Telling the truth about SME life today

Is there a perfect size for a business?

For Ted Littlechild, co-founder of Electro-Flow Controls?(EFC), an Aberdeen-based firm that services the offshore oil sector, Dunstone’s basic thinking is nonsense: “There is no doubt that big companies can do more than small ones. They can finance jobs and take on more people. You can have low overheads if you’re a website, or a middleman, or an ebusiness. I can see that. But the idea of six people doing what BP can is nonsense.

Littlechild believes that companies grow in sudden spurts, requiring them to pile on new layers of staff after reaching a certain size or scale. Once you reach 120 people, you might need two full-time human resource staffers, and then four, to make it a proper department.

There is, of course, no one-size-fits-all strategy that suits every business. But it’s notable that the number of people in a typical pre-industrial village 130 matches the number of “friends” added by the average Facebook user. Robin Dunbar, a professor of evolutionary anthropology at Oxford University, has claimed that the human brain can remember no more than 150 meaningful relationships.

Roughly the same thing happens with companies. They reach the point where scale either forces them to become more efficient and well-managed, or unwieldy, bureaucratic and increasingly directionless. Littlechild at EFC says when a company reaches 50 or 60 people, you start seeing faces around you that you just don’t recognise (though he adds that this is ?partly due to age and a poor memory?). EFC currently employs 70 full-time staff and posted revenues of £11m in 2010.

Kate Feeney, a director at corporate consultancy?Just Add Water?believes this is the tipping point where most entrepreneurs tend to exit their creations. At first, entrepreneurs love what they have made. Once upon a time, they owned these buzzy, vibrant, creative companies; now, all of a sudden, they are being forced to sit down and talk with employment lawyers. That’s when the fun tends to go.

Dunstone’s thinking chimes with that of others, too. George Yule, executive chairman of offshore energy specialist?Romar International?(see case study here) believes that no single person can directly oversee more than four or five people. More than that and your efficiency and effectiveness becomes diluted, to the point where you can’t manage as well,” he says.

Yule has sought, wherever possible, to hire on a temporary basis in the wake of the recent recession 20 per cent of Romar’s positions are temporary or outsourced. Really, the only person in the world you can be sure about is yourself,” he says. You can never know everything about a new employee, whether they?re the MD or the janitor.

Continue reading on page three.


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