I’ve recruited a lot of people out of big companies (1000+ employees). Here are some of the sources of “slack” I’ve noticed in the process:
1. Employee and Project Mismatch
Many big companies are bad at matching people with projects that they’re good at or excited about working on. In theory, a big company has more people and more projects, and so there is more room for matching. But in practice, most big companies end up worse. A good manager at a small company who knows all the employees personally and who is also responsible for deciding what projects to do next can often do a much better job.
2. Internal Social and Cultural Issues
In a small company, employees are more likely optimized for the company rather than for themselves. This is important because employees make lots of small local decisions every day. There is also a lot of social and cultural pressure, often along with direct financial incentive and intrinsic motivation to do what is best for the company. In many big companies, the main incentive is to look good and avoid getting fired, which leads to decisions that aren’t quite optimal for the company.
3. Lack of Flexibility for Big Companies
It’s generally easier for a small company to change direction. This means more of the work that’s done is optimal for the market, and a smaller percentage of the work ends up in canceled projects.
4. Doubled Work
There’s more duplication of work in big companies. In a small company, everyone can know what everyone else is working on and make sure that everything fits together and is optimally reused. This can be much harder for larger companies.
On the flip side, big companies can get much greater economies of scale. They should be able to invest more in shared components and infrastructure that enable their employees to be more productive. But that often just doesn’t happen because it’s difficult to manage.
5. Bad Hiring Decisions and Low Employee Retention
Many big companies can’t attract and retain the best people. Often, the people making hiring decisions aren’t accountable for the performance of the hires, and much of the time they don’t even end up working with them.
This leads to a cycle where the interviewers don’t improve over time, and adverse selection pulls the best employees toward companies that are better at hiring.
This is just a sample of what I’ve encountered. In many ways, it’s possible for a big company to be more productive per employee than a smaller company, but in practice it’s hard and many big companies fail to do it.
If you look at some of the big companies where employees feel productive and efficient, they have always managed to find ways to take advantage of their scale. Google in 2006 and Apple in 2010 are good examples.
Google’s employees were the best, and their infrastructure and data centers made all of them much more productive at building search and AdWords than they would have been anywhere else. Now, many of the best employees have left, and cloud computing and open source have neutralized a lot of their earlier advantage. Apple, despite its size, has managed to stay nimble, has changed direction quickly, and avoided duplication through its strong top-down culture and processes.
Read Adam DAngelo’s comments on, “5 Reasons Big Companies Experience a Slack in Growth” on Quora.