Haordic Organization Visa (Part 3)

In whatever country you are today, in front of whatever audience you speak, if I show the NBI credit card and ask: “Who among you knows what it is?”, In return, a forest of hands will rise. But if I ask, “Tell me, who owns the NBI, who controls it and where can you buy its shares?” - there is a deathly silence in the hall. Everyone feels that we are talking about something unusual, but just can not express in words what and how. There is nothing surprising. The results of the activities of a haordic organization are always visible, but its structure, management and processes are hidden

Di Hoke

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Dear readers, we continue the series of articles on the history of the birth of the largest financial institution in the world - Visa. As in the previous section, the quotes from the book “One from Many: VISA and the Rise of Chaordic Organization” are shown in italics. Important quotes are highlighted in bold. We will discuss these points in the fourth and final part.

<< Visa Haordic Organization (Part 2)

When I came out of the forest with a notepad in my pocket and a maple cane in my hand, I had already decided. It was hard for me, but it was simple. Either I say “no” and give up my dream, or I say “yes” with all the ensuing consequences. With a heavy heart, but realizing the correctness of my decision, I returned home and sat down to write to Sam Stewart. I had two wishes. First of all, I wanted to get a salary, let it be modest enough considering the task that I have to solve. And I also wanted this salary to be a little higher than what I had received so far, and that it would be guaranteed to me for three years - in case I am offered to resign or live somewhere on the other side of the Rocky mountains Without demanding much, I made it clear that I worked not for money, but for an idea. I was sure that Sam and the members of the committee were going to offer me much more generous conditions. As for the three-year term, I knew that when debugging a new system, I would have to be tough and many would turn away from me. In other words, I was afraid that I would not last so long in my post.

A month later, I met with Sam to discuss my letter. Sam worked for many years at BofA, he was part of the culture of this bank. Amadeo Giannini, the founder of Bank of America, became famous for having lived in a small country house all his life and received a very modest salary. It was this person who established the wage rates in the bank, which have survived to this day. No one knows why Giannini paid people so little: either to reduce costs, or simply out of principle. In any case, it was unfair, because he, unlike his employees, received a huge profit and had excellent working conditions. Anyway, when California began to flourish at the beginning of the century, BofA became the richest bank in the world, but at the same time it was famous for its monstrously low salary. Sam laid out to me as it is:

- Dee, since you will be the president of NBI and a member of the organizing committee, your salary will be made public. Such a salary, which you request, in the bank receive only a few people. If you earn so much, I am in trouble. So let's stop at $ 44 thousand per year, which you will receive from the date of registration of the NBI. In addition, we are ready to pay you $ 10 thousand at a time in recognition of your merits for these one and a half years and the next few months, while you will put the banks together and run the NBI.

Is he serious? Only $ 44 thousand per year, without any bonuses and additional income? And despite the fact that I have to rake a pile of $ 2 billion? Only $ 10 thousand for two years of innovative, exhausting work in the most difficult conditions? Do they have only a few people in the bank get $ 60 thousand a year? But even if this is the case, are there still stock options and other bonuses and privileges, is there finally a lifetime guarantee? But no, Sam is not joking. Seeing how upset I was, he was trying to soften the blow.

- Dee, be patient. Many years ago I myself could not get a promotion. It is difficult, but over time, everything will pay off.
“Sam, this mistake is from the start.” Have you discussed this issue with other potential committee members?
- No, they let me figure it out for myself. If you want to secure their consent to join the NBI, you must give an answer right now.

Am I wrong in this man? What nonsense? Why should my salary depend on the whim of one person? Sam is clearly not cunning. Rather, it is mistaken. I did not expect that from the first steps I would be subjected to such an unpleasant test. But I already decided to work in this position!

- Sam, I will do as you say. And yet you are wrong. Your mistake hits my pocket, but I will survive it. Tell the committee members that everything is fine, and seek their consent. In a week I will present an action program.

And I left for Seattle, leaving Sam in a superb frame of mind. A week later, I showed Sam a program of action. She did not like her.

“Dee, that's impossible.” We are not persuaded by 3,000 banks to refuse licenses and join the NBI, and then hold annual meetings and elect directors. All this must be done in 3 months. It is impracticable.
- Sam, we will not know whether this is doable or not until we try. We enlisted the support of 13 powerful people. Dozens of specialists worked in this field for a year and a half. Our concept is convincing enough. The time has come. Now is the right moment! If we build relationships with banks correctly, inspire people, give them freedom, they will create a miracle. I watched it repeatedly. True, not on such a scale. Still worth a try. If we pull, we all miss. I feel like Sam is starting to give up.

