Why big is going out-of-style.

• Author: Hall, Robert
• Position: MARKETING SOLUTIONS

"I am suggesting that they [big banks] be broken up ..."

--Sandy Weill, former Citigroup Chairman & CEO, who put together mammoth Citicorp and Travelers

PUT THE WORD BIG IN FRONT OF BUSINESS, GOVERNMENT, LABOR, OIL AND BANKS and it makes the appeal smaller. In my March 2010 column "Big Bank Blowback," I chronicled the strong marketplace head winds that impeded the progress of large organizations and especially banks. Now over two years later the strong winds have been upgraded to a storm.

According to the latest survey by the Chicago Booth/Kellogg School, trust in large national banks that operate across the United States fell to 23 percent from 25 percent in March while local community banks rose from 51 percent to 55 percent for the same period. Confidence in credit unions rose from 58 percent to 63. Ironically, while the financial crisis and a string of scandals and embarrassing flubs raised concerns about "too big to fair the crisis-era acquisitions actually accelerated asset growth in the four largest banks to over $7 trillion, up 50 percent since 2007. This has reinforced a worry that banks have reached a size and complexity that is "too big to manage." Accordingly, stock prices at most of the largest banks trade at a substantial discount to their book value. Sandy Weill's about-face supporting breaking up the banks was characterized by The Wall Street Journal as less a change of heart than a heart transplant.

Is there a size limit on organizations?

So if size is going out-of-style or even hitting a wall, the question is why? What happens as we grow from big to really big? How does an 800 pound gorilla who sits anywhere he pleases become a dinosaur reaching extinction? Geoffrey West, former president of the Santa Fe Institute points out that in organisms there are clear limits to growth. He has wondered if those same kinds of limits apply to social organizations.

Given our current organizational practices and know-how, I believe we are bumping up against size limits. The question is why? I think the answer is locked inside a simple conclusion: Big is bad for relationships, and productive relationships are the key to innovation, productivity and sustainability. In Facebook's registration with the Securities and Exchange Commission, Founder and CEO Mark Zuckerburg said: "Personal relationships are the fundamental unit of our society. Relationships are how we discover new ideas, understand our world and ultimately derive long-term...