MT Round-table: Is small beautiful or big better?

A debate between leaders of companies large and small about the pros and cons of being an SME.

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Last Updated: 09 Oct 2013

In association with British Gas Business, MT gathered leaders representing both ends of the business scale to debate the pros and cons of being an SME compared with a large corporate.

John Vincent: I started out quite big; I used to work at Procter & Gamble in sales and marketing. I had all of the joys of working for a big multinational. I then worked at Bain & Company, the business consulting firm. Then I started a little business called Leon with my business partner, Henry Dimbleby. The mission we had there was to try and make fast food good, as opposed to bad. But at the same time I did an aggressive turnaround of a Scotch whisky business called Whyte & Mackay. So I had this very sweet little Leon, a company we were trying to grow on the basis of that pure culture; but, at the same time, I had to turn around this big, quite difficult Scotch whisky business - which we did.

Matthew Gwyther: So, John, if you had to come down one way or the other, working for a large organisation or for yourself in a small organisation, which gives you more of a buzz?

John Vincent: It's a question I often ask myself. I think: 'Do you want to be involved in something where you are at the creation stage, or do you want to be involved in something where you have at least some form of cashflow and scale with which to work?' The benefits of taking over Whyte & Mackay were that I had lots of problems to solve. That is good news. We managed to refinance, cut out the distillery, take two bottling halls and put them into one. We managed to sack our UK distribution company and rebuild that organisation.

Generally, my view is that most big businesses are more badly run than small businesses. Most are so far away from their customers and have so many layers of stupidity and waste in the corporate overhead that, on the whole, most entrepreneurs going into a big business would probably make quite a difference.

Andrew Caesar-Gordon: I love being an entrepreneur in media training. I go home at night and cannot wait to go to work in the morning, because I'm in control of my own destiny. However, like most people, I did start off in corporate life: Thames Water sits on my CV. Most importantly, I rely upon and embrace large blue-chip corporate organisations as my clients. I love them. They are reliable, they pay their bills, they have a partnership with us. This might be a function of working with their PR communication teams, who are always a bit more lateral and free-thinking than other parts of the corporate organisation.

As an entrepreneur, what are the things you want to do? You probably want to grow your business, and growing your business brings growing pains. Do I want to head a Plc and therefore become remote from what I'm doing? Not really. As with most organisations that grow rapidly, quite often the management has to change, because they are great at establishing the business and the initial growth period, and then you need to bring in professional managers, good or bad, to take the business to the next level. Most entrepreneurs do not want to be involved in that kind of thing.

Roger Southam: As a property manager, nine times out of 10, I would rather deal with small businesses. Unless you are incredibly determined and dogmatic, large firms are such faceless bureaucracies. It is a bloody nightmare. The amount of time we have to spend kicking, fighting and pushing at big business is way more than small businesses. What I want to do is keep the ethos we have and the mentality we have because, sure as hell, one thing I will not end up with is the big-business mentality.

Matthew Gwyther: Everyone feels that, do they not? It's difficult to keep control on something like that if you grow to be enormous.

Roger Southam: Every business is kind of a reflection of the people at the top who are running it. Ultimately, you are all talking about individuals here, about people, because we are all human beings and we are involved in the companies. Someone is passing that ethos down. When you look at the banking, accountancy and legal culture, their ability to make it a blank, amorphous mess is unbelievable. This is where the entrepreneur comes in, if you have someone in charge who shapes something.

Everybody just sees Virgin as Richard Branson. The fact that he has a queue of thousands of people actually running the show is neither here nor there. It is still his brand and ethos that is flowing through the way those companies run. That is the testimony of it.

Sharon Warmington: We manufacture a biomass solid fuel from naturally fallen tree leaves. Every autumn, millions of tonnes fall from the trees, and the majority of them go to landfill. We are just 18 months old. We spent the first year in commercial trials and we won a Shell Springboard Award that catapulted us forward. We have gone from four employees to 14 this year, possibly increasing by another five or six in the next 12 months.

At the moment, we are looking at licensing internationally, and that in itself is quite frightening. You create this thing and then everybody wants a piece of it, but how do we manage that to make sure that the quality and the brand and everything are protected? I don't know the answer. We have just gone through an investment round and have two other investors in who are now directors of the company, as well as myself and the other founder.

I am, like most entrepreneurs, very much a control freak. I have been reined in by my business partner and am having to let go, because you cannot physically do everything yourself, even if that is the way you started. As you bring more people in to help you build the business, it will dilute certain things. It's not something that I imagine running for the rest of my life. If you sell on your company, you have no control over what happens to it, so it could very well become a monster and a beast.

Tom Morgan: Our company, The Adventurists, organises adventures with as little support as possible. We are trying to revert to as true a sense of adventure as we can possibly manage without ending up in prison. We are lucky in that there is more demand than supply. We are sold out 10 to one, but we will sell out a year in advance. It is a growing market and has expanded a lot in this past year.

But if it ever grew to become Thomas Cook, then it would have lost the whole point of what it is. The more people you have and the bigger it gets, I feel like it changes slightly. I used to enjoy meeting every single person who came on our adventures, but I cannot do that any more. Obviously, if you get a good team in, you can still produce basically the same results. It is a sliding scale of growth. For us, I think it will be quite a balance. I, too, am a bit of a control freak. I mean, it will get bigger, but there is a distinct limit to what we can do.

