"I've recently been happy to find that the Oxford Style Manual has the following to say about that ... less common now, editors should leave it where it has been imposed consistently, as it can serve to avoid ambiguity."
But this is an excellent example (in my mind anyway) where such hyphenation has served to ambiguate it in the wrong direction.
The example is cited: small scale-factory
This tells me that it is a small (scale factory) i.e. the factory is associated with scales, and it is a small example of such a factory. A small factory that makes scales.
Whereas a small-scale factory is a factory that is described as small-scale, or possibly one that manufactures small scales.
The algorithm being that the modifier is hyphenated with the thing it is modifying... In this case it is the scale that is small and not the factory.
The example white water-lily is fine because it is the lily that is associated with water. This compound entity is then described as white. It is not a lily associated with white water.
My zwei pfennigs.
Jitze