Ropella

Growing Great Companies

 

Jumping Into Smaller Ponds

Managers seasoned in large companies make a big splash when they plunge into smaller ones.


Two years ago, Kevin Robinson was sailing his way through the management structure at Top Electric CO. as market manager of its $300 million large screen television unit. When TE merged its TV operations with RCA’s, Mr. Robinson was slotted to move up to TE’s corporate staff.

Instead, he jumped ship and landed on the bridge of a company called RentFirst Inc., an Atlanta start-up that rents video movies through vending machines. He transformed from one of a zillion TE market managers into the second ranking executive at RentFirst Inc. His fortune was put into his own hands.

4 years ago, Electronic Research CO. (ERC), Cincinnati, Ohio, reached a crossroad in its business life. At 18 years of age, it should have been past corporate adolescence and steaming on its way toward lofty heights in the blossoming computer-aided engineering arena. After all, it had developed unparalleled mechanical design software and had a history and presence in the market its competitors could not match.

Unfortunately, ERC was not flying high. It was lumbering along, making just a $1.5 million profit on $39 million in sales at a time when industry profits were soaring. The answer to its woes came in the person of Mark Wiggins, a 17-year veteran of Chapman Corp., which is now part of United Corp. Mr. Wiggins infused ERC with “big-company” management and discipline that the small enterprise had never known. Since his arrival, the company has whipped off nine record quarters in a row, nearly doubling its sales, allowing profits to soar threefold.

Two companies, two executives, two stories? Actually, there are two sides to the same scenario: a big company manager; a big fish jumping into a small pond. Conventional wisdom holds that success means working your way up, going from small to big-reaching the top of mountain and then going on to the next and bigger one. But the reverse of that-going from big to small, can hold some tremendous returns for both the manager and the new company.

For the executive, the adage that good things come in small packages often holds true. Going to a small or mid-sized company can be vastly rewarding, both professionally and personally. It can also be more lucrative than working for the biggest and best corporation.
   
Conversely, small or medium sized companies usually do not have home grown management talent to sustain growth and build for the-long term. That talent, however, lies in abundance in the corridors of big business, where executives thoroughly learn the disciplines that small companies need, but frequently lack.
   
The greatest attraction of small or medium-sized companies is the chance to be the boss, to run your own show. In doing that, RentFirst’s Mr. Robinson says, “You can put a personal stamp on the company you are building. Your actions have an impact [on yourself], both financially and emotionally.”
   
Small-company life can also be more fast-paced. “I like the freedom, the looseness,” says Mr. Robinson.  “You can react almost instantaneously to information and not have to go through layers of management. How you get things done is almost irrelevant, as long as you get them done.”
   
Donald White, who left Southern Telephone Co. in 1985 to head up Equipstel Inc., a Boulder, Colo., maker of telecommunications management equipment, agrees: “You get a chance to move rapidly and live by the results. That doesn’t happen in big companies.”
   
The main reason it does not happen is the bureaucracy inherent in large firms. Legions of committees, approvals and matrices come along with the prestige of big-company names. Most small companies are free of plodding and frustrating management structures. In other words, the small pond can be a pretty nice place in which to work.
   
At RentFirst, you can forget about “management layers”-the company has only 12 employees. That kind of environment gives an executive a measure of control over his surroundings not possible in big companies. “If there’s something I don’t like,” Mr. Robinson exclaims, “I can change it.”
   
As for financial returns, they, too, can be greater in a small company. “The cash salary may be similar, but there are stock options and other incentives [in a small company],” comments Michael Nelson, vice president director of Executives in Seating Inc., which places managers in temporary posts. “Managers can get more credit [for their work] in a small company. There’s more of a spotlight on performance.”
   
The executive is not the only one whose well-being comes into play in a move to a small company. The ultimate success or survival of companies sometimes hinges on acquiring “big-company” business expertise.
   
“Small companies are usually based on the founder’s invention or new technology. That drives growth for a while, but once the technology reaches the end of its life cycle, the company must change. Then it needs a market orientation to determine the character of the next product,” Equipstel’s Mr. White observes. “One of the values of going to outsiders is making the transition from an invention-driven company to a market-driven one.”
   
Main Computer Inc. is the classic case. It grew spectacularly on the strength of the Main II computer, and then tripped when the Acceltech did not take off. In came Bob Michelson, the “big-company” manager from Worldwide Inc., to supersede founder Stephen Walters. Under Mr. Michelson, Main produced the Acceltech II, a computer more acceptable in the business market. The company has been flying high ever since.
   
Page 2 »