The first external partner we hired had most recently worked as chief executive of an industrial company; before that, he had started his own successful venture; and he was not American. He was brought in to head a new specialist unit outside our normal consulting practice. And it worked brilliantly. He brought it a lot of profitable business and the unit grew to be huge. Then we hired more and more people like him. They were all great. The fallout rate has been minimal.
It all sounded a little too good to be true, so we tracked down the first ‘dissident’ partner. Did everything really go as smoothly as our original interviewee described? The new partner tells a somewhat different story:
It’s true that Bain has a fantastic culture and collaboration, and it’s also true that it’s been a great commercial success. But it was hard in the early days. You see, Bain has a policy of not consulting for competitors–if Bain works for Hertz, it can’t work for Avis. Never. But my unit had different needs.
In my business, there are only a few big global clients, and they often collaborate with each other on deals. We get no confidential information about our clients; we just work on the deals. So the traditional Bain policy of not working for competitors doesn’t apply. Yet many partners in Bain’s traditional consulting practice were hostile when they found out that we wanted to work for ‘competitors’.
It took me three years to persuade the partners to allow a multi-bidder policy. But eventually they did, and I grew to admire Bain tremendously. I think it’s the best consulting firm in the world, by a mile.
Many Bain partners–probably a majority–didn’t like the policy of hiring hot-shot new partners from outside. But it gave the firm a powerful network of weak links that otherwise they would have continued to lack. By now, of course, most of the ‘external’ partners are thoroughly dyed in the Bain wool. So the price of being externally connected is eternal hiring.
London, England, 2009
What would you expect a global firm specialising in gathering legitimate intelligence for commercial firms to be like? A highly disciplined, homogeneous group, discreet and highly secretive, a kind of private sector FBI or MI5?
If so, you might be surprised. Greg recently talked to the senior partner of a very successful one of these ‘business intelligence’ firms in London, one that provides confidential and unbiased information for corporate decision-making and due diligence on deals. The first surprise was the variety of staff floating around the office: ex-spooks, as expected, but also former senior industrialists, bankers, diplomats and politicians. In addition to the forty or so permanent staff in London, there are ‘a few hundred operatives’ on modest retainers scattered around the globe, and another three thousand contacts who are used on a freelance basis. The partner explains:
The money is never a key factor in getting and keeping our operatives. They are all senior people and they do it for a taste of the cut and thrust. They like to engage at a level where they can demonstrate their judgement and knowledge, and their connections. The way we gather information is to be discreet but completely open internally. All information is triangulated to build a composite picture and to avoid being misled by a few pieces of rogue data. There is no ‘need to know’ policy here. The only hanging offence is if someone hoards information–the bankers in particular take some time to adjust to this. It’s company policy that every email communication with an operative or external contact is sent to management here as an automatic blind copy. Although few of these are read thoroughly, and many not at all, it turns all private conversations into public ones, within these walls.
It may seem a paradox that an intelligence firm believes in openness and heterogeneity, but it seems to work very well, and it fits with the idea that better information comes from weak links bridging different worlds.
At the end of the interview, the partner gives a further insight into how he and the rest of the firm’s staff work:
I’m on my way to talk to the mergers and acquisitions department of a big company. I talk for free for fifteen minutes on a topical issue, open up the discussion, then I start my serious work. I listen very carefully. They feel I’ve done them a favour, but I always come away with much more information than I’ve given.
New York City, 1980
Sociologist Judith Blau is studying the Bronx Children’s Center, a psychiatric hospital that cares for mentally impaired children. Most similar hospitals are blighted by low staff morale and high turnover. But this hospital seems to have high morale. Judith learns that it deliberately fosters weak ties between the two hundred staff, so they all know each other on first-name terms. There are no cliques and information is shared between disciplines (such as psychology and nursing) and departments (residential units, clinical teams, arts and recreation programmes).
Judith attributes the overwhelming predominance of weak ties to two policies: project teams comprising a small number of staff from various departments are formed; and the hospital refuses to employ two or more staff who have ‘a sexual or family alliance’. Although this sounds draconian, Judith says, ‘In a complex structure…extensive weak networks can remain viable only when close ties are prohibited.’ The absence of strong friendship and family ties, and departmental loyalties, weakens ‘in-group solidarity’, which in turns makes it possible for the entire staff to share information.92
The stories of Bain & Company, the intelligence and the Bronx Children’s Center provide some guidance to executives of successful organisations who want to maximise weak links and minimise the dangers of strong ones. To stimulate weak links, flat structures and project teams appear to be important, as do informal opportunities for people who rarely see each other to meet and socialise; diverse hiring; rotating staff through different departments, functions and locations; semi-structured cooperation with other organisations, including exchange programmes; and encouraging employees to cultivate links with people outside the firm. Hiring superconnectors is clearly desirable, as is being in the industry’s ‘world capital’.
Minimising the dangers of success and strong links requires being alert to their downsides; being paranoid about upstart competition, however small; having a senior executive act as ‘devil’s advocate’ towards your strategy, and reviewing it whenever anyone sniffs potential peril; being willing to do U-turns, or cannibalise your most profitable products by latching on to lower-cost technologies or ways of doing business as soon as these become feasible or a potential rival starts to use them; ferreting out new types of customer, and pursuing small markets, at least on an experimental basis; and bringing ‘dissident’ executives with a foreign mindset into the highest levels.
These remedies may sound simple, and indeed they are. But to put them into practice–against the grain of success, the requirements of volume production and a firm’s culture–requires vision, determination and studied pessimism. That is why the prescriptions, although obvious, are so rarely tried.
Such is the tension of networks, the tension between strong and weak links, the resolution in favour of one, then the other. Weak links find better things to do; strong links find ways to do things better. Weak links are most adept at creating new value, jump-starting a new market; strong links are crafty at capturing and maximising value. (Value capture is distinct from value creation. For example, great scientists such as Charles Darwin and Albert Einstein created enormous value, but they didn’t capture much of it. The same is true of the creators of Wikipedia. But it is emphatically not true of Bill Gates, who created a lot of value but also managed to capture a large proportion of it.)