Reset, Italian Style - Essential and Expendable

First, a note about an opportunity for a New York City-based non-profit:

We have just moved the main office of our firm, Cambridge Leadership Associates (CLA), from Cambridge to New York City. As part of our commitment to the community and as a recognition of the challenging times facing nonprofit organizations right now, we are offering ADAPT New York, a year long pro-bono consulting engagement to a selected NYC area nonprofit organization.

CLA will work with the nonprofit to co-design a comprehensive leadership program that directly meets the challenges the organization is currently facing. If you know of anyone that might be interested, please pass this information along. Click here for the application. ADAPT New York is featured on the corporate social responsibility website, JustMeans. (The application deadline is June 12.)

*********************************************************************************

Having spent quite a quite a bit of time a couple of weeks ago with people at or near the top of private sector organizations in Milan and Rome, I can see how the economic crisis has spread to Italy, but also how there is enough distinctiveness in the Italian economy and society so that its manifestations are different than they are in the US.

First, there is no widespread banking crisis. The Italian banking system is heavily regulated and heavily locally-owned and operated. They are what New York Times columnist Paul Krugman called "boring banks" in a terrific piece he wrote last month.

Most Italian bankers are local businessmen and businesswomen, known in their community, and knowledgeable about the folks to whom they lend money. They are conservative and risk-averse. They are comfortable but not rich. They did not do credit default swaps.

I can remember the days of post-world War II boring banking in the US. Within a four block area in Coolidge Corner in Brookline, MA, there were four or five banks, all locally or regionally owned and run. The men (all men, as best as I can remember) who ran those banks were active in the community, involved in civic life. I watched those local banks then get gobbled up and disappear, sometime around the 1980s, replaced by huge national bank companies and equally impersonal ATM machines. Krugman thinks we need to get back to boring banks. Seems right to me. But there are a lot of folks in the banking industry who will fight for the deregulated world that made them fabulously rich until their house of cards crashed last year. But my guess is that a highly-regulated locally-driven banking system will be one of the consequences of the current turmoil. (And, further, but the subject of another post, the pattern of heavy regulation plus lots of local autonomy will be part of Reset going forward, not only in the banking industry, but in government-private sector relations generally and in individual organizations as well.)

This is not about nostalgia for the good old days. It is about the function of banks in the economy, providing capital for businesses to invest and grow and for families to buy and fix up their homes. Deregulation led to consolidation, fostering the morphing from savings and loan institutions to venture capitalists, creating incentives for the banks to feed the financial bubble. And despite James Surowiecki's characteristically insightful piece in this week's New Yorker about the need for capital to drive the economy, seems to me there will always be institutions and people with lots of money to fuel big growth, but that local banks serve a different and critical purpose for ordinary folks, as Italy illustrates.

Italy has also been somewhat insulated because the Italian economy was lagging behind most of its counterparts in the European Union. There was no consumption frenzy. Families were not inundated with debt. Houses are not under water. There was not too far to fall.

What makes Italy so appealing - and sometimes so frustrating, to both natives and expats - is that the country seems to have been determined to hold on to its definition of the good life as having more to do with family and food than money and materialism. Last time I looked, for example, Italy had the highest number of hours working per person and the lowest productivity rate in the European Union. Italian workers talk a lot, take long lunches, and generally enjoy themselves. As our contractor said to us, "We Italians like to start things, We are not so interested in finishing."

Italy is feeling the pinch in industries that rely on exports of consumption goods or imports of visitors. We have a friend who owns and rents a fabulous villa - take a look, it is really extraordinary - on the Amalfi coast whose bookings through agencies are down dramatically, although he has managed to keep his business thriving through his own contacts and repeat clients. And in my time in Italy, I talked with folks from industries like fashion and automotive parts who are seeing orders from Japan and the US plummeting. Fiat seems to be a notable exception, seeing this worldwide crisis as an opportunity not to hunker down, but to Reset and make big bets on the future, with investments in Chrysler and perhaps General Motors that, if they work and the economy recovers, will make Fiat a worldwide industry leader.

But Italy has considerable cultural constraints to moving forward in the current turmoil. Domenico Bodega, Professor of Organization Theory and Dean of the Faculty of Economics at Catholic University in Milan, was a respondent at one of the sessions I did for a group of 150 private sector corporate big-wigs in Milan. I spoke about Reset and the need for adaptive leadership in the current reality. Bodega responded that Italy is not well positioned to adapt because of deeply held norms which get in the way of an adaptive response: deference to authority, reliance on charismatic leadership, discomfort with uncertainty, a culture of alibi, and an aversion to efficiency in use of time.

Selfishly, of course, I do not want Italy to adapt too much or too quickly. I love it there in part because of those eccentricities, such as the values on food and family and relationships, which permit me to relax as soon as I land at the airport in Rome.

The challenge for Italy is the challenge that we all face in adaptation, in thriving under uncertainty: Do we have the courage, and the skill, to separate the essential from the expendable? Can we make good, tough choices about of all that we value, what to keep and what to leave behind?

Can Italy preserve what makes it so special and move away from those practices and norms which are holding it back, as it responds to the growth pressure from the European Union and from its own citizens, and its reliance on exports and tourism?

Can Italy make progress without risking what is essential in the its DNA? Can you? Can we?