to identify and test new ideas for integration into the business.
• While small to medium-sized business culture is usually a reflection of the owner/manager, the operation will form its own culture and process-habits over time. Consequently, at those times when the long term owner/manager looks to take their business “in another direction”, confusion and conflict can arise, as the business culture and expertise is not geared for it.
• Smaller usually means more agile…
• At some point, we all want to take a holiday…
• You can’t train attitude. Many businesses chase growth in areas where they lack aptitude, because it’s “there for the taking”. Stand out examples include technically-oriented operations chasing relationship-based business…and visa versa. Other more strategic business successfully access new markets because their expertise and culture match the service requirements.
• Many large businesses (100+ staff) with dynamic reputations, when confronted with a need for a new product or different market, literally add on a new business area with it’s own identity (as opposed to extending their current operations) in order to capture the excitement and ideas of the start up to settled phase.

So what can we make of all this?

Well, it would take a lot more research and thought to work that out. The little I think I have learned is that understanding the phase a business is going though is critical to understanding how best to manage it.
Also, different owners, managers and staff don’t just suit different types of business…but different phases of business (which is one reason why people do not always transition smoothly from one business to another within the same industry).
This is obviously of particular importance to an owner/manager…but  it is up to everyone, at all levels of a business, to at least determine the type of business they are part of - or dealing with (client, partner, supplier) - along with the “phase” it is going through, in order to determine their own personal response. My discussions with others (and I’m a nosy bugger) convince me that I’m not the only one over the years to have been confused when dealing with a business environment (sometimes my own) that - while on the surface seemed fine -  was experiencing growth “issues” which in turn created an environment at “odds” with my expectations.

But my overall impression is that bigger is not always better…in fact it is often just more complicated and stressful.

And the perfect business size? That will depend on lots of factors, not least our positions, goals and expectations. Personally, I enjoy a business that grows its revenues and client numbers while maintaining its compactness…its closeness - and from which one can take a break.

But my opinion shouldn’t matter, because we’re left with figuring it out for ourselves. To borrow a line from Monty Python’s Life of Brian…
“We’re all individuals…”


Wayne Hall 
Director

Back to Top

 For more SBA Business News Articles, click here.