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.

82 Responses to “Why do big companies suck?”

  1. Drew @ Cook Like Your Grandmother

    Nit about the USSC ruling: Most of the Wikipedia article focuses on the fact that the court in fact intentionally avoided the question of corporate personhood. This “obiter dictum” statement has been relied on ever since as the basis of legal treatment of corporations. Without it, the corporate psychopath couldn’t exist.

    Reply
  2. SG

    I think that labor specialization leads to its own brand of suckiness.

    For example, at startups, the IT infrastructure tends to be managed by the same people building the product, and request fulfillment is generally an order of magnitude faster than in the large IT departments in which I’ve worked.

    Given that the quality of the deployed infrastructure was actually higher in the startups, I have to think that some aspect of separating people into specialized groups leads to suckiness. Maybe it’s because there are more places to “hide” poor talent in a large, multi-group organization, or maybe it’s just a matter of motivation, I don’t know.

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  3. Mike Nitabach

    Big companies should have dedicated process simplifers, 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.

    This is a great idea! Universities could definitely benefit from this, too!!

    Reply
  4. Glen B Alleman

    This of course is HIGHLY domain dependent. From my office window I can see several of our clients:

    CH2M Hill
    Lockheed Martin Space Systems Company
    Northrup Grumman
    Ball Aerospace and Technology

    None of these multi billion firms have any of the attributes you list.

    When the firm produces an exciting, state of the art product. One that chances the course of the world. One that causes grown men to cry when it fails and cry even more when it succeeds – locate the video from the JPL control room when the Mars lander reported back that it had arrived and was working as defined.

    You need to drop the cynic view and come visit those of us who do “cry” at the launch of our “baby” on its way to orbit or Mars.

    Glen B. Alleman
    VP, Program Planning and Controls
    Aerospace and Defense
    Denver Colorado

    Reply
  5. Alan Lunk

    I do agree with the list here. It is ironic to see that companies become big because they were once creative but that within their success lies a poison that kills the visionary spirit.

    Reply
  6. Branimir ?orluka

    Hi Scott,

    Great article!

    Regarding Addicted to bureaucracy, actually a lot of big companies are using methodologies to improve their processes.

    What you call “process simplifers” is actually called process owner in the BPM methodology.They are trying to achieve a process oriented organization in contrary to current functional organizations.

    Greetings

    Reply
  7. Helmut Kazmaier

    Thx for the great post.
    With all the layers of management the decision makers get more and more detached from real customers. They lose focus on what it means to be a customer of their company. An inside-out perspective predominates and leads to many of the symptoms you describe in your post.
    What’s your opinion on getting big companies to shift to a outside-in perspective and put themselves in their customers shoes in order to focus on what’s really important?
    Would like to hear more on that.

    Reply
  8. Dwayne Phillips

    Don’t forget that government agencies – all of them really big – suffer the same maladies. Plus, they have people who act like morons as senior executives. Proof, if they were really bright they would be making 10x the money as executives in private industry.

    Reply
  9. KoW

    Working myself in a big company (hey, it has got its benefits! ;)) I do see one pattern again and again: the higher people are in the hierarchy, the shorter their TTL is, therefore they better make the most out it in short time. Nobody has got a real interest in the situation of the company in five years from now (either you have been promoted or kicked), so everything is streamlined to look good for the next bonus round …

    Reply
  10. JustTheGraphicsGuy

    Based on my experience in big pharma it seems to me that personal responsibility for decision-making is avoided like the plague. Low level people are not empowered to make decisions while middle and high level people are too busy trying to fly under the radar, afraid to make a mistake that will cost them later in terms of future promotions, bonus etc. As a result, they spend much time getting “buy-in” from as many other people as they can find who, like them, are afraid to take a position that could expose them to the potential for being held responsible for the ultimate decision should it not succeed as well as expected. Result: projects either go into limbo or die on the vine.

    Reply
  11. Michael Bolton

    I have lived through the experience of a small company changing into a (bad) bigger one. That experience included each one of the items on Scott’s list.

    I know people at one of the companies named in the comment above by Glen Alleman, and those people would disagree with his claim that “None of these multi billion firms have any of the attributes you list.” Note that Scott referred explicitly to bad big companies. Note also that VPs tend to have a perspective that’s different from the line workers. It’s rare to hear an executive saying “Man, the paperwork we have to deal with around here is all total B.S.”, because either they’re not subject to the paperwork, or there’s an admin to handle it for them. It’s equally rare, in my experience, to hear a VP or a
    CxO say, “We should cut down on the bureaucracy” or “We should hire an admin for that group so the people in it can work more efficiently (as I do).”

    —Michael B.

    Reply
  12. Christa Avampato

    Hi Scott,
    I think this list applies to big and small companies alike. Any company that has lost the principle that their people truly are their very best asset will suffer, particularly in this economy. Good talent, if not appreciated, walks eventually.

    Reply
  13. Joel D Canfield

    I’m sure it’s embedded in the others you’ve listed, but another flaw more common in large companies than small is the disconnect between authority and responsibility.

