I've spent some time in very small businesses (including a startup where I was employee number 1) and some time at very large (Fortune 500 sized) corporations. I am fascinated at the urge towards mergers and acquisitions and what happens when businesses exceed a certain size.
The basic notion behind M&A activity is fairly easy to understand -- you grow your business by buying customers and possibly technology and infrastructure, and then you eliminate redundancy to reduce costs (for example, who needs 2 HR departments and 2 CFOs). Overhead goes down - up to a point. However, there seems to be a turning point where that ceases to be the case. I'm not sure where that is, really, I've only seen the top and bottom ends, but it must happen somewhere around when the business moves from "medium" to "large" or "enterprise".
What seems to happen is that as the business becomes larger and larger, the administrative functions decouple from the parts of the business that actually do the work. This decoupling generally has a significant negative impact on the business.
It starts as the administrators lose track of who actually does the work; they start to see their function as the truly compelling part of the business. In their opinion, their needs and their requirements are critical, no matter that real work is being impeded. Head counts in operational units are artificially low, forcing hiring of contractors to do work that should be done by real employees. Contractors get fired periodically even though they may have crucial knowledge simply because the administrators are worried about
lawsuits and the IRS (this is very real to me, as I was contracting at a Very Large Corporation last year and was let go in December, along with a number of other long time contractors due to corporate fear of the Microsoft Contractor lawsuit. I'm about to start a contract developer position at GE Global Research which has a similar 18 months and out policy, we'll see how that goes.)
Other issues arise from large corporations trying to impose inappropriate processes and structure. As these businesses become large through the M&A process, they generally impose corporate wide standards on the new business. This is not entirely unreasonable, it's part of controlling costs, but it needs to be done intelligently. If a business is growing through M&A activity, it is likely acquiring business units that may be doing things that are different from the original core business. A very large retail/wholesale bank, for example, may acquire business operations that, while finance related, are not banking operations in the classicial sense. Imposing software, hardware and security rules that are relevant to banking is often irrelevant, and may be very expensive if not actively dangerous. A good example is an IT security policy that forbids use of NFS (Network File System) because it's insecure while database passwords are being transmitted over the network in the clear. My take on it is that if sniffing on the internal LAN is a genuine threat, your business is already toast.
The administrative decoupling reveals itself in other ways. Some years back, after I'd been working as a developer at a Very Large Corporation for about 18 months (they didn't have a functioning 18 months and out policy at the time), I suggested to my immediate supervisor that maybe a modest rate increase would be nice, and he thought that was a perfectly reasonable thing to do. It took 6 months for the decoupled administrative wing of the business to say no. It's the sort of thing that gives you a real feeling of "they don't give a damn if I work here or not", and the truth is, they probably don't.
That's enough for now. I may come back to this subject at a later date.
