When get-togethers are not cosy

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At these meetings, staff congregate in a venue (town hall) to ask questions of senior management. Used regularly by Goldman Sachs, Merrill Lynch, Deutsche Bank and, more recently, JP Morgan Chase, town halls are something of a bonding device. 'It's a matter of linking people in a meaningful way and making a large firm feel like a small firm,' said a spokesperson at Merrill Lynch.

The illusion of cosiness is appreciated. When Goldman Sachs was voted 15th in Fortune magazine's 100 Best Companies to work for index last year, staff in the US cited town hall meetings as one of the factors creating a positive working environment. The regular events give staff an opportunity to interact with the regional heads, an important requirement as the firm has become larger.

'Most people had never seen the people at the top in Europe. From that point of view it was as much a freak show as anything else,' says one insider.

As banks grow, communication is becoming more important. In recognition of this, Goldman Sachs recently appointed Anne Yang, a co-ordinator in its M&A division in New York, to a new post as head of internal communications.

Technology is making internal communication easier. Video link-ups mean that participation in a town hall meeting is open to people who are not physically present.

'We have town halls where we link the whole Merrill world,' says Jane Ageros, director of marketing and communications for Europe at Merrill Lynch. She says that people from Princeton to Milan can call David Komansky and Michael Marks, chief executive and executive chairman respectively in Europe, with their questions.

Goldman Sachs makes its town halls accessible to all in the company by broadcasting them on the intranet remote participants can email questions.

JP Morgan Chase used a 'global' town hall to contact staff on their first day back following the merger between Chase Manhattan and JP Morgan. 'It was huge. There was William Harrison, chief executive, in New York, Douglas Warner, chairman, in London, and members of senior management on stage,' says one person who was there.

Video link-ups do not necessarily work well, however. The magic may come from physical interaction between staff, rather than from the wonders of technology. Nigel Nicholson, professor of organisational behaviour at the London Business School, compares town halls to a tribal clan meeting. With face-to-face encounters reduced by the internet and other modern media, the physical proximity to other staff at town halls can be an important means of re-humanising organisational life.

Nicholson also argues that individuals are psychologically unable to maintain close relations with more than 150 people.* Once an organisation has more staff than that, smaller clans become more important than the main group. Town halls that try to bring together too many people risk being ineffective. 'One hundred and fifty people is a threshold. It becomes hard to manage anything beyond that size because people don't know each other,' says Nicholson.

Alternatively, town halls can be seen as a means of bringing representatives of each clan under one roof. This too has its uses. 'Sub-groups can become neurotic,' says group psychologist Cynthia Rogers. 'By convening larger groups, the sub-groups can be kept in conversation with one another. They are less likely to become disassociated and will rely less on their own ideas. This will make them less internally competitive.'

So town hall meetings may be more important than their title suggests. 'The large group is the keystone that holds everything together: one addresses questions of culture, issues like where the firm is going and what it is doing,' says Rogers. In investment banking, town halls are often convened to discuss financial results. At the more enthusiastic conveners, such as Goldman Sachs, broader issues are also addressed.

Mike Stanley, head of human capital at Arthur Andersen, says that town hall meetings work best where difficult questions are asked. 'People are rarely willing to put their head above the parapet and this means that the real issues are often not discussed.'

Banks deny this. 'We have cultivated a culture that avoids nervousness about asking questions about anything of anyone,' says a spokesman at Goldman Sachs.

One employee of JP Morgan was cynical. 'After the merger, some people at a town hall had the courage to ask about job losses and bonuses. But the answers were always vague. Questions were rarely answered directly,' she says. Some questioners, she added, simply use such occasions as a platform to show off.

Yet town halls can be used very effectively. Jack Welch is widely thought to have applied the concept successfully in his Work Out meetings at GE Capital. So did Kevin Newman during his early days as chief executive at First Direct.

But where there is unwillingness to talk about the real issues, town halls can be less magical rituals than empty ceremonies.