Small business owners can learn a lot from the major corporations around them. These giants are examples of success, with leaders who know what it takes to go from a small shop to a global enterprise.
With that said, you can learn just as much from watching big companies make mistakes as you can from watching them succeed. Even the largest organizations make errors, and learning from them can help you avoid them yourself.
This list of 7 operational mistakes is more common than you may realize. Take note of how they affect even the biggest of companies, and look for ways to avoid them at your own startup:
1. Overspending on Materials
Big companies have big budgets, which sometimes causes them to overlook the price tag on their purchases. Overpaying may be easier than sourcing a new supplier, but it’s rarely the better business move.
Small businesses can’t afford to overpay, but they also can’t qualify for bulk discounts. If a supplier fits all your criteria except for the price, consider joining a group purchasing organization. GPOs harness the collective purchasing power of their members, giving them access to more options at better prices.
2. Hiring Too Quickly
Big companies plan quarters ahead, but they frequently fall short of their own timelines. The result is that they often overhire and then have to let team members go. Not only is this inefficient, but it sends up a red flag to potential future hires.
Make sure every new role is tied to a specific need. If you can’t articulate it, then you probably shouldn’t be hiring for it. And even if you can, your vision for the role needs to extend beyond a single initiative.
3. Failing to Adapt
The business landscape changes by the minute. Big companies sometimes fail to change with it because of their inertia. They either don’t see startups surging ahead of them, or they fail to realize what a threat they are. Kodak, Blockbuster, Dell, and countless others have fallen prey to this problem
Adaptation must be constant, even at small companies. Full-service accounting is no longer necessary, thanks to accounting software. Business travel is all but an artifact these days, given how popular and inexpensive video conferencing tools like Zoom have become. Change with the times, or they will eventually change you.
4. Overmanaging Employees
Every team needs a manager. But at big companies, middle managers often feel the need to prove their worth. The trouble is, they do so by making employees jump through any number of unnecessary and unpleasant hoops.
The result isn’t just wasted time. Overmanaged employees get burned out, do inferior work, and turn over more frequently. They have more fraught relationships with their managers, who may not even realize how overwhelmed they are.
In most cases, less management is better management. Give employees autonomy, and avoid more than a 1:10 ratio of managers to employees. Train your managers in empathy, which might be as simple as pairing them up with their peers for listening exercises.
5. Overemphasizing Efficiency
No doubt: Efficiency is a good thing. But if you overdo it, you may shoot yourself in the foot.
Big companies have a bad habit of paying attention to metrics above all else. They’re constantly trying to increase output and push down costs. The problem with that is, any one person can only produce so much so quickly. Beyond that, their quality of work will decline.
But the problem is deeper than one of quality. When leaders push their team members too far, processes and people snap. And there is almost nothing less efficient than having to refill a role every six months.
Turnover is almost certainly more expensive than you think. One study found that companies pay an average of $15,000 per worker when it comes time to hire a replacement.
6. Failing to Standardize
Many leaders — at big companies, as well as at smaller ones — mistakenly assume everyone works like they do. When work isn’t completed how they expect, they get upset. The result is work that needs to be redone, strained employee-manager relationships, or both.
Standard operating procedures provide clear direction and avoid regulatory snafus. Say you run a company that processes meat to distribute to local restaurants. Without standard operating procedures, you could miss a lot of the regulations that make meat preparation and consumption safe.
On the flip side, providing too much direction can make employees feel micromanaged. There’s no need to insist that they use a certain email template, or ask them to log their bathroom breaks.
Find a happy medium. Standardization tempered by flexibility will keep your employees, managers, and customers happy.
7. Relying on “Stars”
Because they often pay generous compensation, big companies tend to attract star employees. Although these people are valuable, they are often overworked because they can handle just about anything that is thrown at them.
A few stars may be able to float a team for a time. But at some point, they’re going to notice that they’re doing all the work — likely for a similar rate of pay as the people around them. When that happens, they’ll either quit, demand a sizable raise, or simply disengage.
Sharing the burden is the only solution. Ask your stars to share some of their magic with other members of the team. They will not only feel appreciated by the gesture, but they’ll raise the performance of the entire team.
When you identify a “cream of the crop” team member, don’t take advantage of them. Realize that they have not only options, but a lot to teach your team. Nip resentments in the bud, and they’ll be yours for the foreseeable future.
What separates your company from bigger ones isn’t necessarily the operations work required, but the scale of that work. When large companies make mistakes, they have the room to rebound. That may not be true for a company of your size. Learn from your larger peers, and you won’t have to find out.
