November 12, 2005

Large companies versus small companies

Posted in Life at 10:03 pm by mj

There is something about the working environment of a small team that I miss. It goes beyond the shared focus on a single goal, or the ability to influence overall direction. It’s more about respect, familiarity and trust.

I started thinking about this after talking with some friends and former colleagues, who’ve moved on to new start-ups, or who know of opportunites with small teams. I have no real data to back up anything I’m going to write, and I’d like to see some real studies, but I don’t mean any of this as definitive anyway.

General Respect
Consider this. My current employer forbids families from attending any corporate-sponsored program. This includes luncheons and picnics, launch parties, Oktoberfest, and, especially, Christmas parties. I guess that’s fine for the single city-dweller, or many of my co-workers engaged in office romances. But, sorry, if you’re forbidding me from bringing my wife, I’m just not going, regardless whether she would (or even could) have gone otherwise. There’s just no class in that; no respect. Not every big company forbids families from attending, but anecdotally, it seems to occur at a disturbingly higher rate within the big organizations.

By bonuses, I’m not talking about stock options or grants, but just plain ol’ holiday spending (or saving) money. Large companies seem to not provide them as frequently as small companies, at least not to levels below director.

On the other hand, large public companies do often offer employee stock purchase plans (ESPPs), which, if managed correctly, can meet or exceed the amount of any missed yearly bonus. And, what’s more, the amount and certainty of ESPP profits is directly correlated with performance. So maybe big companies have an advantage in this area after all, both economically and philosophically.

Stock Options
The stereotype is that companies provide options to compensate for their lower wages, but, so far, I haven’t seen any indication that small companies pay less. (Except in the dot-bomb days, when the foolish worked for minimal pay with promises of big rewards.) In truth, options psychologically mitigate the risks associated with a small company, and simultaneously provide a sense of stake in what happens over the long term. At my current employer, I have no real stake.

I have no stake, but do I have less risk? Not really. I know that all it takes is one bad quarter, and my employer will be in downsize mode. What’s more, the success of the overall company isn’t really in my hands. My team can double or triple our contribution to the bottom-line, and the company still can sink into unprofitability. That is precisely what happened at my first employer.

Many startups, by contrast, will survive quite a while longer without resorting to lay-offs, in part because they have fewer (if any) non-critical employees, and in part because they’ve planned for lean times (no start-up goes in expecting instant profits). Maybe familiarity between executives and employees also plays a role. If you’ve made a decent decision on which start-up to join, then, you’re more likely to have a stable job–or at least to predict in advance when your tenure will come to an end. During the large-company RIF dance, nobody’s sure who’s leaving when, and irrational competition and distrust between employees skyrockets.

Job Comfort
So, if it’s not less risky, surely it’s a more comfortable job — shorter work weeks, cushier deadlines, less pressure… um, no. To be sure, there are roles in larger companies that aren’t demanding. Large companies can afford to hire people who view their responsibilities as a 9-to-5 job, and have no commitment outside of that.

But even large companies thrive–if not survive–on the sweat of their committed employees, who are working more than 40 hours, meeting short deadlines, and dealing with a lot of political bullshit. Why? Because they have professional pride, even if
they lack incentives to commit specifically to their employer. (The hope is that different employees will be working long hours at different times, so everybody’s not burned out at the same time.)

Pay Increases
Large companies usually have rules about raises that prevent them from offering attractive yearly increases without putting the burden on the employee to initiate an uncomfortable conversation. A cynic will say you can work your ass off working 75 hour weeks for months, but if you’re not a director, it doesn’t matter, except for some slight, obscure, confusing, tentative connection with your performance review and merit increase that might, if you’re lucky, match your cost of living increases. And to judge by some companies’ ratings systems, the system is, literally, stacked against even the high performers.

Vacations and Time Off
This is another area that I’m sure large companies win easily. Large companies can afford to offer more sick and personal time (some employers even have an unspecified sick policy, designed to encourage people to not go into the office and make everybody else sick…it doesn’t seem to work, though).

What really wins it for big companies, though, is that with a large team, you have better coverage. Which means a less likelihood that your vacation will be interrupted in an emergency.

Resource availability and allocation is an area that large companies ought to win hands-down. But, for some reason, there seem to always be systematic inefficiencies or roadblocks that prevent the necessary amount of resource allocation. I’m not sure I can give specifics without betraying current or past employers, but I hear the same stories from acquaintances in large companies. There’s always a hiccup with getting what you need in a large company, which means it’s not an advantage to the degree that it ought to be.


I guess there’s no definitive conclusion. As a skeptic, I wonder if the romanticism of working for a small company has more to do with social-psychological factors of belonging to a small, elite team than it does with any real general advantage. But then, I do feel that pull myself.


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