last week, I got to spend nearly an hour interviewing Jack Welch, the legendary former chairman and CEO of General Electric, in front of an audience of several thousand bankers from around the world. It was a fun and stimulating conversation that ranged from the toughest leadership challenge facing financial institutions (his answer: energizing rank-and-file employees, who used to be the “friendly neighborhood banker” and are now seen as responsible for the country’s economic mess) to the launch, in January 2010, of the Jack Welch Management Institute — basically, his version of the MBA.
Our conversation reminded me of what a force of nature this guy is — upbeat, informal, and truly original in his take on strategy, competition, and what makes business tick. My favorite theme of the conversation involved the relationship between size and strategy. The country is engaged in a debate about the policy hazards of institutions that are “too big too fail.” But at the level of management, I wondered, isn’t the problem that too many organizations are too big to succeed? I’ve become convinced that size itself is becoming less of an advantage and more of a curse. So I asked Welch: In a world where the Web levels the playing field, where customers expect organizations to be quick, responsive, and flexible, where new business models can overturn whole industries in a matter of a few years, is there a new relationship between size, strategy, and success? Are we moving to a world where small is not just beautiful, but powerful?
The former CEO of GE, the ultimate big-company leader, wasn’t buying it — although he made no excuses for waste, bureaucracy, and the other familiar shortcomings of so many corporate giants. Executives should want their companies to get bigger, he said. For one thing, it’s evidence that you’re winning in the marketplace. For another, it gives you the opportunity to bring in more people, which gives you access to more talent, which allows you to tap into more ideas, which you can then spread more widely — and start winning all over again. In other words, he made the case for size based not on market power but on brain power, which puts a lot of pressure on the talents of management. “I want to be big,” Welch said, “but then run the company like it’s the corner grocery store.” And there’s the rub — at least for big-company executives who aren’t as adept as Welch at tapping the idea-enhancing virtues of scale without suffering the mind-numbing costs.
Indeed, as the bureaucracy-busting Welch was urging bankers to run their institutions like mom-and-pop operations, I couldn’t help but think back to a widely reported story from earlier this fall that underscores just how rare that is. It’s a silly story, so extreme as to seem absurd — except that it speaks to just how disconnected big companies can get from their customers. A guy named Steve Valdez, from Tampa, Florida, wanted to cash a check at a Bank of America branch where his wife had an account. But because he didn’t have an account in his name (although he did have two forms of ID), bank policy required that he provide a thumbprint for anti-fraud purposes. There was just one problem: He was born without arms! The branch manager wouldn’t budge; he told Valdez that he could open his own account or return with his wife. Valdez, as you might imagine, was underwhelmed by the choices — and Bank of America’s stupidity quickly became big news. (My favorite headline: “No Thumbs, No Prints, No Service.”) Would the corner grocer do something like that?
Pete Carril, the Hall of Fame basketball coach, has a trademark expression that sums up the relationship between size and success. “The strong take from the weak,” he likes to say, “but the smart take from the strong.” If you can figure out, as Jack Welch did, how to add to your company’s muscles without atrophying its brain, then maybe you’re not too big to succeed. But most big-company leaders, who don’t share Welch’s fervor for staying close to customers, better figure out how to make their organizations smarter — or they will keep getting weaker.
Bill Taylor Practically Radical – Harvard Business Review