Tuesday, December 23, 2008

The big myth

The big myth is one of the things that infuriates me most - the belief that things are best if they are big. Particularly in the business world.

The general principle behind this myth is that the bigger you are the more you are able to compete and the more you are able to insulate yourself against economic problems, but as we've seen with a number of very large companies from Exxon to Woolies this isn't the case.

The basic theory behind the big myth is the same as that used by big government - that by centralising everything you minimise the bureaucracy and are able to concentrate more on doing "the business", but as anyone who has worked for a large corporation knows that isn't what happens in reality. Instead the bureaucracy grows exponentially and you end up with an organisation that is tied up in red tape.

Worse still, you end up with people who are unable or unwilling to do anything off the cuff - which actually stifles the innovation which companies need to move forward. With little innovation internally the company finds that the only way it can find innovative new products is by buying up smaller companies that somehow come into its radar. They are then swallowed up whole and quickly turn from dynamic innovative companies into just another corporate arm with the usual red tape and petty corporate thinking.

It's the same with government. The more you centralise, the more bureaucratic and unwieldy it becomes and the less responsive it is to the needs and requirements of local populations - what is decided in Westminster and implemented through various "corporate arms" of government may be suitable for Hackney but entirely inappropriate for a village in Dorset.

Even though we've had a degree of devolution - except for England - the fact is that centralisation has actually got worse over the last ten years with more and more power concentrated with the EU. It's ridiculous to think that an organisation based in Brussels issues directives that have to be implemented the same way in every part of Europe.

Just as it is daft to assume that the requirements of that Dorset village are the same as Hackney it is equally ludicrous to assume that the requirements of a German city are the same as a Spanish hamlet - but that is the situation centralisation creates so an Indian restaurant in Solihull is required to obey the same rules as a Greek taverna in Santorini in the interests of "fair competition" even though it is plainly daft to imply that the taverna and curry house are in competition with each other. But thems the rules - and to ensure those rules are implemented the government (the EU) creates a vast bureaucracy to oversee their implementation AND requires businesses to create their own bureaucracy to monitor that.

The result of this is that large companies immediately have an unfair advantage over smaller companies because giant corporations already have that vast bureaucracy in place. When the EU issues a directive the corporation can swiftly implement it - it costs a fortune to do so, but they are more easily able to absorb those costs. Small companies can not. But regardless of whether they trade internally only or export as well, they ALL are required to implement EU directives.

So centralisation encourages corporatism and corporatism stifles the lifeblood of progress - competition and innovation. Corporations are also slaves to a single criteria - the share price. There are large corporations which are extremely healthy with excellent profit margins, strong order books and cash in the bank - but because their share price isn't doing as well as it could be they are being forced to "restructure" even though there is no real need to. But the share price is the single issue on which their performance is judged and the only concern of the CEO - so jobs are cut, lives are devastated and families ruined all for the sake of a share price.

The big myth has dominated thinking since the end of World War 2. Ever since then we have been duped into thinking bigger means better. Our successful and thriving car and aviation industries were merged into large corporations by governments that believed big was best - and as a result we have neither a car industry nor an aviation industry worthy of the name today.

The big myth is the reason why we now have big government and big corporations (I don't mean just business corporations - there are others too such as trades unions and NGOs) who are utterly reliant on one another.

In a day and age when the word "diversity" is bandied about with gay abandon we've lost touch with the fact that where we really need diversity is in business and government. Business thrives on competition and local populations have different needs up and down the country. Neither can be achieved by centralising power into fewer hands and giving control to vast bureaucracies.

1 comment:

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