Bigger is not always better

Sometimes the only way to grow is to become smaller, as counterintuitive as that may seem. That applies whether we are talking about cities such as Detroit or companies such as Citigroup.

If growth were defined as more or bigger, than certainly shrinkage would be anathema. However, if growth is defined as value, then more companies ought to consider the moves Vikram Pandit is making at Citigroup which is shedding a significant portion of itself because the company simply has gotten too big and too complex to manage.

Beehives routinely shed portions of themselves in a process that might be described as iterative renewal. When a colony gets to a certain size, the addition of additional bees would be inefficient given the capabilities and physical constraints of the hive. Growth beyond a certain limit would produce too many idle workers and unused resources. The colony reaches a point, then, where two hives yield greater reproductive value than one. Consequently, the colony divests itself of just under one-half of its members in a swarm. The philosophy of the hive is to build up, split up, start over, build up, split up, start over.... It is the natural result of getting too big with the associated potential to waste too much. Throwing off a swarm, however, is not only meant to give the parent colony more elbowroom to conduct its operations more efficiently, but to produce greater systemic value. The swarm is expected to perform well on its own: to help it on its way, the swarm gets the old queen (seasoned leadership), a disproportionate number of younger bees with longer productive life spans, and a store of honey. The net result is that a shareholder in Hive, Incorporated should be very pleased with divesture even though the parent company has shrunk.

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