Understanding medium enterprise

In a sense, any definition of medium business must be about size. Medium is neither small nor large. Two questions emerge from this sort of approach: a) what size is a mid-sized organisation, and b) is size a good arbiter in this issue? M Institute has done research on this important area which we think is helpful in shedding light on how medium businesses should be analysed and understood.

Defining the size limits of a medium-sized organisation is a matter of debate but the UK government and the European Commission share a similar understanding. The European definition of medium-size is any organisation with employee numbers between 50 and 250, annual turnover of between €10m and 50m, or a balance sheet between €10m and €43m in assets. Mid-sized organisations are categorised in most UK analytics as part of the SME grouping. This is certainly tautological in terms of size as SME seems to cover any companies that are not large, but it does not provide any analytical insight on the behaviour of such companies as they are different from small and micro enterprises in a number of significant ways.

A number of researchers have done work on establishing if there are behavioural characteristics that improve our understanding of medium organisations, The links below provide further information on the studies carried out in this area.

In 2005, the Institute of Chartered Accountants and BDO Stoy Hayward conducted a research study among 183 mid-sized UK enterprises and identified seven key dimensions in which mid-size businesses are different from others in the SME grouping. M Institute extended the ideas in the ICAEW / BDO Stoy Hayward report to contrast medium enterprise with small and large organisations in nine different areas. Interestingly, in many ways, medium business is rather more like large business in its behaviour and characteristics, which makes it even more incongruous that medium business is compartmentalised with small business via the SME definition. These differences are summarised in the table below.

Small business	Medium business	Large business
Owner-managed	Owners plus professionals in key leadership roles	Professional management
Micro-management of employees	Empowerment of employees	Freedom to act within corporate guidelines
Informal processes	Formal processes	Formal structures and processes
Short-term planning horizon	Longer-term planning horizon	Short-term results / long-term planning horizon
Low external input	External input from professionals	Governance structure separate from management
Equity held by founder / family	Wider equity base	Diversified equity base
Small customer base	Diversified customer base	Diversified markets with diversified customers
Limited personnel development opportunities	Culture enables employee / management development	Multiple career development paths
Low borrowing requirement – government support possible	Borrowing needed long-term / funding available shorter term	Wide pool of funding sources

Behavioural differences between small, medium and large organisations, M Institute, 2006

These behavioural differences,rather than size, are particularly important in helping distinguish medium organisations from small and large organisations.

To find out more about medium enterprises, check out the M Institute report, Empowering Medium Enterprises - a guide for policy-makers.