No-one needs to be told that Richard Branson has built a hugely successful business enterprise that stretches around the globe. On the surface the Virgin business appears to resemble a large corporate conglomerate however the reality is that it is actually a collection of more than 400 separate small to medium sized companies all operating independently with relative autonomy.

Branson’s view is that as businesses grow they can lose the intimacy and culture that allowed them to flourish in the first place. This must be retained at all costs, he argues. Every time a venture gets big, Branson breaks it down into several new companies. When Branson sold Virgin Music in 1992 he had created nearly 50 different subsidiary companies under that label and none had more than 60 employees. Virgin Records was certainly a big company but it didn’t feel big to its employees.

So what’s the right size? There’s no magic formula but it will be difficult to get the level of intimacy required if the number of employees is more than 50-60. This number might surprise you. The key is that everyone must know each other well and trust each other. It’s hard to achieve this with a larger group.

The internal culture can’t be impersonal either otherwise you’ll end up with a bureaucracy full of clock-watchers and ass-coverers more interested in themselves than in pushing the business ahead. Basically, everybody needs to give a damn.

Some big companies struggle with the idea of thinking small to grow big. They think that economies of scale are more important than creating an engaged workforce. They’re wrong. The team is the number 1 asset and creating a great culture should be an overriding imperative. A great team will achieve a lot more with a lot less resources than an average team operating under a corporate umbrella.

A friend of mine worked for a successful medium-sized manufacturing business that was merged with a larger competitor. One of the strengths of the smaller business was its extraordinary customer service which was legendary in the industry. It had this reputation because its employees were treated like family. They were a small but highly motivated team who understood the business and what had made it successful in the first place. Their culture was prized as the company’s primary asset.

At the time of the merger, the larger competitor made all the right noises about recognising the different cultures and histories of the businesses and how any changes would be made slowly, progressively and with full consultation. Six months later this all changed, however. The business was to be restructured – all that mattered was economies of scale and cost savings.

The problem was the execution of the restructure was terrible – it was done too fast and without adequate planning. Key people left and the outstanding culture of the smaller business, which had taken 20 years to build, was quickly destroyed. Twelve months later the merged group was on its knees fighting for its survival. What a waste.

Central to the power of the think small to grow big philosophy is creating smaller entrepreneurial businesses, or business units, that are focused on exploiting niche markets or opportunities. They need to be well-led, have a defined area of operation, a well-understood plan and a mandate to carry it out without undue interference. Essentially they need to be left alone to “get on with it.” This allows the team to develop naturally and to be 100% focused on what it needs to do.

Branson made a fortune building businesses using this method. How’s your business going?

Have a great week!

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