Small businesses and large companies vary in various ways. They have a different and distinct organization structure that can effectively serve the size of the business. In addition, small businesses have different managerial, organizational and development characteristics that define the nature of the business entity. These characteristics give a general view of how the size of a firm influences its operations and in general the organization structure it adopts. The nature of the distinctive managerial, organizational and developmental characteristics of the small businessvis-à-is well-resourced large companies can be evaluated as follows:
Differences in Organizational characteristics:
Layers of management
In general, smaller businesses have fewer levels of management thus implying that the number of managers is also fewer in general. This is because the operations of a small business are not many and in essence can be managed easily thus fewer managers are required. In most cases, small businesses usually have one manager who solely controls the operations of the business. Other employees are considered to be at the same level in the organization structure and as such small businesses have a simple organization structure.
In contrast, large companies have several levels of management that are well defined. Each level represents different levels of control with the highest levels being granted more control in the company. Though many, the levels of management interact and share ideas and resources as they aim to achieve the overall company objectives. Despite the fact that the different levels have varying functions in management, the common company goals consolidate them into one.
Strategic decision making in small businesses is more centralized compared to larger companies and this is attributable to the small number of managers in small businesses. More often than not, small businesses have just one individual responsibility of making all the important decisions. While this reduces the amount of time taken to make a decision, decisions may be biased. This often leads to poor decision making.
In the larger and well-resourced companies, it is impossible for a single individual to make decisions. The owners of the company normally delegate decision making to company directors and managers since they are independent parties. Given this responsibility, directors are expected to make decisions that will be beneficial to the company as a whole and not to an individual. In addition, a certain quorum has to be reached before any decision is made. This makes for more informed decision making and the different opinions of individuals contribute to more quality decisions being made. However, this makes the decision making process much slower as compared to that in small businesses.
The structures in larger businesses are wide and well defined with each employee having a specific operational role. The job descriptions are very detailed hence each employee knows their work and the part they have to play in ensuring that the organizational targets and objectives are achieved. With each individual aware of his or her responsibilities, it promotes coordination in the company and ensures that tasks are well executed.
In smaller businesses, the range of tasks that each employee is likely to take is wider compared to someone in a large company with the same job title.For example, an accountant in a small business could be responsible for attending meetings with clients, opening the mail, responding to customer emails in addition to his accounting duties. Though the few operations in small businesses can make this possible, people with unrelated job titles filling gaps in work tasks can result in confusion in organizing tasks.
In contrast, small businesses are more likely to have their operations situated in a single location which should also be strategic in relation to their target market. This results in minimal redundancies in tasks performed and in the human resources. A single location also makes it much easier to monitor the operations of the business entity.
All organizations must have in place formal lines of communication since this is part and parcel of an organization’s structure. Communication in small businesses is mostly on a personal level especially when the operations of the business are centered in one location. Operational employees are provided the opportunity to directly interact and speak with their superiors or employers. This provides for faster communication and feedback. The manager is able to be in touch with what is actually happening on the ground.
Larger companies have a longer channel of communication as employees are not allowed interact directly with the executives. Communication is limited to phone conversations or emails. However, even when relaying information, there is a protocol that has to be followed. This is to say that junior employees cannot directly communicate with their directors without going through their managers. This makes communication and feedback process very slow. In most cases, the top management is alien to the opinions of the operational staff.
Differences in Managerial Functions
Small businesses have their own distinguishing managerial features, in relation to the various management functions, that separate them from small businesses. Regardless of the distinction, the functions are similar and only vary slightly.
Both small and large companies have to decide in advance what is to be done, who is to do it, how it is to be done and when it is to be done.Small businesses are mainly involved in short term planning since they operate in a more dynamic market since there is more competition at lower market levels. Therefore, their plans are more focused on the current business performance, more specifically profits. The small businesses have limitations in planning since they lack expert staff and do not have the skills required in planning. Also small business managers will not engage his employees in the planning process because he wants to keep business secrets to himself.
On the other hand, large companies are involved in making long term strategic plans as they look to achieve shareholder wealth maximization while at the same time aiming for profit maximization. They incur research as they look to develop new products and better existing ones so as to keep up with their competitors. While short term planning is left to lower level managers, strategic planning is reserved for the top managers.
