How Cities Outlast Companies

Last week on the Fast Company site, a piece titled 'How Short-Lived, Slow-Moving Companies Can Become More Like Fast, Creative Cities' , a review of some of the research of physicist Geoffrey West on the growth and development of cities, caught my attention. It was a familiar read since I had previously blogged about West and his research in December 2010 in a post called 'Physics, Cities, and Corporations'.

By way of review, West describes a theory, based on extensive research of world cities and over 23,000 companies, that cities tend to follow a pattern found in other complex ecosystems; most often, they grow in stability, success, and creativity as they increase in size and grow more diverse. With rare exceptions, cities tend not to disappear. In contrast companies tend to look more like mammals, getting slower as they increase in size and bureaucracy, and then growing old and fading away entirely.

Why did I want to essentially re-post on the same topic once more? Well, the original piece ran a few days before Christmas 2010, and somehow I get the feeling that physics and demographics were not really all that compelling for most readers who might have had visions of sugarplums and all that going on. And second, last month a talk given by Professor West about his theories and presented at the TedGlobal2011 event was posted on the Ted site. A copy of the 17-minute talk is embedded below, (email and RSS subscribers will need to click through to see the video).

While West's theories are highly provocative, they don't really start to offer organizations, particularly large ones (or ones that aspire to grow large), ideas on how to prevent that inevitable slide into the kind of growth stagnation and slow decline of vibrancy, creativity, and energy that seem to ensnare so many large and mature organizations. Why does it have to be that with increased size, organizations seem to be destined to slower rates of growth, and eventual disruption at the hands of smaller, faster, more agile competitors? While cities, on the other hand, seem to thrive with growth, and when you dig into West's data, see increases in efficiency in many measures - energy use, infrastructure requirements, creativity, etc.

Obviously this topic is interesting to me, since I've posted on it twice, (and watched the TED video a couple of times), so hopefully this will resonate with some of you that might be inside organizations that seemed to have lost a step as they have grown larger. 

What are some of the ways that you can help instill some of that energy and agility that most of your smaller competitors are using against you? What, if anything can you take from the growth of urban areas and city ecosystems that might apply? 

The Unfamiliar and Scary

Submitted for your consideration, three pieces of news from the last week or so:

Maryland Department of Corrections subjects job applicant to a social media strip search by making him turn over his Facebook login and password.Flickr - soonerpa

New Jersey Police Chief offers tips and advice to parents on how to hack into their kids' social media accounts, to snoop and spy, sort of the 21st century equivalent of reading their diaries, (man, that is an old fashioned reference, does any kid keep a diary anymore?).

Spanish nun who had served for over 35 years expelled from her order due to 'Too much Facebook.'

While the three stories all have social networking in common, specifically Facebook (aside, are we getting close to Facebook becoming the generic term for 'social networking', like 'Kleenex' now essentially means any facial tissue?), this post really isn't about Facebook at all.

To focus too much on how organizations, be they public or private, approach and adapt to Facebook, Twitter, and whatever comes next is, I think, to take too narrow a view of what is important and common about the above three situations. 

It is sadly for leaders and institutions of limited courage and vision a short and straight path from the unfamiliar to the scary.  What they don't understand, what they can't reference in a policy or by past experience, what in their narrow world view seems at all out of the ordinary can quickly evoke feelings of discomfort, angst, anger, and in the cases we see above, result in seemingly irrational reactions. 

Yesterday I posted about trust, or at least a form of trust.  I more or less said that external measures of influence can only be guides at best, and that ultimately the value and influence one exerts upon you is a highly variable, highly personal evaluation. And I think we all can kind of agree on that, at least in theory.  'Trusting' an algorithm to give you sound advice that is to be used as a meaningful measure inside organizations does seem like too much of a stretch.  We love our machines, but we are not quite ready to trust them. Even you Watson.

But in the cases above, trust between people is lacking, and in the kinds of relationships we would normally expect trust to be assumed, a given, and only to be withdrawn in the case of some kind of egregious action.  A long time employee attempting to obtain a better role in the organization, a public safety official (who we ought to be able to trust), advising parents to spy on their kids (who the parents ought to be able to trust), to finally, of all things, a nun who somehow ran afoul of her order by discovering a new way to spread the good word.

