Back in the 1980’s one of the most popular books on management making the rounds was In Search of Excellence by Peters and Waterman. Not long after the book was published, several of the ‘excellent’ companies they wrote about ran into trouble. Some of the principles and ideas discussed in the book have since fallen from favor, too, but one of them has intrigued me from the time I first read it.
Scaling down for growth
The authors wrote that many of the excellent companies ignored theoretical economies of scale and deliberately designed their systems and plants to be sub-optimal. It turns out that by keeping things small, these companies were able to achieve efficiencies which more than made up for any economy of scale. They reported that things started to go wrong whenever there were more than about 1,000 people under one roof.