Lessons in Leadership
What's right with our free enterprise system
Small business is one of the keys to our strong and growing American economy
By Robert L. Bailey
Small business is one of the keys to our strong and growing American economy. It’s an example of what’s right with our free enterprise system. Perhaps that explains my ongoing love affair with independent insurance agencies and regional insurance companies. I’m very much a fan of small business. Small business is responsible for the creation of most new jobs in America and for this nation’s very robust economy.
Of course, every business, wants to grow—and must grow if it is to succeed and prosper. Too often, however, that growth brings with it the waste, inefficiency, bureaucracy and the not-too-favorable culture of big business. Count the times you’ve seen the small, profitable, successful, customer-focused company evaporate when it is absorbed into a larger parent. Relatively few companies are able to become large while retaining the small-company philosophy and values that brought about their initial success.
What’s so great about small business?
• First is accountability. In small business, everyone has a clearly defined mission. Every person is charged with the responsibility of carrying out that mission. Contrast that culture with the super-large organization in which rank and file workers express the sentiment, “I don’t know whose job it is, but it’s not mine.”
Several times during my career I’ve made the mistake of not clearly defining missions. I can recall one situation involving a state of operation that had become consistently unprofitable. “Who is responsible for this?” I asked my direct reports. “If you’re going to fire the person responsible, who will that be?” Some said it was the underwriting manager; others felt the actuaries played a role; perhaps the sales people were partially responsible; and a few others were listed as possible culprits. Finally one suggested, “The only person we know for sure is responsible is you, so it looks like you’re going to have to be the one who is fired.” He was only kidding—I think.
In accountable organizations, one person should be clearly responsible for any particular problem that might arise. If your people are asked, “Who is responsible for (fill in the blank)?” there shouldn’t be three hands or no hands. There should always be one hand and only one hand.
In small business, responsibility and accountability are generally clear-cut. This is a prerequisite of success.
• Small business lacks bureaucracy. When companies become large, too many believe that they must have a vice president of industry relations, a vice president of community relations, a vice president of compliance, a vice president of planning, a chief risk officer, a chief ethics officer, a corporate development officer, a chief diversity officer, a chief blogging officer, and countless other high-powered titles, including several managers. The mere presence of these individuals and departments doesn’t necessarily guarantee that the functions for which they are allegedly responsible will occur.
It’s not that I’m opposed to planning, industry relations, community relations, diversity, corporate development, and similar activities. It’s just that these matters cannot be separated from the day-to-day operations of the company. These are integral parts of every management job. Small business understands this.
• Small business is efficient. Employees of small business understand that their mission in life is to serve customers. When it’s necessary to add staff, that staff is on the firing line serving customers.
• Small business is people oriented. It’s a system in which people serve people.
American consumers are screaming for personal attention. They want someone to care about them and their problems. When they call, they want to talk to a human being. In their everyday business transactions they want to build a close and trusting relationship with people.
Although some large banks have begun to adopt the “personal banker” concept to bring back personal relationships to banking transactions, our experience has been that each time we go to the bank, our “personal banker” is a different person who doesn’t know us and may even require identification to cash a check.
• Members of small business understand and support the simple concept that more money must come in the front door than goes out the back door.
Investors and regulators alike are expressing concern about CEOs who receive millions of dollars a year in compensation while sales stagnate, profit margins evaporate, stock prices fall, and employee lay-offs are required.
On the other hand, when executives of small business are paid well, it’s a near sure sign that the company is performing well and all constituencies are being served well.
Certainly every small business isn’t the model of efficiency that I’ve described; and every large business isn’t so bloated with waste and bureaucracy that it can’t waddle. But I can safely say that every successful company, regardless of size, incorporates the philosophies and values of small business.
Three cheers for small business—and for big business that thinks and acts like small business. *
Have a question or comment on leadership? The author would like to hear from you. Robert L. Bailey is the retired CEO, president and chairman of the State Auto Insurance Companies. He now speaks professionally on leadership, customer service, sales, ethics, strategic planning, and similar business topics. He is author of the book Plain Talk About Leadership. Visit www.bobbaileyspeaker.com or contact him at (941) 358-5260 or email@example.com.