Business is all about Business

[bUU]

The small company I work for has recently been acquired by a large multi-national corporation. While we're not employees of that large multi-national corporation, we're receiving some of the new employee indoctrination so we're gaining some insights into the internal direction and environment.

Backing up a second: While I've worked for this small company for twelve years, and another small company for a few years prior to that, earlier in my career I worked for two corporations that were among the largest private employers in the world at the time I worked for them, and one remains in the top 20, the other in the top 100. So I'm not new to the corporate world. I'm noticing a major difference this time around, though.

Those two corporations I worked for decades ago impressed on us the importance of what the corporation was actually doing, i.e., focusing on the specific products and services we were making for and providing to our customers, how being the best XXX-maker was so critical, how excellence in XXX-making was the goal, etc., and that's how we would increase shareholder value.

The corporation that acquired our small company is projecting a different message. There seems to be a strong emphasis on managing the corporation's business units like a portfolio. There is relatively little focus (in the introductory materials) on what most of the employees of the corporation do (building, assembling, inspecting, installing, servicing, etc.), and a much heavier focus on what we referred to as "staff operations" decades ago: Media relations, visibility in the trade press, financing, mergers, acquisitions, and divestment.

[SteveinMN]

The corporation that acquired our small company is projecting a different message. There seems to be a strong emphasis on managing the corporation's business units like a portfolio. There is relatively little focus (in the introductory materials) on what most of the employees of the corporation do (building, assembling, inspecting, installing, servicing, etc.), and a much heavier focus on what we referred to as "staff operations" decades ago: Media relations, visibility in the trade press, financing, mergers, acquisitions, and divestment.
Interesting -- and, honestly, dismaying.

My last gig -- a Fortune 100-ish global manufacturing company -- showed a very different skew than media relations and financing, though M&A&D were much more of a thing (seems if your corporate culture no longer supports being entrepreneurial, now you just buy entrepreneurs). In fact, rather than funding them independently, budgeting for staff operations was set as a percentage of sales. Unfortunately, while demand for staff services may go some up with increased sales, there's still a high floor one runs into when sales slump and there's no money for same staff operations.

What we did see was much more marketing-related. X percent of sales had to come from "new" products, even if the "new" was only a rearranged version of an existing product. Business units had to maintain a certain profitability level or they would be reorganized into larger business units ("In order to perform more efficiently, we're merging the Kitchen Utensils unit with our Timber Products unit. Wooden spoons, wooden joists -- what's the diff?"). It's a far cry from discovering new technologies and then making new products. Now it's about brand equity and line extension and Tier II markets. Oh, and the folks on Mahogany Row, where the ecosystem never suffers in bad times.

[Zoe Girl]

I am working for a very large school district, it may be different in some ways from corporations however not as different as you may think. The trend has been to replace positions with people outside of education, I have mixed feelings. They come in with a more business perspective which could be good but there are a LOT of educators with experience and no jobs because they did not fit the model.

What seems really different is both good and bad, one is to treat education with more customer service. That means charter schools, innovation schools, and choice. The research is mixed but often they don't show higher achievement when they truly have the same population. It also means that we have thrown away some of the good stuff like not keeping teachers which values community and relationship and quality. I think that is what I hear from bUU, that the way it used to be was about developing quality and relationships based on that quality of service and product. I also see my district trying to 'sell' our schools and programs by introducing a lot of change and image work.

[Lainey]

I also work for a large corporation, and what I've seen is the monetization of almost every internal interaction.
E.g., "Hey, Fran, here's a quick project for your dept. that will save money. Two other depts. have done it and are pleased with the outcome." Reply from Fran: "Can't do anything without a charge number." Project person: "I don't have a charge number to give you, but I'm telling you this is an easy project with a guaranteed dollar savings." Fran: "Sorry, nothing gets done without a charge number."

or, "Can we try to do this another way? I've heard great things about this software and my colleagues in the industry are getting great efficiencies with it." Reply from management: "Sorry, we don't have money in the budget." Then, the corporate annual report is issued, and, as usual, multi-millions have been awarded in salary and stock options to the top level execs.
Not very inspiring for any of the employees.

[Zoebird]

seems if your corporate culture no longer supports being entrepreneurial, now you just buy entrepreneurs

This is basically the situation. DH's prior company was a small company that provided one of two products in a specific market. They focused on creating a better project than the other small company.

Then, the company was sold to a large company that buys companies. They bought both this small company AND the other one, and effectively mashed it into one product for a market wherein there are now no competitors.

