by John Abrams
Is it true that small businesses are just big businesses that haven’t succeeded yet? It’s a cherished business doctrine that companies must grow or perish. But at South Mountain Company – a 29-year-old, $6 million architectural and construction firm on Martha’s Vineyard in Massachusetts – we don’t believe it.
We used to respond directly to demand. Whenever work was offered we accepted it, and if we needed to expand capacity we did. But over time we noticed the sometimes negative effects of growth, and we began to question our passive approach. We now have consistently more opportunities for work than we can handle, but we’ve decided not to accept them all. We expand with thoughtfulness and deliberation.
Part of what makes that possible is the fact that we’re employee-owned. The people who own the company and make the decisions are also the people doing the work. We are challenging the false gospel of unchecked growth.
At South Mountain, we’re driven as much by principled practice as by profits. Since co-founding the company in 1975, I’ve learned that while we practice our craft building fine houses and successful neighborhoods, we also produce workplace satisfaction, support good lives, and shape strong communities. Our fundamental purpose is to use our business as a tool to help us create good things.
There are a number of core values we embrace. One is local commitment: We have made a long-term investment in the small island community where we work, with a focus on affordable housing and other initiatives. What may be most unique about our values, however, is our commitment to conscious growth. We believe we would not remain who we are if were significantly larger. Thus, when we grow it is by intention, not by chance.
We think about “enough” rather than “more” – enough profits to retain and share, enough compensation for all, enough health and well-being, enough time to give the work the attention it deserves, enough to manage, enough headaches, enough screw-ups.
The first time we began to consciously question growth was in 1994, in the middle of our most tumultuous years. We had taken several large projects that caused us to double our revenues and add employees. The company was shot through with anxieties, dissatisfactions, and stresses. There seemed to be a general sense we had grown too much, too fast.
We decided to measure the degree of concern. At a company meeting we hung a sheet of paper on the wall with a heavy horizontal line and an arrow at each end. The left end said, “Decrease size to 1990 level.” The right end said “Continue slow growth.” In the middle there was a vertical line that said “Maintain present size.” Each person was given a sticky dot to place somewhere along that continuum. When we stood back to look, we found most dots were just right of the line, a few were to the right, and two were on the “maintain” line. Nobody placed a dot to the left.
This was the group will: that we should back off on the accelerator a little, adjust ourselves to our recent growth, err toward caution, and slow down a bit.
Since then we have a similar meeting every few years. If we can increase revenue or profits without increasing the number of employees or the difficulty of working conditions, we consider it positive growth that doesn’t require examination. But adding workload without increasing staff often means added stress. And adding employees always means greater obligations, because we have decades-old tradition of zero layoffs.When we hire, we are not hiring temporary employees, but future owners.
For the last decade we’ve pursued growth at a snail’s pace. Last year, however, a new consensus emerged: We agreed we have reached optimum size for now, and should direct any future growth to internal efficiencies (like doing more with less). In short, we believe we’re better off small.
Is this a conservative position? yes, because it holds onto what works and avoids risk. but isn’t it also radical? I think so. Foregoing opportunities for growth mean employees of this company value the quality of their work life over the size of potential compensation that might come with more growth.
When necessary, we can increase capacity temporarily by using sub-contractors. We team up with micro-businesses of one to four employees. They like the camaraderie and learning opportunities. These are not temporary employees: they are independent contractors with whom we create long-term relationships.
As George Gendron, editor of INC. magazine, wrote recently, “Wherever I go these days I run into founders who say that getting big fast is not part of their business plan.” But such a view, he added, isn’t considered legitimate in business. “There’s absolutely no reinforcement for such thinking in the mainstream culture and precious few role models.”
Yet he sees new trends arising in residential architecture, which may be harbingers of culture change. After four decades of seeing increasing size in America’s homes, he says the tide is beginning to turn – with books about cottage homes selling briskly. The astonishing and unforeseen success of architect Sarah Susanka’s The Not-So-Big House is testimony to this trend.
