A thought piece for the Global Drucker Forum in November

Huge structural issues exist in the global economy, including unsustainable debt, underfunded social security systems, income inequalities, bloated and inefficient public administration and excessive short termism by big business. These and other issues will be addressed at the Global Peter Drucker Forum 2014 to be held in Vienna in November. The Forum brings together the world’s leading management thinkers to debate issues with a view to producing more meaningful ways for us to benefit. This thought piece, by Peter Drucker Associate Nick Hixson, asks whether small biz has some ways of describing outcomes and behaviours from which big biz and so all of us could learn. The abstract of the Forum is here.

Has the recession caused more than disaffection for a mainly material world governed by large corporations? Has there been a small shift towards a more reflective and aware society, where people are just a little nicer to one another? It feels so, at least in the south of the UK. There has certainly been a shift in customer service values locally. This may be more emphasis and better training, but it doesn’t seem that this is enough to explain the general friendliness and interest in customers shown in retail environments that now exists. It may be fanciful, but just maybe changing the ways businesses think might have found its moment. I certainly think that there is a slowly shrinking gap between big biz and small biz in their approaches.

Big biz has a rational, structured view designed for predictability and to protect itself. This brings security but sloth, and doesn’t easily engage individuals except as a trade-off – usually money for time. But not hearts and minds. Small biz isn’t rational, somewhat unpredictable, and often insecure. In other words, it behaves like real people. Like us.

As small biz grows, the reasons it was started can easily get lost, even overwhelmed, by the needs of the business. Sudden imperatives to do this now, this way, for the good of the organism take over. The organisation is always hungry, and the owners can become its slaves. It’s just like a cuckoo in the nest – the tiny foster parent is worn away feeding this rapacious huge fledgling.

One of the growth limiters in small biz is the prospect of owner overload at higher levels of activity. Getting growth isn’t so hard; small biz owners often worry that managing it will be beyond them. That’s why we start by making sure that personal and business objectives are aligned first before we get into growth and strategy. Small biz shows in miniature some of the reasons why businesses of all sizes don’t function well enough. Lack of clarity and consistency, lack of motivators that are meaningful to people, lack of ability to challenge ways of thinking, and a lack of an ability to see the wider view are all writ large in the annals of stagnation and failure. Quite often this is because small biz thinks that they must ape big biz to grow, so take on structures that demotivate colleagues and obscure the message. Sometimes small biz never really articulate the reason they are in business well enough to grow their people and thus their business.

Small biz should be, and generally is, quite good at motivating its people. They all know one another, there is a sense of common purpose and a common understanding of what they face, whether opportunities or threats. For small biz to grow, it needs to cast its mission and values, and then trumpet them, so that everyone gets a regular shot of the firm’s DNA. This drives leadership elements into everyone, so each person can anticipate how the business should react and be able to fit an individual or small team action into a collective action. It should work rather like the armed forces – clarity of purpose, agreed goals and leadership right down the organisation. We’ve written a starter guide on how to manage growth here. Even when growth takes place and small turns into big, often big biz loses these drivers as the need for control and protection takes precedence.

Because small biz experience people at an individual level – colleagues, customers and suppliers – there is more empathy usually. This seems to be mankind’s preferred state but the current drivers of management, business, education and government can pull us away. It’s described well by Jeremy Rifkin in this short TED talk. Empathy, he argues, is where we get meaning and a sense of belonging, transcending blood ties, religion and nationalism.

Small biz uses heuristics, usually unknowingly, for most of its decision making. Also there is plenty of individual choice and accountability, as there are few people with often quite broad work roles. This allows for a more agile entity, but brings its own issues when business disciplines such as marketing and finance are not well understood. However, small biz is often quick to rectify errors, even if that just means drawing back to the start point. In that respect, they are good at successful failures. Some element of failure or experimentation is often a necessary precursor to success, and shows that the business is trying to innovate and change.

Small biz is more collaborative. It doesn’t have the same in house resources as big biz, and we encourage our clients not to pull resources in house even if they can, as we prefer them to look outside the organisation, so that they get an external view. We call it forming strategic partnerships, but it is in essence, collaboration, where resource and expertise can be loaned or bought in non-competing areas so that both organisations remain agile and effective.

Are we seeing the end of capitalism and socialism as the dominant economic forces, and moving to a more collaborative society. Would this lead to a more devolved and inclusive social order?  An order where national boundaries have less relevance in the biosphere which we inhabit? Will the Internet of things lead to a society that needs big biz as a rump of organisations that serve a growing number of small societal businesses and home workers with stuff that only big biz can make?  If so, is it better to attempt change in other entities than in big biz, as their days may be numbered anyway? Or is that a too distant a view, as we need answers now, for today’s issues.

How for example, should we develop a model aligning personal and business objectives for larger entities?  Could that lead to discovering the motivators and demotivators, and can we scale this to produce a mechanism for change?  Would that lead to more clarity, and agreement which should engage colleagues more meaningfully? Can that sense of purpose produce a more open entity which recognises that it is in a wider community? Would that allow a gradual shift towards the more distant view without causing deep divides and fractures?  All this also implies metrics that measure satisfaction levels which are not solely monetary, or are money based with a longer view and with a more equal weighting between the various metrics (monetary and others).

In short, small biz has ways of experiencing and experimenting which big biz doesn’t use. Whilst small biz isn’t the answer, might it though provide better ways of framing the questions?