Mid-level or even top executives who have built their career in large companies may look with envy at small businesses and particularly startups. Many will believe that it must be easier when running a small organisation, where the whole picture can be seen and having total control seems to be a realistic prospect. They might also see it as a chance to create capital wealth for themselves instead of their shareholders. With years of industry experience, extensive networks and proven track records, it may seem that these leaders are perfectly positioned to build thriving businesses from scratch or lowly beginnings. However, the reality is that many big company executives face unexpected challenges when moving downscale.
In reality, few stars from large corporations immediately thrive in the early-stage startup environment or the subsequent scale up phase of a smaller enterprise. The role of an executive in a big company could hardly be more different to the job of an SME founder or Director. The culture is entirely different, as are the skills required. The experience from one is likely to be the exact opposite of what you need for the other.
Are there principles that might improve the chances of making a successful transition?
Resource and support
In large companies, teams and their leaders are specialised. In the world of smaller enterprises, managers need to be generalists. They must wear multiple hats, operate with limited support and make decisions without the safety net of groupthink to catch their mistakes. SME successes are consistently self-reliant. At a small company, wanting more support will risk turning the net impact into overhead creep rather than value creation. This is one of the harder transitions for anyone moving from a big organisation to a small business.
Establishing influence may help an executive to gather support and resources in a large business. Equally, being seen to acquire a larger footprint of direct reports can often be a sign of success in that environment. These ways of working are likely to antagonise people in a small company, where one individual demanding more resources is a serious negative.
Big company executives tend to be demand-driven by initiatives handed down from above them in the hierarchy. In contrast, for Directors of smaller companies nothing happens unless they make it happen. They need to drive multiple initiatives concurrently or the company will stand still. Well defined and well documented processes don’t exist to guide them.
Decision-making
Large companies move at a different pace because they are usually in reasonable financial condition, with less urgency, have a lot to lose from making bad decisions and have built layers of management sign-off procedures over the years. Achieving management consensus matters. These conditions don’t apply in a small business. Speed of action and decision-making creates the greatest chance of success.
Managers at large companies often have the obligation and luxury of thinking about problems that may arise at some future time if things go well. SMEs spend little time on this; the risks of enormous success are so remote they don’t justify planning.
Dynamic budgeting
Big companies usually operate with annual budgets and half-yearly or quarterly reviews. Often the budgeting process is locked down months before the start of the fiscal year. At startups and smaller businesses, budgeting can happen opportunistically, monthly, or even on a constant ongoing basis – often out of necessity to juggle tight cash resources and react to growth spurts or sudden sales droughts.
Daily impacts
Many managerial decisions can have enormous effects in a small business. Larger companies rarely face business critical opportunities or threats. Small companies can face them daily. The most practical way for former senior executives to transition is to focus on learning to evaluate and trust their judgment.
Cultural change
Culture contrast is another significant change. Big companies tend to be hierarchical and process-driven, whereas small companies are flat, fast-paced and less formal. The transition to the hands-on, all-in approach required in early-stage and small ventures can be quite a change. It can be difficult to relinquish control and delegate effectively.
The change for big company executives
Executives from big companies come with strong reputations and achievements but this doesn’t always smooth the path for their start-up or SME involvement. It is important to be mindful that smaller company ecosystems value innovation, grit and adaptability over pedigree. While experience in large organisations absolutely brings valuable skills, start-ups and SMEs demand a different mindset and approach. UK executives considering the leap must be aware of the potential differences and be prepared to embrace new ways of working. Success in the SME world is not guaranteed by past achievements; instead, it’s built on adaptability, resilience and the willingness to get hands-on with every aspect of the business.
If you are seeking professional advice for your business, Opus is here to help. We can arrange for you to speak to one of our Partners, who can discuss options with you. We have offices nationwide and by contacting us on 0203 995 6380, you will be able to get immediate assistance from our Partner-led team.