The Death of the Megacompany, by Anthony Citrano III

The Death of the Megacompany

Anthony Citrano III

January 1998

I start with a prediction: the giant, impersonal company, with centralized power and authority, will die. While the last decade was the moment for mergers, acquisitions, and general corporate distension, the new era is an age of personalization and agility. Evolution will kill off companies that don't adapt rapidly and respond instantly to their customer base. Linear organizational hierarchy is dead. Rigid rules are dead. Organizations must empower front line workers to make instant business decisions in order to survive with the new digital consumer with high expectations.

I support my thesis with a battery of personal experiences from the last few months. I'm going to name names, so I'm ready for libel suits and cease and desist orders (just send them directly to my attorney, please). While it may appear as such, it is not merely a shallow opportunity for me to gripe against these firms. I was inspired by these experiences, and I feel it shows that remarkable entrepreneurial opportunities exist for new, "boutique" companies that are agile and responsive to their customers' needs at a moment's notice.

Being a technologist and writer in this business has its perks. I get lots of free, new stuff from companies who want me to try it out, tell them what I think, and perhaps even write about them. For example, MCI Paging has sent me several demo pagers, one of which is my primary pager. I can send and receive e-mail and both kinds of pages through a toll free number, the Internet, or another 2-way pager. Check them out at MCI Paging. As another example, I'm writing this column on a beta version of Windows98, which is faster and better than its predecessor.

Of course, with this great new MCI gadget, I eventually cancelled a pager I had to pay for, with a company called Arch Paging (formerly Page New England), who turned off my pager but continued to bill me (in advance). After getting nowhere a few times with their billing department, I dropped into their offices in Augusta, Maine, not far from my home, fairly confident that a little face-to-face would solve the problem. Over the last ten years, through four companies, I've bought dozens of pagers from them, and paid for years of service. Despite this, the "customer service" representative in the office told me it was my fault, and that there was nothing she could do. I simply had to pay the bill. She had no power at all, and it will cost Arch Paging dearly.

In another example, my wife and I moved to San Francisco (and back) recently and had to ship our German Shepherd. We contacted American Airlines several times to arrange her passage. We were quoted the same price many times. When we arrived to pick up our dog, we were presented with a bill that was double what we were quoted. The "customer service" representative kindly informed me that it was my fault, there was nothing he could do, and I had to sign the credit card slip or he would not release my dog. Over the last few months, a dozen phone calls to American Airlines have resulted in no refund of any kind. Even their managers claim they are powerless to help (one admitted they were wrong, but had no idea how to refund my money). American Airlines did not empower their front line representatives to make critical business decisions, and it has already cost them thousands of dollars in lost revenue (I travel a lot to technology conferences, etc. and no longer use American).

Another fun example is my lending and deposit relationship with Key Bank of Maine. They lent me money for my car, and I have put an enormous amount of money through their institution. They made a posting error on my auto account, resulting in an apparent delinquency of just a few bucks (it had something to do with a poorly trained employee, they said). I had the loan on "auto-pay" so they took the money out of my Key Bank checking account every month on the due date. They also took late fees out on the due date, every month, even though it was being paid on time every time. I started receiving threatening phone calls and certified mail - they were going to repossess my car over their own error. I spent an hour on the phone with a "customer service" manager who, after initially blaming it all on me, reviewed the account history carefully, payment-by-payment, and finally admitted it was their fault and she would fix it and refund my late fees. I never heard from her again (Key claims they have no employee by her name), but the threats continued. I never got my money back, but I refinanced my car that week with a credit union, and that cost Key Bank over $4000 in lost finance charges. Key lost this money because they gave no power to their front line people.

The above examples demonstrate the incredible return on investment possible if more information about consumers is made available to the front line worker. They also demonstrate that such a return will be improved if front line workers are empowered to make immediate business decisions in the interest of the company and their relationships. In the above examples, a $500 investment by American Airlines (refunding my dog's inflated fare) would have returned thousands in revenue (I would still fly them, as would my colleagues, clients, and readers). If the Key Bank "customer service" representatives had been able to make the account adjustments themselves, and communicate with each other, Key Bank would have preserved a relationship worth thousands of dollars in recurring revenue. Had the Arch Paging employee been able to do such a simple feat, perhaps my readers would not now be flocking to the MCI Paging web site.

These stories are miniature versions of futurist John Petersen's "wild cards". Petersen suggests "surprise management" as a way to empower employees and businesses. I concur strongly. Centralized authority, by nature, is not programmed for surprises. Only front line workers can manage them and retain customers on the spot.

An example of successful surprise management is found at my credit card company, MBNA. They're here in Maine and are the largest issuers of premium credit cards in the world. I have a MasterCard with them. About two months ago, I was near my MBNA credit line and Key Bank would not give me access to the money in my checking account because I was too far away from my home address. (Key's "customer service" department was "sorry" but they couldn't do anything). The first person I spoke with at MBNA immediately (I wasn't even placed on hold) granted me an increase in my credit line to save the day. That's surprise management, flexibility, and superior customer service all in one. Check out all their great credit cards.

The new consumer expects immediate and instant responses, a recognition for a valued relationship, an understood value (and understood potential value), all crafted instantly and carefully around their wants, needs, and desires. Companies with rigid structures of management and centralized authority cannot cope with this kind of power structure, and they will wither and die as consumers flock to more responsive companies who value relationships, not rules.

An agile approach where front line workers are empowered allows an organization to move quickly when appropriate, adapt quickly to a rapidly changing world, and survive in the face of uncertainty. Centralized authority and hierarchy is predicated on certainty, and there really is none anymore. Technology is changing our world too rapidly.

To adopt this approach, you really have to believe in your team. You have to trust your people. But excellent organizations don't hire people they don't believe in and trust.

Planning, rigid rule sets, obstructive vertical hierarchy, and centralized decision making is all based on the industrial age assurance that the world will be static, and will pretty much look the same tomorrow as it does today. You can't count on that anymore. Here's to personalization, flexibility, and power to the people.

About the Author

Anthony Citrano III is a technologist, commentator, and consultant in the high technology industry. You can learn more about him (and contact him) by clicking here.