Dee asked BoFa to allocate 6-8 loyal people for two weeks, 10-12 experienced specialists from the credit card department for six to eight months, a loan of $ 2 million. And the NBI should have been located in an empty BofA building with a moderate rent.

Do I understand this person correctly? Will it reach him or not? I can not resist the temptation. I beat off his ball, hinting at the recent conversation about the size of my salary:

- Sam, no time to try. The workers' committees commissioned me to finish the job. If you want them to start acting, decide right away on the spot.

Sam laughs: he can remember something too.
- Well, we will do everything. I will not comment. But do not demand that I agree with you. Because you're wrong. All this can not be done in three months. Tell your work committees that I agree, let them get down to business. In a week you will have our program of participation in the work.

On the same day, I phoned all members of the organizing committee and made a bold request to them: to meet with the directors of all the regional licensee banks and discuss with them the content and main areas of our work. I will attend each meeting myself, as well as the chairmen of the local working committees. Costs will have to pay the bank, which is all organized. “Very interesting,” they said, and agreed.

All kept their word. For ten days, they called each other, agreed, and as a result, 12 meetings were scheduled, which were to be held sequentially in cities located two hours from each other. Ten days later, I boarded the plane and joined the frantic schedule. One meeting followed another. I was bombarded with questions, people doubted, lit up with an idea, criticized, confused, convinced each other. Then I rushed back to the airport, slept in fragments - and so on for 12 days in a row: 12 cities, 200 banks, hundreds of people.

Representatives of licensed banks received copies of official permission to create the NBI, statutory documents, license waiver agreements, membership in the NBI and other working materials. They discussed documents with the right people, sent their proposals to the working committee, and he, in turn, brought them together and made changes. As a result, a package of statutory documents of members - owners of NBI was created. According to one of the points, the documents had to be approved within a month after their receipt. In the finished package of documents it was impossible to change a single word, a single comma. Banks had to either accept the documents or refuse them. The third was not given. Moreover, after the formation of the NBI, any bank that meets certain requirements could join the organization at any time.

Each bank member of the NBI had to sign a short standard contract confirming that all documents were accepted with the obligation to comply with them “in this wording with all subsequent amendments and changes”. A minimum number of votes was approved to decide on the immediate entry into force of membership agreements and contracts between NBI and BofA. As it was supposed, if during the voting the necessary number of votes is not gained, the treaties will not receive legal force. In the event of a positive decision, a date will be appointed for the election of the board of governors and the first meeting of the members - owners of the NBI.

Each member of the board of governors will have one vote for every $ 1,000 of the volume of operations of Bank of America in the previous year. Service fee will be 0.25% of 1% of the volume of operations. Thus, the service fee and representation will be interconnected.

Dividends, if they will, will be distributed among the members in proportion to the share of the service fee of each of them in the total amount of service fees paid by all members. There will be no need for endless negotiations, renegotiation of contracts and legal proceedings. The most important rights and obligations of bank members, as well as the NBI structure itself, will be based on self-organization and self-government.

Membership in the organization will not be able to be transferred and will not be related to the number of issued credit cards and revenues. The business portfolio can be bought or sold, but it will not be possible to buy and sell the rights of the members — owners of the organization, as well as the rights to use the trademark and other similar assets. These rights will be available only after joining the organization in accordance with the requirements imposed on members of the NBI. However, the NBI will not be a closed club. Managers will be able to determine the conditions for accepting new members, but will not be entitled to reject applications from applicants meeting these conditions. As well as taking into the organization of banks that do not meet these requirements.

Although the right to vote will depend on participation in the program, the principle “one bank - one director (one vote)” will be strictly observed . Regardless of the number of votes received in proportion to the volume of operations, members of the governing board will not be able to use their votes to elect other representatives of their bank to the board. Each member of the Board of Governors will be responsible not to his own bank and those who elected him, but to the whole organization. In the decision-making process at meetings of the Board of Governors, each member will have only one vote.

Board members will have different powers. The country will be divided into regions, and each of them will elect a member of the board of governors. Only banks in the region will have the right to participate in the elections of regional managers. From each region, on the basis of a cumulative voting procedure, no more than five members of the board of governors will be elected. One manager will be elected by small banks. Each bank, whose share in the volume of operations will exceed 15%, will be able to elect a manager.

