Does Charisma Scale?

Recently I wrote a long essay on the 800ceoread blog about the unifying themes of the five books nominated for this year’s Financial Times/Goldman Sachs Business Book Award. Here’s an adaptation of this piece, addressing two books in particular, Small Giants and The Wal-Mart Effect.

Reading these books close to one another leaves a powerful impression that they are both about the same business questions—is big good?—but that they come at it from two sides and meet in the middle. As Bo Burlingham’s Small Giants argues, the measure of a great company has less to do with its brute size than with the quality of the company’s management, profits, people, and practices. This may seem a surprising message from a guy who was key to the success of Inc. Magazine, a publication which for years celebrated insanely fast growing companies.

Yet Burlingham has been around long enough to witness the hazards of growth, and his book celebrates companies with a powerful sense of purpose and meaning, a culture and spirit that binds itself together in a business sense by linking the company to the community, providing motivation for the employees, and maintaining what really matters for its customers. “When a company has charisma you want to be associated with it,” he says. And that charisma must always be consciously tended to.

Indeed, there could be no more stark an illustration of growth gone mad than that described in Charles Fishman’s wonderfully written and researched “Wal-Mart Effect.” I really loved this book. For many of the early chapters, I was intrigued by the book, and fascinated by many of the stories. Yet at the same time I couldn’t help but feel that the author was somehow conflicted: while writing about the detrimental effects Wal-Mart has on everything from the environment to wage structure to the fabric of city life, Fishman never seems to miss an opportunity to report on the remarkable innovations pioneered by Sam Walton, enabling the company to become such a force of nature.

It turns out that Fishman’s mixed tone results an awareness of the company’s ill effects, tempered by an Inc.-like admiration of the policies and practices that enabled the company’s spectacular growth. Fishman reports on many of the common-sensical yet challenging practices of Ole Sam that made the company what it is today. Walton was a genius at delivering on the most basic of missions—to provide good goods at the best price. And during the crazy growth times he created a culture that kept employees motivated (and produced many Wal-Mart millionaires.) The company has always been single-minded in its goal of growth by selling things ever cheaper than anyone else. And Fishman finds that most of the practices that it now finds itself skewered for are either unintended consequences and byproducts of that goal; or were elements of the business model that translated into qualitatively different results on a smaller scale.

Indeed, for much of its growth Wal-Mart might very well have qualified as a Small Giant, (or even a Massive Behemoth as it were), before it collapsed under its superweight. Scale back its growth by a factor of ten, or maybe one hundred, and the company might have made it in Bo’s book. However, the massive scale resulting from its compounded success, finally takes Wal-Mart to a new and virtually alien place.

Today the sheer bulk of Wal-Mart requires all of society to rethink what the company does and how it affects everyone. This company doesn’t merely play by the rules of capitalism as they are stretched to their logical conclusion; the company has become so dominant that it in fact creates new rules. One of them being that Wal-Mart dictates what millions of companies do and tells millions of consumers how much they should pay. “Wal-Mart has outgrown its culture, it has outgrown its personality, but it has not yet come to terms with that new reality.” And his book does a great job of pointing out what that reckoning entails.

Fishman shows how this factor bears upon many of the most powerful dynamics in the economy today. For example, one of the effects of Wal-Mart’s massive scale is that its very practices redefine what it means to be global.

“In the global economy, the familiar stuff floods into stores: Levi’s jeans, Ohio Art Etch A Sketches, Black and Decker cordless electric screwdrivers, Huffy bikes, Nelson sprinklers, and acres of clothing and accessories—stuff not just for Wal-Mart, but for the Gap and Abercrombie & Fitch and Home Depot and Disney. But more than ever, we have lost track of the places where the products come from, the factories where they are made, the people who make them.” And as a result, Fishman argues, conventional ideas and practices that formed a domestic social contract are anachronistic at the least, and as a working policy, essentially ignored.

Fishman ultimately concludes that: “Wal-Mart has outgrown the rules—but no one noticed,” he argues. “At the moment, we are incapable as a society of understanding Wal-Mart because we haven’t equipped ourselves to manage it. That is the reason for our ambivalence, our appreciation and aversion, our awe and our nervousness, our confusion.” And so it needs a new set of rules, just as we have, over the decades, increasingly regulated the use of another profound American mechanism, the automobile.

One final thought about both books: they are each exceptionally well-written. I’ll prove that with one excerpt I particularly enjoyed from Fishman’s book:

“Wal-Mart’s business relies on its own ceaseless hunger to reduce price a few more pennies (and its ability to transmit that hunger to its suppliers), whether through distribution efficiencies, or cheaper product design, or cheaper labor. Wal-Mart benefits from the impression that globalization is some kind of unmanageable economic weather system out of the control of everyone, affecting all players with indifference, benefiting those who happened to be properly prepared. That posture avoids any of the challenging discussion about why the world is suddenly so flat economically and what role a globe-straddling company like Wal-Mart plays in the flattening. Wal-Mart enhances its own image as just another economic planetary body with an impermeable barrier about how it gets its merchandise, and the impact of its needs on the companies that supply it.”

And for more on Bo’s book, you can check out an earlier post of mine.