The larger you get, the dumber you get

OK.  Larger organisations aren’t actually ‘dumb’ – they often have some of the smartest people around. But they can appear dumb, both from the inside and the outside. Decision making is slow. Decisions don’t seem to make sense, or they’re contradictory. Or they keep changing.

Different departments, functions, business units, geographies, leaders, whatever, … are pulling in different directions.  Everyone is always in a meeting. Power resides in odd places. Systems that are supposed to make us more efficient take more time. Structures designed to help us work more effectively make it harder to get things done. We are constantly being dragged away from the most important stuff. And so on. Many people who have worked in a firm bigger than (say) 50 folks, have a story like this.  Everyone who has worked in a firm larger than 100 people has one or more stories.

And, let’s be clear, all of the things that we’ve just described are done with the avowed intention of improving how the firm works – making it smarter, more agile, its people more empowered, its customers more satisfied, its profits more, well, ‘more’.

Let's dive into why this happens and what we can do about it.

The Growth Paradox

First off, let's acknowledge the paradox of growth. Initially, companies expand to increase efficiency, gain market share, and boost profits. But as they get bigger, they often become slower, less innovative, and less responsive to customers. Why? Here are a few reasons:

1. Bureaucracy Takes Over

If you’ve ever worked in a small, independent group (project team, start-up, innovation cell, new product group, small business), remember what that was like. Decisions were made on the fly, and everyone had a say. But as the company grows, so does the impact and complexity of the decision making, and some additional checks and balances are required. Often, this evolves into bureaucracy: layers of management, endless meetings, and convoluted approval processes. Decisions that used to take minutes now take weeks, if not months – or they never get made at all. It's like trying to steer a cruise ship with a teaspoon.

2. Loss of Agility

Big companies are like supertankers – they're powerful, but they can't turn quickly. Smaller companies are nimble; they can pivot quickly in response to market changes (although they may have other challenges). But as organisations grow, they become weighed down by their own size. They get stuck in their ways, unable to adapt effectively to new trends or technologies. Meanwhile, smaller, more agile competitors may be able to take swoop in and steal their lunch (or at least the tastiest bits).

3. Groupthink Sets In

As companies grow, they become more homogeneous. Everyone starts thinking alike, we recruit the same kinds of people, we share the same values and ideas, and (because we feel like we don’t have much impact) we start avoiding dissent. This phenomenon, known as groupthink, stifles creativity, empowerment, and innovation. It's like living in an echo chamber where only one voice is heard.

4. Risk Aversion

With increased size comes greater fear of failure – because the stakes are higher. So, naturally, they become more risk averse. They tend stick to the tried-and-true, avoiding ideas and opportunities too far from their ‘main game’. Playing it safe can be just as dangerous as taking big risks. It leads to stagnation, missed opportunities, and if unchecked, collapse. Weirdly, larger firms, have more resources and a greater ability to ‘fail fast’. But the effort and complexity of deciding and the reputation risk to the sponsors of failure are often a contribution to risk aversion.

So, How Do We Fix It?

Now that we've diagnosed the problem, let's talk solutions. Here are a few ideas to help big organisations regain their mojo:

1. Embrace Decentralisation

Instead of concentrating power at the top, empower employees at all levels to make decisions. Create cross-functional teams that can act autonomously, without getting bogged down in bureaucracy. Give them the freedom to experiment, fail fast, and learn from their mistakes. Decentralisation fosters innovation and agility. ‘Six Simple Rules’ (Morieux + Tollman, 2014) is a good place to start with this kind of thinking.

2. Foster Diversity of Thought

Encourage dissent and debate within your organisation. Surround yourself with people who challenge your assumptions and bring different perspectives to the table. Diversity isn't just about race or gender; it's also about diversity of thought. By welcoming dissenting opinions, you'll avoid the pitfalls of groupthink and unlock new ideas that could revolutionise your business.

3. Cultivate a Culture of Experimentation

Make it safe for people to take risks and try new things. Celebrate failure as a learning opportunity rather than a cause for punishment. Encourage experimentation and innovation at every level of the organisation. Create dedicated spaces – both physical and virtual – where employees can brainstorm, collaborate, and prototype new ideas. Remember, innovation thrives in environments where creativity is nurtured, not stifled. And there are plenty of firms (Atlassian is one example) where this approach works very well.

4. Stay Close to Your Customers

As companies grow and have a smaller percentage of their total population customer-facing, it’s not unusual for them to get more focussed on their own needs over those of their customers. Don't let that happen to you. Make it a priority to stay close to your customers, solving their problems now and anticipating their future needs. And don't be afraid to disrupt yourself before someone else does.

In Conclusion...

Big organisations have huge advantages. They need appropriate structures, governance, systems, and processes to avoid making costly errors. But they don’t have to be dumb. They can be as agile, innovative, and responsive as their smaller counterparts – perhaps more so in some cases.

But you can’t legislate for this stuff. The ability to be smart within the required structure and governance is a function of culture and leadership. 

Your people are very smart.  Stop making them dumb.