    In a big company, it’s easier to tell the IT staff “If you just work faster, you can get more done in less time.”

    When ‘IT’ is one person and they eat lunch at your desk with you, that ain’t gonna fly.

    My friend Tom Berarducci (27-year veteran of an enormous corporation whose name begins and ends with ‘K’) is writing a book called ‘What Not To Do’ with lessons about everything on the list here. I’ve read the first draft, and it’s smart and funny and useful.

    Oh, a nit of my own: “many companies entire revue” sb “many companies’ entire revue” (Plural possessive. Sorry; I’m editing three books right now and it’s hard to turn off.)

    Reply
  14. Jim

    I think the worst moment in any (bigger) company is that when people just resign. I feel that everytime I hear at a meeting in my company “that’s not my business”, “I don’t care”, “Can’t change it” etc. that a small part of me dies inside.

    Because “that’s not my business” when in fact it’s most important for the employees in the team… than what should be the motivation to ever change something for the better?

    Reply
  15. Scott Berkun

    For the record none of these things are universal conditions. If you have a good manager, or a great VP, they can create a very different environment underneath them that is superior in culture/quality/morale/productivity/etc. inside the big company.

    That is one advantage, of several, of a big company – there can be a wide range of management styles and cultures inside one company.

    Reply
  16. lauren cramer

    I would add that in large companies there is the silo affect. Many large companies are public companies and can’t share information with their employees or it’s considered insider trading. This creates an atmosphere of only knowing what’s going on your department and what is relevant for you to get your job done. When you see the big picture and what other teams are working on, it gives you a feeling of being more deeply involved. You feel like you have a little piece in every part of the pie versus just your small slice. At least that is what I’ve experience being in small company that grew to a larger one.

    Reply
  17. chromatic

    Success justifies the means. A company that’s survived 25 years or has hundreds of employees or is the leader in its field believes itself to have done something right — even if no one can agree on what that something is or reproduce it.

    (Absent) founder envy. A company with a strong, charismatic founder who started most of the business units and is still around in some leadership role will suffer trying to find or develop replacements for the founder; they need several smart and creative people, but none of them will get the resources they need to succeed out of a corporate sense of loyalty.

    Reply
  18. Shuje

    Excellent piece.

    I worked at a company from day zero (5 employees) for 7 years (1200 employees when I left.) I resigned partly because I could not adapt to the very things you mention in this article. It was so frustrating.

    The successful suckups, the self lying, the useless processes. I might add there is a powerful disconnection between people when numbers get bigger. The sense of family run business slowly fades and gets replaced by an “every man for himself” attitude.

    Your suggestion for a Process Uncluttering Process :) seems like a good initiative though. I would applaude companies that on their way to getting bigger try to stay small were it matters the most.

    Cheers.

    Reply
  19. Joe Enos

    All very valid points. I’ve done the small companies and two gigantic companies, and it’s so much nicer day-to-day working at the small ones. It’s easier to get things done, easier to get noticed by your superiors, and just generally more pleasant.

    I’ve done the whole small-to-large company transition, and it’s not a lot of fun. Little-by-little, productivity gives way to committees, personal responsibilities turn into group decisions that never get made, and bonuses and benefits turn into mathematical formulas on how the owners can line their pockets the most.

    The big advantage for large companies would seem to be stability, but that really doesn’t hold true for me – I worked for two of the oldest and largest companies in the country (Montgomery Ward and Bear Stearns), and both are now gone. Just bad luck for me, I guess…

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  20. Pawel Brodzinski

    The thing which I hate about big organizations is lack of trust. You just can’t tell what you think or share your opinions because odds are it will turn against yourself. You can’t really expect you get honest opinions from your colleagues. It’s all, to some point, about office politics.

    I can play by these rules but at the same time I hate it.

    Reply
  21. Joel D Canfield

    Pawel, while I’d put ‘lack of trust’ under Scott’s first point (soulless) I like that you brought it up. It’s easy to build trust with a small group. It’s nearly impossible with a large group.

    Reply
  22. Pawel Brodzinski

    Joel, I’ve taken ‘soulless company’ more like a place when you come just to get a paycheck but you don’t care anymore. But I agree that there are very similar (or the same) reasons which take soul away from the company and kill trust between people.

    There’s one thing I’ve realized reading the article and comments. Being ‘big’ starts with very different sizes when you just count people. In its soul a company of 200 can be small or big. I’ve even seen a company of 50 which suited the picture drawn by Scott.

    Reply
  23. JoyfulC

    I’m not sure what you’d call it, but they seem to spend enormous sums marketing for new customers, while failing to do what it takes to keep old customers. Every time you phone technical support or customer service, you hear “All our operators are currently busy. Your call is important to us. Please stay on the line for the next available operator.” And lately, it’s not uncommon that you hear that AFTER you’ve already been through some sort of menu. Once you do reach a real live person, that person, more often than not, isn’t empowered to help you if you truly have a problem. Mostly, they’re only empowered to help people who aren’t bright enough to follow installation instructions, or whatever.