Small business managers arrange the activities of the business in the organization structure into different levels as they lead employees towards completion of the business goals. The lack of a well-defined organizational structure in small businesses makes organizing tedious and more time consuming. Large organizations already have an established organization structure and thus organizing the functions in the company is much simpler. This also improves the coordination among employees in the execution of their tasks. A company that has a good organizational structure also implements a good departmentalization format and this makes it possible to easily group functions into specialized units.
Directing involves guiding, motivating and leading people towards achieving the expected levels of performance. Managers of small businesses are the sole role models for their employees and he they have an obligation to set an example that they can emulate. Directing may prove cumbersome to a small business manager since he also orchestrates other functions in the business and may be too focused in the business goals that he forgets his directing functions.
Compared to small business managers, managers in large companies are more of leaders than they are bosses. They oversee the execution of tasks by their employees and provide guidance where need be. They also ensure that employees work in good conditions and achieve maximum job satisfaction. The company owners charge the managers with the responsibility of effectively directing other employees and making sure that their sights are set on attaining the overall organization goals.
Small businesses have a few staff as they are not involved in as many operations as large companies. The employer in most cases does not acquire expert staff since he assumes to be in the know of all operations in the business and only needs to give instructions. Not so in the larger companies. They employ people who are experts in their field and require a certain level of experience as they recruit. They also provide training to their own staff to equip them with the necessary skills needed to effectively carry out their jobs and also to make them aware of new technologies and market trends.
This managerial function looks to ensure that a business entity is moving in the intended direction. For small business managers, they set up procedures and goals that are meant to guide the employees. Large company managers carry out the controlling function by establishing standards of performance, targets and budgets. Since they focus on the long term, they also extrapolate the company’s performance and ensure that the company staffs are geared towards achieving actual results that are favorable.
Differences in Developmental characteristics
For any business, development is a long term continuous process that should be part of the business as long as it continues to exist. Continuous development of a business ensures it is up to date and evolves as time goes by to fit into prevailing market trends. The ability of a business to be dynamic and adapt to changes in the surrounding environment is very important. For a business to achieve the desired development, the duty should be left to someone with the experience and expertise to decipher the business world.
The development of small businesses is mostly characterized by increased profits, more client inflow, and an increase in their operations. Small businesses look to progressively attain a higher status in the market as they aim to match the competition from larger and more established businesses. There are various ways through which a business can develop. One is consulting expert advice on affairs of the business. This provides an informed and professional opinion that the business owner can consider. Also, the business owner can be innovative and develop a new product or service that will provide a breakthrough in the market.
Developing a good business strategy will make it possible for a business to penetrate existing markets and even new markets.Business development enables advance planning and as effective management of the business as possible. A successful business can be developed by making use of various techniques including creating a business plan which acts as a step by step guide in achieving business success. Small businesses can look for additional funding to cater for costs relating to the research of new markets and the competition.
For companies, their development can be seen in the growth of shareholder wealth. An increase in their share prices shows that the company has increased in value. This development increases confidence of investors in their firm and even attracts more potential investors. While striving for the development of the company, the shareholders of a company want to ensure that is in a viable going concern position and its perpetual existence is not under threat.
The distinction between small businesses and large companies mostly goes down to the sizes of the organization. As businesses grow into large companies they have to change their organizational structure to suit their size. This means that the organizational structures used in small businesses cannot fit into the larger organizations which are more complex and sophisticated.
For small businesses attempting to achieve sustained growth, they have to put in place strategic long term plans. These plans should aim to expand business operations and widen the scope of their market. As a business positions itself for greater expansion it should ensure that it has adequate resources that can sustain the size of the business. It requires a lot of capital to achieve significant growth of a business. Small business can consult a financial expert to help them come up with a workable financial plan. They can also seek financial assistance from financial institutions by acquiring loans or seeking investors who will fund their growth prospects.
In general, small businesses have the potential to grow into large companies gradually. With good management and efficient and effective planning targeted growth can be achieved. Small business owners should also seek to emulate large companies which started as small businesses by borrowing ideas and seeking advice from those who have already made it. Due to the great competition that exists between firms, most small business owners are discouraged from pursuing growth prospects for their businesses. Such is a loser’s mentality and they should be encouraged to be risk takers rather than risk averse.
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