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Small is beautiful to some

August 5, 2008

Ron has a blog post about the downside of being small. Great post with some definite statements about how small is not the panacea for everyone.

First, small and large are relative terms. They are labels we place upon items in order for us to gain some semblance of order. What is small to some will be large to others and the opposite, what is large for some is small for others. Remember the end of the film Men in Black II?

There is another aspect of an organization’s size that is of a prime concern. How it is managed. You can have any size FI and if it is managed well size, though a consideration, is part and parcel of many other goals and strategies. A badly managed organization doesn’t need size to fail.

Small to me means keeping the organization flat, tight, and productive. It means being able to move on a dime. It means ‘fighting’ with 3rd party suppliers that create expensive products that would force you into a strategy or product that is not even a 50% solution. It means quit ‘whining’ and do what you are supposed to do. Small means have staff meetings where the contribution is from everyone so you formulate objectives that are understood and agreed upon so you don’t need a marketing department to push anything. Small means you don’t have to structure meetings to decide on the colour of the toilet paper in the washrooms. The list could go on and on. It is important that the term small does not get translated in the terms most employ. Small by its nature in today’s society looked upon as an anomaly because so much that we are shown (big) is the antithesis of small. That is why I think ‘small is beautiful’.

Ron and Jeffery are right. You need more coming in that going out. A very simple rule of business. But not all mergers have delivered that ideal and so merging sometimes clouds the issue of what is really necessary – changing the management to at least begin to move forward. Sometimes I have seen mergers to build larger empires of senior management. FIs live and they die, nothing continues forever. Try as you might there may be conditions and reasons that are no longer available or valid to continue.

It would be very easy for the Board to say “we need 10% growth and nothing else matters!” Piece of cake. But when they say “we want at least 5% growth, keep the community happy with at least a 7% dividend, make sure donations are 7% of net income, be sure to continue to contribute to the social capital of the CU and the community, and deliver innovative products that are useful, as well as no line-ups in the branch, etc…well that gets a bit more difficult to manage. Keep the bottom line healthy and you can realize all and more of these goals. That is the tough part. Fine tuning all the aspects of what makes you successful. Growing in all of these aspects makes for a difficult and at times impossible situation. But man is it ever rewarding and satisfying when everyone contributes to making it happen. The biggest enemy of being small? Thinking small.

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4 Comments leave one →
  1. August 5, 2008 12:56 pm

    Well put.

  2. August 5, 2008 1:03 pm

    Beautifully written.

  3. August 5, 2008 2:11 pm

    Gene,

    The phrase “economies of scale” has driven many American credit unions into mergers without fully understanding what the phrase means. It’s math. Not a strategy.

    I believe there are “economies of small” and my business is a perfect example. I have tried to partner (merge) with other firms, and I lost my identity. I believe I offer something unique to my clients and that I don’t really have any competitors. I don’t mean that to sound arrogant. I think it should be every credit union’s goal (again)….to have no competitors.

    As a small company I can specialize and stay focused on one thing – helping cooperatives understand that loyalty matters and that brand is not your logo, or your tag line or name, it’s your reputation.

    I truly believe that organizations don’t have values, people do. And if the people making the decisions for the member-owned cooperative only value the bottom-line and growth, then they’ve missed the point of a credit union altogether.

    Can’t wait to see you at BarCampBank BC!!
    D.

  4. August 8, 2008 6:58 pm

    I think it’s very attractive right now to be small, nimble, and focused. Great post – I enjoyed reading the way you articulated your side of the debate.

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