Why do big companies suck?

Many small companies aren’t that good and medium ones too.  The real question then is why, if at all, do big companies suck more than smaller ones. I’m not sure they do, certainly not when I put my selfish consumer hat on. I own a Honda Civic, an Apple iPod and a Black & Decker cordless drill, three good products made by three very large corporations. These products are relatively cheap, well made, and part of what I’m buying is faith the company will be around in five years if I need repairs or support for these things. A smaller company probably couldn’t provide low cost, high quality, products and promise they’d be around in the future.

And when I fly I’m glad my airplane is made by Boeing or Airbus, and not some local startup company run by people working from their garage. But there are some things that tend to happen when companies get big that are problematic for independent, creative people – and that’s what I’ll explore in the list below. Why big companies suck:

  1. The soul has left the building – All big companies start as small companies. But by the time a company has 500, 1000 or 50,000 employees, many of the people who made the small company successful have left and their spirit went with them. You can have a financially successful company that is mostly banking on the ideas and successes of people who left years ago, but whose middle-managers take credit for what was mostly inherited the day they were hired. When things go bad, none of the ‘leadership’ has any of the tools required to fix, rebuild, or recreate the pattern of success that started it all.
  2. Obsessive Optimization – When you have 5,000 employees, or $500 million in revenue, fractions become significant. A .5%  increase in revenue is not a small thing, it’s a big thing. It can be bigger than many companies’ entire revenue. And as companies age the culture looks to optimize and refine, eventually to a point where the good things that led to all the success have been whittled away. Managers at big companies often have more incentives to minimize costs, than to find new business or develop new ideas since minimize costs or optimizing an existing process are cheaper wins that show results in the short term. In an optimization centric culture, the myopic love of short term wins can make long term improvements which often require short term sacrifices hard to achieve.
  3. Addicted to bureaucracy –  I travel often and visit with companies of many sizes. It’s fascinating to visit places where there are 20 people doing work I know is done by 3 or 4 at one of their competitors, often with better results. It’s strange to see smart, senior people who have forgotten it’s possible in this universe to make things happen without talking to a committee, filling out forms, or doing extensive market research. The bigger a company gets the more dependencies there are between decisions, which makes it natural for committees and approvals to grow in number.  But it’s easier to add processes than to remove them. Over time bigger companies accumulate process, it gets inherited, and no one can even imagine a simpler more autonomous workforce. Big companies should have dedicated process simplifiers, senior people who just run around, point our areas that can be leaner or simpler, or where line level employees should be more autonomous, to keep this tendency in check. Or once a year every manager should be forced to work on a small project (like a website), where 3 to 5 people are responsible for everything. It’d refresh their sense of how little process is actually necessary.
  4. They believe their own bullshit – Any large group of people functions because of shared beliefs, but their are both positive and negative kinds of belief. The negative kinds are the ones that involve lies, distortions of truth, and a lack of perspective.  Company all-hands meetings can feel like political rallies, where  a reality distortion field prevents any valid questions of the company from being mentioned, and all bad news or mistakes are whitewashed away. When you’re banned from using competitors products, even when they’re better, or not allowed to critique and criticize decisions even when they’re dumb and bad, it gets harder and harder for good ideas to rise because real thinking is prevented. When the party line is BS, the wise start to keep their mouth shut, and look for other jobs.
  5. The Peter Principle – When you have several layers of management it’s entirely possible the manager isn’t contributing much, and the line level employees are mostly self-sustaining. If a manager inherits a successful team, a team self motivated to improve, and it does under his management, he may very well be promoted for simply being around at the right time.  There are many bad reasons people get promoted, and it’s more likely to happen in bigger companies, where there is more ambiguity about who is contributing what.
  6. It’s hard to fire people – Big companies get sued more often because they have more money. And on the day a small company gets it’s first law suit for wrongful termination, or discrimination, everyone runs the numbers and concludes it’s cheaper, on paper, to prolong the process for firing people and increase the amount of paperwork about employees managers must create, than it is to lose lawsuits.  Performance evaluations, mid-year reviews, and all of that are heavily (but of course not entirely) motivated by lawsuit prevention and defense.
  7. Corporations can be psychopaths – In 1886 the U.S. Surpreme court ruled that corporations were entitled to the same protections as people. This was a big deal. It made it possible for executives to make decisions on behalf of a corporation that were illegal, or ethically questionable, without being directly liable for them, and gave constitutional rights to entities that were not people.  Combined with the motive for profit, there are lines big corporations are lead to cross that no indivudal ever would, since the entity of the corporation is held responsible, and not necessarily the individual leaders.
  8. Status quo / Follower mentality – The bigger a company gets, the more it’s main attractive power for new employees is job security, rather than opportunity to grow, learn or take risks. The Innovator’s dilemma is real, and leaders who have big sucess are often the last to recognize when it’s time to move on. For anyone interested in progress, risk taking, change or growth potential, a large company is incredibly frustrating, as the dominant psychology is one of play it safe and political correctness. A running joke at Microsoft used to be that the best way to get a product idea to ship at Microsoft was to have a competitor do it first.

