As a small company owner and an adviser to leaders of the largest of organisations, I have observed at first hand significant differences between directors of small and large organisations. In a nutshell, the small company copes with today; the large one plans for tomorrow. The bigger the organisation, the more time is spent on strategy, planning and risk management. In contrast, the typical corner or machine shop owner tends to be swamped by immediate challenges such as operations, service, and savings.
The differences are most apparent in approaches to cost control-more specifically, managing expenses. When you are spending your own money, it's amazing how your attitude will flip 180 degrees in a heartbeat.
It seems obvious that the most efficient way to spend the money you make is to spend or invest it yourself. That way you make sure it is spent at the right time, in the right way, and on the right things.
As your company grows, the next best option is to have someone under your direct influence and control who will spend it on your behalf and just as you would yourself. This is when budgets work well in small operations. The seeds of failure are usually sown once your buyer starts thinking "new shelving is easier", not "fire-sale auction will be cheaper". Frankly, the only other vaguely satisfactory option is to have monitoring capability but no real control of your money. If your business partner has always wanted a fountain in reception, you may have to use emotional pressure to ensure your version of sense will prevail. Those of us not so skilled in this department usually avoid the discussion by pleading poverty at every corner. Things inevitably deteriorate.
More frustrating is when someone independent of you gets to spend your money while you have to watch in pain. The consultants working on our new computers spent on themselves three times the nightly hotel budget we would lavish on our biggest and best customers. I signed the cheque in blood-red ink.
But surely the worst of all worlds is when someone outside your control spends your money unseen, so you have no clue as to how the fruits of your labour has been spent. This is also the most inefficient situation, usually involving layers of administration costs, and is where government comes to the fore. I rest my case. If you think this all fine for the small-time amateurs but irrelevant for professional executives, I point you to the GEC board in the days when Lord Weinstock was at the helm. I have it on very good authority that his fellow directors were unimpressed by the false poverty displayed by their drab corporate offices, and the chairman's concern as to whether so many of his executives really needed mobile phones. But then GEC didn't become Britain's largest company-and once proud possessor of a cash mountain taller than Kilimanjaro-by mistake. And look what happened once the professionals took over.
The differing approaches mean that David normally flies wedged into the cheapest bucket seat he can find, while Goliath flies club. Of course, we all go club long haul when someone else is paying. Otherwise, I'm only in the front of the plane when travelling free on airmiles-or when my wife has insisted.
That is, until I flew MAXjet to New York last month. This is one of those new airlines created with those spending their own money in mind. For anyone working over the pond it is a savvy choice. No bells or whistles, but an airy relaxing lounge, a comfortable sleep-enabled flight with no need for a day recovering at either end, and no need to adopt the brace position for a financial aftershock. My colleague arrived so relaxed he forgot to put his shoes back on.
I look forward to a new genre of similar offers: how about MAXgov, MAXbank, or even MAXconsultant? Ninety per cent benefit for 30 per cent cost feels like money well spent. For directors it is a very good rule to work by.
Alex Pratt is the founder of thriving small business Serious Readers (www.seriousreaders.com) and an adviser to the UK government on innovation and skills
