Super community banks are committed to "outnationaling" the locals and "outlocaling" the nationals. Therefore, they need to make things big yet keep them small, encourage autonomy but with consistent applications, and encourage entrepreneurial spirit while sharing purpose throughout the company.

The concept is similar to federalism in government. Companies outside

the banking industry have already discovered the importance of a "federalist" approach in getting the best of both worlds, big and small.

For example, the Swiss company Ciba-Geigy recently moved from a management pyramid with a matrix desgined around businesses and functions to an organization made up of 14 separate businesses that is structured in a federal sense. General Electric, Johsnon & Johnson, and Coca-Cola are moving in the same direction.

Demands for Autonomy

Some, such as Royal Dutch Shell and Unilever, went federal decades ago, pulled that way by the demand for autonomy from their overseas subsidiaries. They, like super community banks, have discovered that the balance of powere is a dynamic system that requires constant tweaking and adjustments.

Manyd super community bank executives, particularly subsidiary presidents, are concerned that their strategy is just another word for restructuring, a stepping stone to the inevitable consolidation dictated by low-cost production pressures and market forces. This is not the case.

There is a belief that autonomy creates energy, that people have theright to do things their own way and customize to market needs as long as it is in the common interest. Well-informed, well-intentined, and well-educated employees are better equipped to interpret that common interest than centralized management. These principles arre assumed to yield efficiencies and profitability on an ongoing basis.

More than Lip Service

The financial performance of super community bankse over the past five years indicates that applying such principles adds value and leads to performance levels that outstrip industry averages. it is not a transitory system or lip service being paid to potential acquisition candicates, nor an interim step in a continuum toward inevitable consolidation.

Properly understood, super community banking is a way of life that yields superior performance. it has proved so again and again within the banking industry as well as in corporations around the world.

Federalism has four key princi;es. Tehir application varies by company since every organization is different and there is no common solution to tradeoffs and dilemmas. There is no single "right way" to apply super community banking, yet we can lear5n from the success fo super community banks and apply the theories that appear consistently in such companies.

Economies of Scale

One the the federalist theories involves the need to be both big and small at the same time. Federalist companies and super community banks need to find economies of scale. The management of trust services, much like research and development activities, requires resources that no small player could contemplate.

Big is essential for mutual fund management and ownership, as it is for pharmaceutical companies that have to finance the massive research programs on which their future depends.

At the same time, these companies and banks need to be small. People want to identify with somthing closer to them and of comprehensible scale. We want villages and communities even in the midst of our cities, and we feel more comforatable in smaller units that are more flexible, less bureaucratic, and more likely to be innovative.

Combining Big and Small

Super community banijng attempts to combine big and small beyond simple centralization. The center - the holding company - does not simply act as a production facility to the separate businesses like the conglomerates oif old.

Portfolio management theory where the holding company is the central exchange will not yield the scale advantages and culture consistency that is essential for future profitability. super community banking is not the mere conglomeration of autonomous stand-alone banks.

It is designed to make the whole greater than the sum of its parts. Without taking individualism too far and while recognizing the expertise of people in the banks to capitalize on their skills.

Super community banking attemps to balance power among the holding company and its subsidiaries through reporting, not through centralized control, because many key people are not located at the holding company. Centers of power are dispersed throughout the operations and the subsidiaries. While they may meet frequently and talk often, they do not need to live together.

Many Decision-Makers

Super community banking spreads responsibility across many decision points. An example of a company that carried this princile to an extreme is ABB, a Swiss company that is nominally based in Switzerland and employs 80,000 people worldwide but has no one employed in its central headquarters exept the one visionary who is also the CEO. Super community banking does not, therefore, imply a hugh holding company with a large infrastructure.

Another key theory is "think globally, act locally." The holding company should have enough vision and cohesiveness to lead the subsidiaries to implement that vision within the local context.

autonmous banks find it difficult to think globally and may even compete against each other for scarce deposits or loans. Guidance from the top is key to making the whole greater than the sum of the parts from a philosophical, as well as a practical, standpoint.

Also, it is essential to retain the entrepreneurial spirit. "What you do not own, you cannot command" is common wisdom. Most successful managers have the desire to run a business as if it were their own.

Best of Both Worlds

Many successful bankers, much like other professional managers, prfer small, autonomous units that they "own" and that allow them to control their own destiny to the largest extent possible.

At the same time, good management recognizes the benefits of having an autonomous group that is a part of the larger family that can provide resources, career opportunities, products and services, and the leverage that comes with size. Super community banking is a way to offer the resources associated with size while keeping individual units small and independent.

Faced with these conflicting pressures and tradeoffs, super community banks are adapting and experimenting. four principles of federalism taken from political science translate readily into the world of business, where they can provide an organizational framework for the way super community banks function.

* Power is placed at the corporation's lowest point.

* Interdependence. The states of a federation stick together because they need one another as much as they need the center.

* Consistency. Clear corporate culture and vision provide the context to each subsidiary operation and promote the single company fabric that holds the subsidiaries together.

* Twin citizenship. In a federalist country, a citizen has two loyalties, the state and the union. In super community banking, an individual has the subsidiary and the parent company.

The subsidiaries within a super community bank have a strong sense of identity, while consistency is fostered by the corporate equivalent of a national anthem in the form of a mission statement that is regularly communicated.

The message has symbolic importance as a reminder of the larger whole an the wider citizenship.

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