Size matters – for social business

Social businesses tend to be smaller than mainstream businesses.  This is unsurprising given the fact that the social business phenomenon in the UK is relatively new, and many of these companies will have only started in the last few years.  Yet I see there relatively small size is having advantages, and moreover, puts them in a position of being morally superior – at least for now.

I have worked all my life for large companies and found that they share certain similarities with large entities in the charitable sector and also in government.  One feature of this size is that in order for the organizations to function effectively they become highly vertical.  That is to say that with several thousand employees, there tends to be many layers of reporting lines between the CEO and the individual on the lowest rung of the ladder.  This is necessary–in fact, it is hard to imagine any other way in which they could operate.

By being smaller, social businesses have fewer layers between the chief executive and the clients being served by that company.  As a result, the cause-related aspect of social businesses is strengthened by the proximity of the chief executive to the clients.  Her or his success and that of the organization will ultimately be determined by how well it delivers to clients.  With the large organization, by contrast, I contend, that the connection between customers and the chief executive is highly attenuated.  Their success, or more to the point, their compensation, is largely a function of staying in place.  The skills required to achieve this end, are not at all the same as those required to meet the needs of the market – their clients.  They are about survival, not service.

I believe it is inherent in the highly vertical nature of large corporations that the distance between the market and the leader leads to a corruption of sorts, in that the CEO’s imperatives (or the Prime Minister’s) are often, in my experience, not aligned with the mission of the organisation (or the citizens) – at least in the short term.  On the other hand, the closeness of the social business leader to the market and to the social objectives for which the social business strives is good for the business and good for the cause.  Thus, for now, at least until social businesses find their own path to corruption, I believe they remain morally superior, and also likely to be more effective in achieving their aims.

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