- I participated in an interesting discussion today about one of the most strongly held perceptions about businesses, that is big companies are “too big too fail”.
Does size of revenue, as an indicator of overall company size, provide an indication of stability, maturity and capability? That is, large cap companies have more mature operations.
The theory is large companies have developed mature processes and practices that enabled them to grow large and maintain their size.
These so called blue chip companies are unlikely to suffer severve drops in value or even collapse. And if they did someone would be around to pick up the pieces and keep them going.
Intuitively Speaking
A small or medium enterprise might fail more often than a large cap company. Common sense would dicatate the large company is less likey to make mistakes or engage in unnecessary or risky practices.
The reality is making silly mistakes, having unmanageble bureaucracies or disregarding stakeholder needs are actually more likely behaviours within a large company environment.
With size, control practices and leadership practices should be more mature enough to deal with the challenges that come with size (more employees, more regulations, and reputational constraints).
Just because it should be, does not necessarily mean it is. Due diligence of large company management, infrastructure and financial framework is just as needed for a large entity as it is for a small to determine the risk and benefits offered by the corporations environment.