I don't want to be too hard on institutions and their leaders, often challenged by a flood of new tools, technologies, and issues that they simply can't process quickly enough to adequately address in their customary manner.  It has to be difficult for the Mother Superior of the 'Facebook nun' to know just what exactly she should do.  

But in these cases the leaders, the decision makers might be absolved from nuanced understanding of this new world, they are not absolved from retreating immediately to a position of fear and mistrust.

The unfamiliar might indeed be scary, but people are still people, and by placing your trust in those that you know you have earned that trust, the unfamiliar becomes less scary, and more exciting. 

Physics, Cities, and Corporations

Last weekend's New York Times magazine ran a lengthy piece titled 'A Physicist Solves the City', in which the physicist Geoffrey West is profiled and his theories that the growth, prosperity, and occasional demise of urban centers can be quantified and analyzed by the correct application of the right equations.Old City

For example, given the population of a city, West claims to be able to accurately predict the miles of sewer systems and the average income of its inhabitants. The main idea is that beneath the surface differences in architecture, food, and sports teams, is that all cities are fundamentally the same, and once you understand this 'sameness', you can make better decisions for allocating investment and resources for infrastructure and public and social services.

It is an interesting, if long, piece that makes for thought provoking reading.  But the most interesting portion of the profile is towards the end, as West turns his attention to the study of the corporation, and more precisely the large corporation. West theorizes that as cities grow they become more successful, mainly by leveraging economies of scale and the relative energy efficiency associate with dense populations. He states, 'In city after city, the indicators of urban “metabolism,” like the number of gas stations or the total surface area of roads, showed that when a city doubles in size, it requires an increase in resources of only 85 percent'. This increased efficiency of resource use is one benefit, but the other, and more apparent one to the city's inhabitants is that big cities make possible more human interactions, frequent opportunity for the exchange of ideas, and development of enhanced collaborative enterprises

Simply put, as cities grow larger, they become more energy efficient and more intellectually powerful via the simple process of jumbling and scrambling lots of people and ideas in a small space.

So you would think the same 'laws' would apply to the corporation, right?  Larger organizational size come withs better purchasing power, longer production runs that reduce marginal cost, and the benefits of ideas and innovation that accrue naturally by bringing more and more diverse (hopefully) and talented people together in the corporate context. But according to West, the opposite happens. As companies grow in size, they become less efficient, at least measured by a widely applied metric profit per employee.

From the NYT piece:

West discovered that corporate productivity, unlike urban productivity, was entirely sublinear. As the number of employees grows, the amount of profit per employee shrinks. West gets giddy when he shows me the linear regression charts. “Look at this bloody plot,” he says. “It’s ridiculous how well the points line up.” The graph reflects the bleak reality of corporate growth, in which efficiencies of scale are almost always outweighed by the burdens of bureaucracy.

Why should it be such? If cities, more or less unruly and only lightly regulated places seem to get stronger, more sustainable, and vibrant as they grow, why shouldn't the same general rules apply to corporations as they grow?  Why go big companies (generally) seem to stagnate, with ideas and changes taking forever to implement, and exciting new innovations often left to wither and die as they progress from manager to higher manager, from committee to focus group to forgotten?

Again West offers a theory - 

Unlike companies, which are managed in a top-down fashion by a team of highly paid executives, cities are unruly places, largely immune to the desires of politicians and planners. “Think about how powerless a mayor is,” West says. “They can’t tell people where to live or what to do or who to talk to. Cities can’t be managed, and that’s what keeps them so vibrant. They’re just these insane masses of people, bumping into each other and maybe sharing an idea or two. It’s the freedom of the city that keeps it alive.

Interesting idea.  As cities grow they become more unruly, more free, less managed, and despite all this more successful.  As corporations grow they devise and develop more rules, more processes, more top-down control, and erect more barriers in the form of internal structure to random and serendipitous collaboration.

For organizations struggling with growth, or large companies unable to rekindle their agility and excitement of their formative years, could the answer really be to act more like wild, unruly, and insane cities?

A Policy of Truth?

Nothing like a solid HR policy to get in the way of some good natured 'bashing the boss on Facebook' antics.

