There is no denying that larger companies have many advantages in the marketplace - better access to capital and technological resources, economies of scale, and brand recognition that can attract both customers and quality employees. At the same time, much has been written about how large companies can be slow to react to changing trends and too unwieldy to rapidly innovate. While every entrepreneur’s goal is to grow their business, including here at Fueled, watch out for negative aspects that can come out of becoming too large.

Trouble Maintaining a High Pace of Innovation

Smaller companies are often described as “agile” or “nimble” because they can respond quickly to changes in technology, market demand, and other forces. They’re normally in a better position to try something new, learn from client response, and reposition themselves based on successes and failures. There is no lag of information between the employers and the employees like there may be at a bigger company, where everything is slowly passed down from one level to the next.

Large companies tend to have established products or services and practices that they want to protect. If a company has a team of employees dedicated to supporting a platform and another team dedicated to selling that service, it could turn into a huge endeavor to switch gears if a new technology or market demand comes along that makes their old way of doing things obsolete.

Impersonal Customer Service

Maintaining a personal touch and the flexibility to a client’s needs is important for a company of any size. Large companies tend to focus on volume production and selling instead of personal interactions with individual clients. There are big companies, like Apple, that make it a point to provide excellent customer service regardless. But those are far and few between.

That may be the first sign that a company is slowing down because what is a company without its clients and customers? When the quality of customer service begins to drop, if there was any customer service to begin with, it’s implying that  all of the people who depended on and supported that company are no longer of any value.

Talent Stagnation

Rigid organizational structures can lead good employees to feel like they are locked into their roles with no upward mobility. Smaller companies often offer more flexibility and growth so there are more chances for employees to move laterally or vertically to continue to feel challenged. As a company grows it inevitably creates a hierarchy, and while this structure can be positive up to a point, it can also lead to an organization determined to preserve its status quo.

Work and life balance are becoming more important and companies that can’t keep up with changing standards, like telecommuting, fall behind in productivity. They also lose employees to up-and-coming firms that are more attuned to their needs and schedules.

Increased Scrutiny

Businesses want to attract attention, but as a company grows in size and gains market share, it may find itself the object of unwelcome media and/or regulatory scrutiny. According to Fang and Peress, stocks of companies with no media coverage earn higher returns than those with high media coverage. After the financial crisis of 2008, the notion than some large companies are “too big to fail” is no more. Large corporations are now considered to have the potential to do immense damage and therefore should be closely regulated.

There is no defined ideal company size. In some cases, a company that used to occupy multiple floors of a large building can be reconfigured as a small team of less than 20 that outsources its entire infrastructure. But many companies continue to expand while remaining flexible enough to take advantage of changing forces. The smart approach is to be cautious about growth and watchful of signs that your company is becoming too large for you to handle.

Author Bio
This article is written by Ilan Nass from Fueled, an award winning mobile app design and development house based in New York and London.