As cities become larger, they create more wealth and
innovation. As corporations become larger, they are less creative, less able to create wealth. That difference
could suggest a very different model of the corporation, helping to highlight a
potential transformation in business that would make employees more entrepreneurial.
First, a theory about
why cities thrive and companies stagnate as they become larger.
Connections in a network grow exponentially. Put in terms of
a city or corporation, the number of potential relationships between people
rapidly goes up as the number of people increase.
The 22nd person to join a group, for instance,
just adds one more person to the group. However, he also adds another 21
possible relationships. This 22nd person could form a friendship,
start a conversation, start a business, or even start a family with one of the
others in the group.
In a city, the relationship of the 22nd person to
the other 21 is not regulated, not defined, not prescribed. And this is a reason – perhaps THE
reason – why cities become more dynamic as they get larger.
In a typical corporation, the relationship of the 22nd
person to the other 21 is regulated, is usually defined in a process. While a
new employee might start a conversation or even a family with one of the other
21, they will assuredly not start a business within the corporation. That level
of innovation is not expected of employees. And while a new citizen of a city
could start a business or make an investment that could make her richer than
the mayor, no new employee is likely to ever make more than the CEO. And this
matter of prescribed roles rather than dynamic relationships is a reason –
perhaps THE reason – why corporations become more stagnant as they get larger.
The corporation defines our world in the same way that the
church defined the medieval world. And while the corporation is more advanced
than the church in so many ways, it still lags it in another.
While the church was once able to dictate actions, beliefs,
and require attendance, it is now just a tool that the individual may or may
not choose to use. People in the West are free to meet in homes with a couple
of people or meet in cathedrals with hundreds. They are free to believe what
they want – whether it is exactly prescribed by their minister or in defiance
of it. In the modern world, people use the church as a tool that enables them
to experience fellowship, peace, joy, insight, a renewal of purpose … or just
make their mother happy. Whether you go to church every Sunday or only twice a
year is up to you. The church is a tool.
Contrast that with the corporation. The corporation can
dictate how much time you spend each week. It requires an adherence to a
central vision, prescribes processes around that vision, and gives you a role
within that larger context and purpose. The corporation is not a tool for
individuals to use. For most everyone but the CEO, the individual is, instead,
a tool for the corporation. In this way, the corporation lags the church in
evolution.
Of course it’s not true that all corporations are like this.
Amway and Shaklee are tools that people can use or not. The
person who “recruits” you has no power over you to define your hours or the
process you use. And if you go on to do great things, that person can benefit,
giving someone the incentive to hire someone better than one’s self (not a
normal incentive inside of corporations). Amway grew through the recession, its
sales now in excess of $11 billion.
Ricardo Semler did something fascinating with his company,
Semco. In his first 20 years as CEO, revenues at Semco rose from $4 million a
year to $212 million. One of the more notable things that Semler did was to
sponsor new business initiatives that employees undertook and the company
sponsored. Even more striking, at one point Semler had people working side by
side under very different arrangements: some were renting the facility and
equipment, paying a flat fee, some were working as hourly employees, some were
profit-sharing, and some were involved in joint ventures with Semco. Semco was
a tool that employees could use as they saw fit. And because any arrangement
that employees proposed or accepted were also acceptable to Semco, the
arrangements that lasted were mutually beneficial.
One way to think about what it means to make a corporation
more entrepreneurial is to ask what happens when the 22nd person
joins the other 21. Is that person free to create something new or is she
expected to fill a prescribed role? Is there room for innovation in the relationship?
Because if the new relationship just has to be managed, it means that as you
become larger the cost of managing the exponentially growing number of
relationships within your corporation will just rise. But if you are more like
a city, a place where relationships have potential you can’t prescribe ahead of
time, you’ll actually see an increase in innovation and wealth as you become
larger. To do that, however, probably means accepting that you are just a tool
for people. That is still a shift that most companies haven’t made.
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