Marc England: Well, this whole concept of ‘large company badly run, small company well run’ I don’t think is necessarily correct. One of the things we do in British Gas is segment our business. British Gas Business is a pretty entrepreneurial organisation, so we might have the biggest market share across the UK for gas and electricity, but we are actually quite nimble. I think it is not about well-run/badly-run; I think it is about nimbleness versus slowness and difficulty in reacting.

In this kind of recession, are SMEs more nimble, able to react, change their business model a little bit, less dependent on the massive supply chain and therefore actually able to survive a recession better than a big company? We probably talk to around 50,000 of our customers a week, so we have been very aware as we have gone deeper into this recession of how it is impacting our customers. The majority are calling us with queries, but, obviously, we are calling some to collect cash and collect debts. I think, from last year, we started to realise that this recession was going to have a pretty big impact on people and businesses particularly, for a number of different reasons – which I am sure we will discuss today. So we set up something we called the ‘save process’, which was really about offering small businesses advice on how they could get more value from their energy, and we have seen huge success from that.

Jerry Benson: I think that subdivision is absolutely right. Serco is a global services company and we employ around 70,000 people worldwide. We turn over about £4bn a year. We run railways, we educate children, and my business is the economic development business, where we do things including running Business Links. We subdivide most of our businesses into business units and then contracts, and those contracts are almost entities within themselves. They have their own P&L and their own cash target, etc. They are responsible for their own growth, too. Success or failure is associated with that contract structure and how it grows. As long as you are focusing at that level on the right business issues, then big or small is almost irrelevant.

Matthew Gwyther: I've got to stand up for bigger business here. You have to have large businesses, do you not? You cannot have an economy in the modern world where everything is small, for all the attraction that small businesses have. It is difficult, actually, to stay one size and still be successful: SMEs want to grow. Also, because of the obvious economies of scale, to run an efficient economy you have to have large organisations, and one feels a good degree of sympathy for them.

Doing the job that I do, I have seen the great strides they have made over the past 10 years with things like, for example, employee engagement - or, at least, they did before the economic downturn. They realised how difficult it is to keep everyone fired up and committed within a very large organisation. It is a genuine intellectual and business problem. I think it's easy to have a go at them, but they have to be there. To be fair to them, large organisations have probably got a lot better at what they do in the past 10 or 15 years.

Amanda Blanc: I know you must have selected great people to come along and talk here, but, on average, SMEs are going backwards at a rate of knots at the moment. As an insurer, I can say that confidently because I look at my numbers every month. In the construction sector, we have seen businesses go back by 80% or 90%. So you have a good idea that businesses are generally shrinking. Times are tough.

It's interesting what you say about big businesses. I completely agree with you about the bollocks that big businesses put in between the management team and the boys and girls that are working. We have bought lots of businesses but we have kept a federal structure: we don't have a head office. We don't have a strategy team, an HR team, or any of those things that big businesses luxuriate in. So we try to keep the businesses in control of their own P&L.

In theory, the downside is that you don't let go and don't let the company move on. Peter Cullum, our boss, will not mind me saying that there was a time when he knew everybody's name in the organisation, and, of the 70 business units, he would know what the profit was of every business, how many customers they had, what the products were and all of that. You do have to let go of some of that, but you can still maintain all the values of the organisation.

Key values of our organisation include: we do not outsource; we do not centralise; we keep local; we keep all the core values of staying close to the customer. I think you can keep your core values and still be big.

This is just a taster of two hours of discussion. For a full transcript of this debate, click HERE.

THE PANEL
Jerry Benson, managing director, Serco Knowledge Services
Matthew Gwyther, editor, MT
Tom Morgan, managing director and founder, Adventurists
Marc England, director of small enterprises and operations, British Gas Business
John Vincent, co-founder, Leon Restaurants
Andrew Caesar-Gordon, managing director, Electric Airwaves
Sharon Warmington, director, Leaf Log
Roger Southam, chairman and chief executive, Chainbow
Amanda Blanc, CEO, UK broking division, Towergate

 

And a word from our sponsor:

‘British Gas Business has close to 1 million small and medium-sized-enterprise customers, making us the largest energy supplier to small businesses in the UK. We are committed to supporting our small business customers as best we can, particularly through the recession. We are also a leading provider of energy to large corporate and multi-site companies. We are listening carefully to our customers, in order to help us better understand the needs and challenges of small business. To this end, we have worked with Management Today to host round-table discussions, to continually evolve the help and advice that we offer.

This present discussion highlights the fact that small businesses are well placed to adapt to changing business landscapes, but also that cashflow can be a real issue for many of them – particularly through the recession. We have already taken steps to address this. Earlier in the year we launched our Save (small business advice and value expertise) initiative. Save provides a flexible approach for businesses to managing their costs and debt, through a dedicated Expert Credit Solutions team, which advises, supports and resolves debt problems for small businesses that are experiencing difficulty in paying their energy bills.

Save also offers advice and practical help to businesses looking to reduce their energy costs through efficiency measures. This includes free advice from a dedicated account manager; access to a tailored energy assessment; Energy Saver’s Packs containing energy-saving products to encourage businesses to change their behaviour; and a unique free online energy consumption assessment tool (Energy Saver’s Report).

So far, British Gas Business has helped more than 4,000 small businesses by setting up tailored payment plans for those customers that require special assistance or flexibility on their energy bill payments during the recession.’

Marc England is Director of Small Enterprise and Operations at British Gas Business

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