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Wednesday, March 10, 2010

Why the rush to get big?

I really have to wonder. What was going on in the Board of Directors when Microsoft decided to become a 60,000 person company? Were they thinking, "We are doing so well now at 30,000 people. If we were bigger, we would be even better!" Because from where I'm sitting, the bigger companies get, past a certain point (that point can be very different for different companies --- Google when it was at 1500 people was more agile than many 200 person companies), the more they suck. Now, if you take a survey of all the managers in a given company, very few of them would say, "I'm over-staffed. Take some of my folks away, please." That's because generally, the more people a manager manages, the better his chances of promotion, since he's seen as having more responsibility. So no one ever says, "I've got enough people."

This might make sense in the industrial setting, where more people means more widgets you can build. But we build software. More people usually makes a late project later. More people adds to confusion, and leads to more communications overhead. Even if you add more people and had them work on different projects, unless they're all in completely different spaces to the point where they might as well be different companies (in which case, maybe they should be!), you still have the overhead of coordinating strategy and making sure that the products fit together. So why the hurry to get big? What goes on in the head of the executives and board members' heads that lead them to think that you can double or triple the growth in headcount without dire consequences down the road? Is it always just foolish optimism? Or is it that when you're at that 30,000' level running the business, all you see are opportunities everywhere that you could get to, if only you had another 500 people here and 500 people there?

Or maybe, just maybe, there's the thought that you could lock up all the smart talent in one company and then all your competitors would suffer?

I don't know. All I can say is, the thrill of fast growth is fun, but you really pay for the consequences a few years down the road, and as far as I can tell, it just isn't worth it. Far better to grow at a pace where new people can be assimilated thoroughly, and new people always have enough old-timers around to show them what's going on. I think the ideal growth rate is somewhere between 20-50% a year, not doubling every year that many fast-growth advocates are so fond of.


Thaths said...

Perhaps the urge to grow comes to the execs of publicly traded companies because of quarterly results pressure. They feel that if they opened the only valve they controlled - the money spent - widely, then perhaps growth in revenues will follow.

Piaw Na said...

In traditional industries like retailing, that does happen. If you open up additional retail stores, you do increase growth, revenue and profit (under the old model --- Amazon's in the middle of demolishing it). I don't think this works in the creative industries. IDEO/Pixar couldn't possibly grow this way, and I guess the problem is that many large company heads think that they're "The Gap" when they're really closer to IDEO/Pixar.