Turns out, at least in the case of the employee fired by American Medical Response of Connecticut, even an all-encompassing and overly broad policy, ('don't say anything at all negative about the company in any way on the internet), was still not enough of a deterrent to stop this employee from exercising what the NLRB contends is her right, and that is not significantly different from water cooler or happy hour commiserating with co-workers.Flickr - Enokson

I've been thinking about policy development, application, and enforcement lately, not really so much about the above mentioned 'Facebook Firing' case, but in the broader context of what the overall set of policies, (and the attitude towards enforcing them) say about an organization's culture, and how the organization is perceived by new entrants to the fold.

Most of the time review and communication of an organization's policies and norms is kind of an individual exercise.  We make sure each new hire is aware of and (sort of) knows how to comply with our policies, (at least the important ones).  We confirm that every employee knows where to find the documentation about our policies.  But most companies don't host open employee forums or implement interactive tech tools to discuss, create, modify, or even eliminate policies.  Questions and answers about policies are usually private discussions.

And employee investigations of alleged policy violations also tend to examine and evaluate policies on a one-off kind of basis. Unless an employee really goes crazy, transgressions tend to be limited to a single policy violation (attendance, dress code, internet use, etc.).  Usually the HR pro focuses on the demonstrated behavior compared to the policy, (or at least the expectations) for that one area only.

This individual or isolated focus is necessary really; if a random new hire doesn't like the company travel policy; well, too bad.  And when an employee needs to be disciplined for taking too many three hour lunches, there usually isn't a call or need for a careful review of the travel expense policies.

Where it starts to get interesting, and I think much more illuminating, is when an organization is compelled to to make a more comprehensive review of its policies in a broad context.  The kind of review that companies undergo when having to assimilate a newly acquired company.  

Questions from the new group abound. Whose benefit plans are better?  How much vacation will I get? Can I work from home?  Is my dog still welcome in the office?  

And on and on.

The thing is most companies believe they have a kind of unique and special and winning culture.  And that the policies they have established help to outline and support their wonderful culture.  But once they are put in place they tend not to get much revision or consideration, at least not on a holistic level.

Until you have to assimilate a few hundred or thousand people from another company, one that believes that they too, have a unique and special and winning culture it is easy to kind of revel in your own 'specialness'.   In these exercises your culture gets put under the kind of scrutiny that is typically just not practical or possible in the course of normal business.

Sure, your company is special, and fantastic, and progressive and all that.  I'm sure of it.

But the folks who aren't so sure are the newest few thousand colleagues that just found out puppies aren't welcome in the workplace anymore.

Failure to plan?

Everybody has one, that one management or business maxim that while you admit is probably sort of true at its core, you are still pretty sick of.

Some candidates for the 'I am so sick of hearing that' distinction are these beauties:Subdivision - Maricopa County, AZ

'What can't be measured, can't be managed'

Blah, blah, blah, anything at all really, leading up to the '80-20' rule being cited.

Or any initiative that involves 'moving needles', 'shifting paradigms', or 'pushing envelopes'.

But my number one in the 'Not again' category is 'Begin with the end in mind'.

I know, it is probably a reasonable assertion that you should have some idea where you want to go before you set off on the journey. Otherwise, you'd wander around foolishly, right?  You'd just be a hopeless, clueless, aimless idiot until you either collapsed in a ditch at the side of the road, or if you're lucky, managed to retrace your steps to make it home.  Tired, dirty, defeated, but at least potentially smarter from the experience. No way you are doing that again, is the lesson learned.

I can't stand 'Begin with the end in mind' because too often people and organizations translate 'in mind' to 'completely and totally figured out, with any deviation from the end, to be considered unacceptable, and quite possibly an abject failure.'

When you think about how many projects or initiatives in the organization, both ones that are successful and complete positively, and ones that crash and burn,  don't end up looking much at all like how you thought they would when you set out, it seems to me that worrying so much about precisely defining 'the end', is often wasted effort.

How much of 'the end' did you have in mind when you set out on your career path, went on your first date with your spouse or significant other (man, what a lame phrase), or reached in to the giant box of Legos for the first piece of your last masterpiece?

Is what you are doing right now, right as you are reading this, what you had 'in mind' a few hours ago? Last week? Last year?

That's why I hate 'Begin with the end in mind'.  I much prefer, 'Just begin'.