Board members will be re-elected annually. The Council will be able to create a committee that will nominate candidates for voting. But if a member of the NBI proposes a candidate supported by at least one other bank, this candidate will be included in the voting list and will participate in the elections on an equal basis with the candidates proposed by the committee. In the regions, the nomination of candidates will be allowed to be carried out by any NBI member at any meeting.

The president appointed by the board will be its chief executive officer, but not the chairman of the board. The chairman of the board of directors elected by the board will not have executive or operational authority. The president will be responsible for preparing the meeting agenda. Any member of the board will be able to include items for discussion on the agenda. The chairperson will conduct the meetings, providing an opportunity for an open exchange of views and equal rights of members. In addition, it will depend on the compliance of decisions made with the statutory goals and policies of the NBI, as well as with current legislation and regulatory documents. The chairman of the board of governors will not be able to share the views of the board members, but will not have the right to exert pressure on the board members.

Visa could not be bought, could not be the object of absorption or sale, because the ownership of this organization was carried out in the form of a lifetime inalienable right of participation. However, the business of each of the participants, owned only by NBI, was reflected in stock prices and could be sold to any other member of the organization. In other words, there was an active and very extensive market.

Each member of Visa received perpetual rights - for this it was enough for him to issue at least one Visa credit card. The right to issue any number of cards anytime, anywhere, complete freedom to determine the type of services, prices and marketing conditions required only compliance with the simplest requirements necessary to ensure the system of using credit cards.

Despite the fact that separate, often peripheral banks served as a source of innovation, the organization as a whole developed rapidly. If there were any mistakes, banks coped with them on the spot. But successful moves were immediately taken to the armament and distributed along the chain to the whole system. The central apparatus could only promote the product and the services offered by Visa members, and not vice versa, therefore the errors of the center were eliminated as quickly as the errors of the peripheral banks.

Products under the brand name Visa received worldwide recognition. Although the organization was completely transparent to the end users, its branches and even some members of the NBI had no idea what it was based on and on what basis it worked. The center, in turn, was also not aware of everything that was happening and could in no way influence numerous branches. Inside Visa, as a single legal entity, there were many boards of directors, and none of them was more important than the other, because each had an inalienable right to independently resolve all issues in their own regions or in their functional area.

The parts did not know what the whole was, and the whole did not know what the parts were, because it was not necessary. This holistic entity, like millions of other haordic formations (for example, the human body, our brain, forests, the ocean and the biosphere), existed by itself, on the basis of self-government.
The work of the NBI was coordinated by less than 500 people scattered across dozens of countries and four continents.

At that time, I was never able to make the retail and service businesses, as well as cardholders, members of the NBI. Any step in this direction caused a storm of protest from the banks. Probably, if I had shown firmness, I would have been able to incline them to my side, but now it is too late to talk about it.

I didn’t have enough experience or character to fully defend my beliefs, without stopping to compromise. I tried to bring my plans to life without any changes, but I could not calm down the dragon with four heads in people - selfishness, envy, greed and vanity. I still struggle with him. I hope that many people do it better than me.

The initial stage of creating the NBI came to an end. The last day of the NBI annual meeting has arrived. The agenda was exhausted, I felt completely exhausted. At the closing session, I asked a rhetorical question:
- So, all the issues resolved?
But then Sam Stewart got up. He was serious and even harsh. His bass echoed through the room:
- There is one outstanding issue.
“Oh, God!” I thought. Sam got up and spoke.
- When BfA supported the idea of ​​creating NBI, we were sure that a quarter of license banks would not want to participate in this endeavor. When Dee claimed that we had to create some kind of ideal organization, reorienting the entire credit card business for three months, I told him that this was impossible, - he made a significant pause and exclaimed with pathos: - I still think so!

The hall burst out laughing. Still, Sam - a miracle! The newly created council elected Sam as chairman, and me as president and chief executive officer. So for me, a three-year period of work in the organization began, after which I was planning to return to my quiet backwater, moving back to Seattle. If I knew then that these three years will stretch for 14 long and difficult years! If I knew, I would immediately resign.

As it turned out, BofA had been in negotiations for several months with American Express, and the two companies had already developed a plan to create their own credit card authorization system. At that time, American Express was the world's largest credit card issuer for travel and leisure. BFA, in turn, was the largest issuer of bank cards. Other issuing banks should have participated in the new system, before paying a tidy sum that would provide financial resources for the development of the system. In this case, banks would not be its owners. Plan were going to make public in the coming days.

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