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Is Small Prettier in Financial Planning? (Part 1)

15 February 2008 - Miscellaneous - Editor

Have you read our earlier publication “Customer Benefits versus Profits for Financial Planning Service Providers”? We brought you examples of how small community and regional banks have done better than the large international ones in 2008. Every week of early 2008 has brought more bad news about large financial institutions going down because of bad loans. Is there a lesson in how smaller banks have stayed away from such a mess? Should investors favor stocks of small businesses? Are there limits to profitable growth in the business world? Could future losses hide in today’s blue chips?

A small business can also run up doubtful debts. Size is not the only difference between a well-managed business and one that is not run professionally. However, executives have human limits on how much they can control directly. How can we be sure that large and diverse teams of people pull together in the same direction? Some professionals such as physicians and attorneys function alone or in small groups throughout their professional lives. Stock investors, executives, and small business owners, all have common interests in learning to delegate-that is getting people to work together for common goals.

MBO as a Defense against Stock Value Losses

Management by Objectives (MBO) has been around business for more than a quarter of a century. You do not read much about it in today’s business papers, but it still works. MBO is just right for rapid business expansion. You can hire large numbers of people, and have them work at distant locations, without any loss of unity. MBO does not cost money, so it suits even the smallest business owner who has chances of growing. MBO also promotes equality because it levels the playing field between rival employees. Any employee who faces discrimination at the work place can use MBO for fair work evaluation.

MBO has downsides. No one’s nose stays at the grindstone all the time. Besides, it is hardly possible to agree with your colleagues in every case. All humans have dark sides, and MBO can be hurtful when it highlights a weakness or a failing. MBO is also limited to matters that we can foresee, whereas many business events are entirely disruptive. After all, Katrina even took the FEMA guys by surprise! The bottom line is that while MBO is far from perfect, it can protect business results in challenging times.

Is Small Prettier in Financial Planning? (Part 2)


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