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This Land of Strangers - Robert E Hall

This Land of Strangers

"..the most important book of the decade." — Richard Boyatzis, co-author of best seller Primal Leadership

Relationships, in all their varied forms, have been the lifetime study of Robert Hall. He brings a rare combination of experience as a researcher, consultant, writer, teacher and CEO in dealing with the real-world relationship challenges of modern organizations. When coupled with a decade of hands-on experience in the gritty world of inner-city homeless families it translates into a tapestry of vivid stories, well-researched and oft startling facts, and strategic insights that weave together the yet untold narrative of society's gravest risk and most stellar opportunity.

Why BIG is Going Out-Of-Style

“I am suggesting that they [big banks] be broken up…”  – Sandy Weill, former Citigroup Chairman & CEO, who put together mammoth Citicorp and Travelers

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Put the word big in front of business, government, labor, oil, and banks and it makes the appeal smaller. In my March 2010 column “Big Bank Blowback” I chronicled the strong market-place head winds that impeded the progress of large organizations, especially banks. Now over two years later the strong winds have been upgraded to a storm. According to the latest survey by the Chicago Booth/Kellogg School, trust in large national banks that operate across the U.S. fell to 23 percent from 25 percent in March while local community banks rose from 51 percent to 55 percent for the same period. Confidence in credit unions rose from 58 percent to 63. Ironically, while the financial crisis and a string of scandals and embarrassing flubs raised concerns about “too big to fail,” the crisis-era acquisitions actually accelerated asset growth in the four largest banks to over $7 trillion, up 50% since 2007. This has reinforced a worry that banks have reached a size and complexity that is “too big to manage.” Accordingly, stock prices at most of the largest banks trade at a substantial discount to their book value. Sandy Weill’s about-face supporting breaking up the banks was characterized by the Wall Street Journal as less a change of heart than a heart transplant.

So if size is going out-of-style or even hitting a wall, the question is why? What happens as we grow from big to really big? How does an 800 pound gorilla who sits anywhere he pleases become a dinosaur reaching extinction? Geoffrey West, former President of the Santa Fe Institute points out that in organisms there are clear limits to growth. He has wondered if those same kinds of limits apply to social organizations.

Given our current organizational practices and know-how, I believe we are bumping up against size limits. The question is why?  I think the answer is locked inside a simple conclusion: Big is bad for relationships, and productive relationships are the key to innovation, productivity, and sustainability. In Facebook’s S-1, Founder and CEO Mark Zuckerburg said: “Personal relationships are the fundamental unit of our society. Relationships are how we discover new ideas, understand our world, and ultimately derive long-term happiness.” I would add that in business, how customers, employees, and shareholders relate to organizations and each other is a primary source of value creation (or destruction).

Ade Mabogunje of Stanford’s Institute for Venture Design observed in Forbes: “In design, you have to know what materials you are working with. With human design, the material is emotion.” Systemic economic growth is tied to human emotions and our ability to optimize those emotions and generate passion. Our relationships are an integral source of emotion.

The problem is that as organizations grow large, they struggle to foster relationships that elicit passion from customers and energy and innovation from employees. Growing large usually means more standardized process, control, and risk aversion. It means less tolerance to deviate, innovate, and customize treatment of people, circumstance, and emerging opportunities. As organizations grow large, the design and emphasis is on scaling up and improving the system without calculating the impact of devalued individuals and altered emotions. Size, no matter how desirable, deters relationship.

Today’s youth, told all their lives they are special and unique, grow up to labor in or be served by large, impersonal organizations that treat everyone the same. It is not surprising, as the Wall Street Journal cited: “An upcoming wave of new workers in our society will never work for an established company if they can help it. To them, having a traditional job is one of the biggest career failures they can imagine.” The message our children internalized growing up and the reality of the organizations that employ them has created a growing disappointment gap – elevated expectations crash head-on into declining reality.

A second reality is the dampening of purpose – a key source of passion – so common in large organizations. (Apple is a recent exception that proves the rule.) Members of the so-called greatest generation went to World War II to save the country and the world. Post-war they went to work to make a living for their family – considered a full-filling and noble cause. Compare that to today where particularly the educated expect to feel a more elevated sense of purpose. Much of this “creative class” now finds itself challenged and disappointed with their experience of large organizations where control is high, freedom is scarce and bureaucracy is rampant – if they can find a job at all. Bureaucracy has a way of enslaving the core mission of the enterprise to the mundane, making purpose and its advocates feel smaller. In fact Forbes placed “Big Business Bureaucracy” number one on its list of top ten reasons organizations fail to keep their talent. It seems as organizations grow and become more complex the proportion of administrative coordination and control expand – and purposeful things done, contract. Complexity invites inaction. Loss of purpose repels talent but the recent high unemployment rate has shielded organizations from defections. According to MetLife’s 2012 annual survey, loyalty is at a seven-year low with one in three employees planning to leave their employer by year-end.

Third, relationships are a unique source of accountability. The success of micro-finance in third world countries where repayment accountability is often spread among family and tribe members demonstrates the power of close, strong relationships. Kiva one of the prominent micro-lenders reports a loan repayment rate of 98.98 percent.

In summary, BIG seems to be growing – not larger – but smaller because of how excess size can alter and diminish relationships and their most important byproduct – productive emotion. Economies of scale that produce efficiency eventually get overtaken by diseconomies of relationship that steal energy, innovation, and commitment. Perhaps NOT BIG is the new big.

 

(Column appeared originally in ABA Bank Marketing magazine – September 2012)

By ROBERT E. HALL

Not to be reproduced without written permission. All rights reserved. © Copyright Robert E. Hall 2012

 

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