    I appreciate that companies do this to reduce overhead and increase profits, but what they may not realize is that I REALIZE that the manpower they’re saving themselves is made up for by ME. I have to do the work, I have to put in the time, and I’m the customer.

    This has led my household and my business to pare down to the bare minimum in our dealings with any companies that do business this way. We no longer have cable or satellite TV service. Our phone service is the basic package. We use free or open source software whenever possible.

    It’s not like we’re just cheap — we paid through the nose for services and products for decades. And if we’d been treated decently, we’d still be paying. Now when we receive some flashy marketing piece from the phone or cable company in the mail, we just laugh and wonder how much it cost them to send it to us. They might as well save that money too because our business is gone. For good.

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  24. Vicki

    To Glen B Alleman – Hold on there!
    You don’t work at these clients, yet you “know” they don’t have _any_ of the problems Scott lists? Are you pyschic? Have you interviewed all of the employees?

    Even for your own company, I hate to tell you this, but you’re a VP. The higher a manager gets in the org, the more likely s/he is to think that all is well. Employees see suckage of the company; execs see a few malcontents and complainers.

    Reply
  25. Pierce Hickey

    Conway’s Law – the larger companies get, the more it impacts their ability to get anything done.

    I believe one of the main reasons that Agile approaches work is due to explicit emphasis on reducing cross-organisational friction, by making as many participants as possible work closely together, ignoring the classical organisational hierarchy.

    Reply
  26. John J Gorse

    Thankyou Scott,

    6:08 AM (11 hours ago)GIVEN IN from Who’s Country Is It Anyway? by ConcernedCitizen

    We think on the same simplicity versus complex bureaucracy.

    John

    Reply
  27. Randy

    Now just think of the U.S Government as the the biggest company in the world …

    Reply
  28. Rajesh Kumar

    Scott,

    This is an outstanding read. High on EQ and common sense. The Soul Has Left The Building… will be my all time favorite.

    I once wrote my views on “Great Workplaces”, you might find something in there to add to your article.

    Rajesh

    Reply
  29. Wilt Alston

    Very thought-provoking list. I wonder how many of these items of suckage would go away without a huge, bureaucratic state to enforce and/or create them. (A government agency is the best example for many of these maladies.)

    Reply
  30. anata

    peter principle corolary:

    Time is spent covering your ass instead of working. Meaning when you are really a big corporate runner-up, you manage for the person next to (or better under) you to do your work, and be responsible for your mistakes.

    Reply
  31. Joe Topinka

    I have worked for public and private companies and in both instances management gets hooked on monthly and quarterly performance results. Focusing on financial performance leads to short-term focus and it drains creative energy. New ideas aren’t welcome unless that have a very short ROI. I agree that as companies grow new managers tend to take credit for the ingenuity and creativity of past managers and creative thinkers.

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  32. Mark

    You really hit the nail on the head here, Scott. I wonder this all the time, particularly as I see firsthand the, on average, much better service provided by staff at smaller companies (the nonprofit I work for runs an annual top small company workplaces competition to find those that are engaging employees most effectively for stronger sales and better community relations).

    I think the big reason why some (not all — just look at the Container Store) big businesses suck is that they inherently have huge hierarchies and bureaucracies which can intimidate and lesson the perceived power of low- to mid-level employees. In short, many people in these companies don’t think they have a voice; and often, they’re right because they really haven’t been given a voice, and a chance to see how their work impacts the business.

    Reply
  33. Willy

    When companies grow sufficiently large, the HR department moves from being an agent for the employers to a group whose sole focus is risk reduction.

    Employee needs to be fired? Shroud it in as much secrecy as possible and forget about employee morale.

    Employees need training? Get it done as cheaply as possible since the goal is the record the employee is trained and not how effective the training.

    The list goes on, but the best friends of an HR department in a large corporation are secrecy and budget cuts.

    Reply
  34. Robert Young

    @ Dwayne:
    Proof, if they were really bright they would be making 10x the money as executives in private industry.

    No proof there. Much of what is done in government is not exactly the same. Much of the time it is crook-catching of one sort or another. Those that want to be crooks work for corporations. Those that want to catch crooks where white hats and work for government. Unless you assert that all government functions should be outsourced to corporations. That would be the world of “Robo Cop”; not one in which I would like to live.

    Note also that most corruption in government is in service (so to speak) of corporations attempting to defraud the citizenry, either directly or through the government.

    Socialism can work, if the society wishes it. The Scandinavians have managed it for centuries. And they live longer for less.

    Reply
  35. Ofek

    My personal #1 reason is divided responsibility. It directly leads to politicization of the work environment, and to channeling energy to placing blames and self-promotion. Personally, I see it as the root cause for most aforementioned symptoms, and (sadly) I consider it unavoidable – the larger an operation is, the smaller fraction of it can be under individual responsibility. It is just inherent in growth.

    Reply

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  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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