And, in addition to this product line, they have several other different kinds of divisions in many other areas of business such as automotive, agriculture, furniture making, and the software of these two companies now making one project.

Totally bats and unsustainable, but does create room in the market for viable start-up competitors.

[Yossarian]

Totally bats and unsustainable, but does create room in the market for viable start-up competitors.

For some companies, it's very sustainable. Small startups are better at finding new products, big companies are better at taking good products and making them broadly available.

[catherine]

For some companies, it's very sustainable. Small startups are better at finding new products, big companies are better at taking good products and making them broadly available.

Exactly right.

I just read a book called Built to Sell which turned some of my paradigms on their heads. The bottom line is, it's not about the service, it's about the system. My idea has always been you bend over backwards for your customer and you will be rewarded. This book's message is if you bend over backwards for your customer you'll just burn yourself out unless you systemize your service offering and turn it into a product that's scalable and repeatable--at least if you have a hope for selling it.

So, similar to what yossarian is saying, sometimes small startups tend to be better at coming up with the ideas and building the customer base--big companies are better at knowing how to provide an infrastructure that will maximize profits for its shareholders.

In my case, this book was really eye opening. I'm thinking of applying its principles to my market research consultancy and seeing what happens. The writer started out in market research, so that made me feel like maybe I can do what he did.

ETA: in terms of the side business I'm starting--the local food delivery service--if I can, I want to try to be more creative with the business model. Eventually if I wind up needing to hire employees, I'd like to play around with a worker-owned business. I've been reading about them and I also have a contact with a similar worker co-op type business, Pedal People in Massachusetts, through the permaculture class I took.

[ApatheticNoMore]

There's no question about which it feels more overall fulfilling to work for though. A small company that's forever trying to come up with new ideas and reasonably improve it's processes as that's it's whole strategy, or a big company that doesn't care how inefficient it is but always is acquiring some new company as that's it's whole strategy. The later is occasionally easier but just seems overall incredibly pointless.

[Zoebird]

Seeing as I work in a business that I'm striving to make repeatable and scaleable, yes, I get how that works. It's the basic franchise model, actually -- so it's one that I work with.

My experience with acquisition businesses is that they just keep acquiring. In the process, they might liquidate entire businesses/product lines, and as such destroy specific businesses/industries that existed before (people lose their jobs, the region looses a job provider/tax base, etc). And that is not sustainable (to communities).

Obviously, the business continues to profit, buys more companies, keeps what works, gets rid of what doesn't and moves on. But the effect on main street is basically "too bad, so sad."

When my husband's company was purchased, it was overall healthy and profitable. There was a good benefits package, decent pay, an annual bonus, and also profit sharing. They employed about 350 people. The next year the business was healthy and profitable, but the benefits package changed for the worse -- more expensive and less benefits, and was also an acquired part of the company -- there were no COL adjustments or raises, no annual bonus, and no profit sharing. So, our income effectively went down -- and continued to go down over the years while working there.

In addition, they demanded 50 hr work weeks (which the CEO would announce before heading to france on his 5 wk vacation -- not great for morale), because they went to a "merit based bonus system" wherein if you worked more hours then you would be demonstrating merit. Of course, the bonuses were not money but things like $25 gift certificates to costco. Not worth it, so DH only worked 35 hrs a week (as per his original contract).

And finally, they reorganized and laid off at least 1/3 of the people incrementally. Now, the company only employs about 150 people from both groups, and is VP heavy, as well as outsources in India.

That's not very healthy for those people who lost their jobs -- many of whom were with the company for over 25 years.

So, no, I'm not going to call it a "sustainable" business model. Yes, it's sustainable for the business itself (as it reworks it's assets), but it's not sustainable for the people who work in those businesses.

[Yossarian]

In the process, they might liquidate entire businesses/product lines, and as such destroy specific businesses/industries that existed before (people lose their jobs, the region looses a job provider/tax base, etc).

Managers should consider the human costs, but you are hurting more people by maintaining assets in non or less productive capacities than you are by undertaking the painful but hopefully productive reallocation. Unfortunately the costs and benefits of a given change usually are not equally distributed. But collectively we all benefit.

[bUU]

Similar logic can be applied to rationalize limited levels of polluting the environment ("industrial pollution sometimes only affects a local neighborhood, but collectively we all benefit"), worker safety ("keeping industrial safety costs down hurts only a small number of people, but collectively we all benefit"), etc.