The list can go on I’m sure (but there could also be an equivalent list of why big companies are great to work for). What did I miss on this list? Leave a comment.

81 Responses to “Why do big companies suck?”

  1. John C, Spring TX

    Thank you for this; it is refreshingly honest and insightful. I was with a large oil & gas company in Houston and all of these are painfully present. As the economy lifts itself up by it’s own bootstraps I think people will start to slowly migrate to smaller mid-size companies and reap the benefits. I see the creativity and inspiration available at a small or midsize company benefits that cannot be quantified though exist on a very personal and individual basis.

  2. Mike

    Nice article!
    Also, corporations monopolize industries, disrupt local economies, and stifle innovation; as their widespread presence and products influence the masses. And they fuck up the environment!

  3. Louise

    My comment relates to “Why Big Companies Suck”, and more close to home how, I spent 20 years coming up through the ranks a savy smart employee (or so I thought), remained of the opinion that large organisations and their leaders were basically honest. A female in a male world (yes Banking)I never questioned the ethics of “big business” I told the truth I didn’t play the politics “I suffered”. The GFC happened, it will happen again, because the large gobble the small, In the eyes of all but the small, big is better. The regulators concentrate all efforts on the small, they can manage them. The large have political sway and are just “too hard”. Small entities can grow faster, comply, have some control over ethical behaviour, they are nimble, employees know each other. Takeover, of course big is better. 5 employees doing what a 100 do at the large organisation, are cast aside,end to end knowlege of he process combined with economies of scale are ignored, better stick with the spaghetti jungle already there. Accountants by the 100, a couple of engineers needeed but nobody thinks. I was from a “small company” perhaps 10,000 people even there I reached the glass ceiling not being female, but the inability to lie was my downfall. It was not until a large takeover, the process, the due diligence or lack thereof, and the self servring motives of those with most to lose and most to gain that I really learned. Ethics is a word best scrapped day 1 at a large Bank. Lawsuits with genuine underlying rationale and should have provided final recourse are met with the largest lawfirms. Who at the start of proceedings open with the comment “we will break you”. The sad thing is irrespective of “breaking individual”, they broke the smaller entity and all that was good about it, a culture despite some players at the top, that was decent , ethical and a great place too work.

  4. Bartholomew

    Imagine you hold a lemon in your hand and you squeeze it. What’s left?
    This is exactly what happens in a big company…a human wreck is what remains.

    The higher you are in the hierarchy the more brown nosing ou can see…a rat race is ‘detectable’ too…all to generate profits for you big company.

    • SortingHat

      Thanks for describing EA Games!

  5. Jerome DePape

    Thank you for putting it all so well, the feelings I tend to have regarding this subject. You touch on may valid points and manage to say them without injecting the frustrations and anger I’ve felt over the years from my experiences of corporate life.

  6. SortingHat

    This question should be titled. “Why do Big Corporations that are protected by Big Government suck?*



  1. […] Why Do Big Companies Suck? Scott Berkun may well be the next Peter Drucker. His books on innovation, project management and his web writings are the motivating force for a significant wedge of next-gen leaders. The bad press given to Big Cos is not one dimensional and unintelligent. With thought leaders like Berkun fueling the crowd, the bigs are painted as virtual penal colonies where creativity is shunned. It’s bad for your employment brand. […]

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