In our work we embrace the same standards she proposes: small scale, high quality, protective land use, environmental care. There’s a place for the not-so-big-business as well.
Even within large businesses, there may be a need to think small. Anthropologist Robin Dunbar studied how groups of varying numbers work, and he concludes there is a Rule of 150 for humans – the maximum number of people who can share a social relationship with one another. The WL Gore Co. – a billion dollar enterprise with 7000 employees in 45 locations – limits each plant to (you guessed it) 150 people. They feel they have been able to retain the feeling of a small company by adhering to the rule of 150, and by spreading ownership and responsibility throughout the company.
The business literature has surprisingly little to say about this. Business embraces an unconscious, unquestioned acceptance of unrestrained growth for its own sake, which, as Ed Abbey once said, is “the ideology of the cancer cell.”
Economist Herman Daley describes it this way: To grow means to increase in size by assimilation or accretion of materials. To develop means to expand or realize the potentialities of; to bring to a fuller, greater or better state. our planet develops over time without growing. Our economy, a sub-system of the finite and non-growing earth, must eventually adapt to a similar pattern.”
This conscious growth issue is integrally related to the larger issue that many socially responsible businesses are wrestling with today – the legacy problem of how to keep founding values intact over the long term.
In order to get capital to expand, many companies that start with a social mission and find early success must go public. Once control is transferred to public markets, the machinery of the system is geared to maximum return – which requires continuous growth. Under the rules of public ownership, public firms must be sold to the highest bidder at any time, leaving them vulnerable to hostile takeover.The takeover of Ben & Jerry’s by Unilever is a prime example.
If going public represents one critical turning point, another is the need for founders to exit, or to obtain expansion capital. Such needs led organic food companies like Odwalla, Stonyfield Farm and Cascadian Farm to be sold to Coca-Cola, Groupe Danon and General Mills.
South Mountain Co. can pursue conscious growth because of our cooperative business structure. We have no outside investors and no non-employee board members. We decide what kind of business ours will be.
I’m not suggesting every business should be small in scale. An unquestioned attachme
nt to smallness seems as careless as an equivalent attachment to unconsidered expansion.
Staying small is about realizing when we have enough. More than enough is unnecessary, and can even be counterproductive. Some say arguing about business growth is spurious. We must grow, they say, because nature demands growth. I disagree. Wall Street demands growth. Business does not. Neither does nature. What nature seeks is optimized growth, and in the process it recognizes natural limits.
In the book Upsizing, Gunter Pauli points out that if an oak tree grows to 150 feet, it is strong enough to resist wind and wear. But it doesn’t grow to 1500 feet, even when nature provides sufficient nutrients. Instead it provides room for ten other trees. If it grew to 1500 feet it would become too fragile. It would lose resilience and flexibility.
Why do businesses want to grow? Maybe it’s because the pursuit of happiness seems to have become, for many, the accumulation of wealth and power. Maybe it’s because we’ve been led to believe we’re supposed to grow.
But our inquiry need not be about growth versus no growth. It better serves us to think about the quality of growth. Some things we want to grow and some we don’t. We want to nurture our responsiveness, our satisfaction, our effectiveness, our reputation, our legacy, our sense of accomplishment, the quality of our products, and our contributions to human life. We don’t want to increase our waste, our pollution, our unfulfilled commitments, our stress levels, or our workloads. We wish to change the measure of growth from quantity to quality. Not to grow but to achieve worthy goals.
The pursuit of more power and wealth may be like chasing a porcupine – you just might catch it. and that may have consequences as painful as the porcupine’s quills. I suggest there may be optimal scales for different businesses, that we need to think more broadly about about the meaning of growth. Perhaps it’s time to bring a new word into the business vocabulary. That word is “enough.”
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Adapted from the book by John Abrams, The Company We Keep: Discovering the Cornerstones of Small Business and Community, forthcoming from Chelsea Green Publishing in spring 2005. www.chelseagreen.com
Contact John Abrams
South Mountain Co.: www.somoco.com
FROM Business Ethics, a SustainableBusiness.com Content Partner.
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