So many people in business seem focused on growth. There appears to be no end of people wanting to tell us how to be bigger. But why? Instead, we should all be more interested in being better, more effective and positively impactful. We need to meet our stated aims and moral missions, whilst sustaining ourselves at the same time. Bigger isn’t always better.
I remember what happened to local council early years teams between the mid 90’s and the mid 2000’s. I would visit council’s and be lucky to find an early years officer at all. In one area, I remember they had one-and-a-half. They were great, knew everyone, did everything, and what they didn’t know about early years and childcare wasn’t worth knowing. Fast forward to 2005, and the same council had over 90 people working in early years and childcare, plus contracted organisations. And I found it the most frustrating thing. They were not great, they didn’t even know each other, could only do their specialist roles, and they needed teaching more than a thing or two. This was a good example of the Ringelmann Effect (1913); the tendency for individual members of a group to become increasingly less productive as the size of their group increases. Ringelmann found as more people are added to a group, it often becomes increasingly inefficient. It is a useful counter-argument to those who believe big is better.
Recent times have caused us all to have real concerns about our businesses and to rethink them – across all sectors. In early years and childcare, we are in the frontline of anticipating and meeting children and families’ massively changing needs, whilst grappling with the realities of finance and business. The fallout of the COVID-19 crisis will create a different world for so many of us for years to come. And these extraordinary conditions will require us to an even sharper focus on the characteristics of our businesses, including their size. This could result in growth, but a consequence could be us becoming smaller.
It’s a cliché, I know, but I love the phrase: turnover is vanity, profit is sanity, cash is reality. After 20 years in business, I believe this is useful, with some justification. Being in the private sector (I have worked in the charity, voluntary and public sector before) I am well-used to the unfair accusation of being exclusively motivated by profit. I am not. This of course is not only a simplistic view; it does not acknowledge we all have business missions and morals. However, anyone in business should appreciate the peace of mind and opportunities that money in the bank, generated by profit, offers the business. The ability to build profits or reserves has been significantly under pressure for the past 10 years after the financial crisis and through austerity. Just as we were perhaps imagining the possibility of things getting better, COVID-19 has changed and will change everything.
Perhaps we might all have to get used to smaller businesses and turnovers. Which means many of us will need to learn to let go, release the vanity and pride attached to scale, and make some difficult and realistic decisions. But the real value of our work is our moral mission and the difference we can make. And there are some advantages to being smaller as Ringelmann found.