By Kate Pierson
For some, the prospect of expanding their business is not a possibility or even on the objectivity radar to begin with. For other companies, growth is a natural or intentional development. Some believe growth is the formula for success — but is it really that simple? And is it fact or fiction that bigger is better when it comes to business?
Yes and no.
There are many variables to consider when evaluating the relationship between business size and success. It is not as black and white as saying yes or no — both answers are fair conclusions. Because every organisation has unique characteristics, priorities and structures in place which influence their outlook; how they define and measure these terms will vary.
But, for the purposes of this discussion, we are asking; if a company has more staff, resources, expenditure and a larger operation in general, does it make this business better than those who have less of these things?
In this country defined by its entrepreneurial attitude and the small enterprises embodying this spirit, it’s a hot topic. And like the nature of the question itself, the theories and opinions offered on the matter are open for interpretation.
Looking at the bigger picture
Growth can be circumstantial or intentional. A company’s size, revenue, philosophies and objectives, as well as financial conditions beyond its control, will impact its ability to grow.
An organisation supporting start up companies in their mission to grow, is Incubators New Zealand. Chairman Jonathan Kirkpatrick is focused on the bigger economical picture when looking at the benefits of larger enterprises. He believes, when it comes to answering the question ‘are bigger businesses better?’, it is pertinent to start by asking ‘better for whom?’
Kirkpatrick says if we are looking at the impact of larger businesses on the economy, then yes, bigger business and business growth will make for a better economy. “Small is fine and it’s not a negative thing to be small, but when these smaller businesses are grown, they can contribute significantly to our economy.” He says the benefits of growing a company are not only economical, but are associated with reputation, assisting other business, appealing to investors and putting New Zealand on the map.
Businesses looking to maximise their potential often aspire to grow for the betterment of their organisation. They see growth as an achievement or strategy to keep pace with an evolving consumer culture spoilt for choice.
In a material world, consumers demand option; some prefer nostalgic shopping rituals, remaining loyal to local minimarts.
Others however, feel liberated by the countless product alternatives available in sprawling supermarkets and other chain stores gaining precedence in the market place.
But figures from Statistics New Zealand say “fear not” to smaller entities, as their size is definitely a trend in New Zealand. As of 2004, just over 96 percent of all businesses had 19 or fewer employees and almost 87 percent had five or fewer.
These figures have prompted further study into why businesses are staying small and University of Waikato, Professor Ed Vos, says it’s about companies putting their happiness first.
Small and happy
In many cases, organic growth is part of a company’s natural development and is a prequisite for its success. Even growth harvested by borrowing money from a lending institution can produce positive results for a company looking to expand. On the other hand, being a big business is not the be all and end all of every company’s existence.
There is an underlying modern economic theory subscribing to the idea that we are programmed with “a default setting of wanting more and that greed is good,” says Professor Vos.
But he is dispelling this theory in favour of the science of happiness.
Having been a manager, owner and analyst of small businesses for many years, Vos is exploring the benefits of companies remaining small.
His research has revealed that small companies are more than happy to be in the ‘small’ category and this, he says, aligns with his contentment hypothesis which proposes happiness and contentment is what most small enterprises are looking for.
Vos says for many businesses it is an intentional decision to stay small and when given a choice of achieving wealth or happiness, 90 percent of the small business culture will choose happiness. He believes today’s small businesses are “striving for more stability and are working in harmony with the structure of reality.
“They gain happiness and utility out of relationships but this does not mean they don’t want to be financially successful or suffer a lack of money.”
Vos says some small businesses will look to grow but want it to be organic or self-funded and he believes there is an important lesson to be learned from such enterprises. “Small businesses are about sustainability. They also understand something important — that more does not mean better.”
When taking into consideration the wants and needs of our businesses, people and economy, it would be a generalisation to say that bigger is better when it comes to businesses, as there is no definitive answer.
For some, being bigger or experiencing growth will be better for their operation and our economy. For others with a differing modus operandi, their intepretation of what makes their business better will not correspond to being bigger, as they strive for happiness, contentment and stability.
Truth is, there are a myriad of options to contemplate and problems to solve as a business owner and the size of your business will not grant you immunity from these trials and tribulations.
Ultimately, the unique operational blueprint that each company embodies will determine if bigger is better for them and like anything in life, what’s better for one will not necessarily be better for another.