The management question

What do bosses do? This old question has gained new force from two recent stories: that BBC bosses siphoned off licence-payers money for themselves, and the FT's report that many managers fail a most basic question about probabilities. If we put these two items together, we have an obvious inference - that managers are not skilled decision-makers who add value to their organizations, but mere parasites.

But can we generalize from just two stories? Maybe.

Certainly, big payoffs are common for bosses. As Rick says, managers' entitlement culture isn't confined to the BBC. Bob Diamond, Rebekah Brooks, Stephen Hester, Nick Buckles and Tony Hayward, to name a few, all left their companies with payments greater than a typical worker will get in all his working lifetime - and not always after meritorious performance. Don't reply that these case are unlike the BBC's in that they were contractual entitlements. Bosses' power manifests itself in their ability to get generous contracts; the law isn't a constraint on power, but also a means through which power is exercised.

There's also evidence that managerial ability is limited. Nick Bloom and colleagues have shown that there's a long tail of second-rate management in the UK. Staffan Canback has described how diseconomies of scale set in quite quickly, implying that managers often cannot overcome bureaucratic limits to efficiency. Alex Coad has shown that there's a large random element to firm growth, implying that bosses contribute less to corporate success than they claim. Paul Ormerod and Bridget Rosewall have shown that corporate collapses are unforeseeable (pdf), implying that bosses perhaps can't prevent even huge disasters. Jeffrey Nielsen has argued that corporate hierarchies have a demotivating effect on workers. And there is no evidence that the rise of managerialism since the 1980s has contributed to better productivity growth or macroeconomic performance.

So, maybe the new evidence corroborates Stephen Marglin's old contention (pdf), that bosses' role is one of extracting incomes for themselves rather than increasing the size of the economic pie for everyone.   

However, the point of this post is not to claim this definitively, but merely to point out that we have a reasonable question here which is not being asked by the mainstream media. The BBC story is framed in conventional journalistic terms - "who knew what and when" - as a story only about the BBC. The question of whether it tells us anything about management more generally is not asked. The ideology of leadership is so dominant that the media and political class cannot even see that it is questionable.

Herein we see just how powerful the boss class has become. It's not that bosses can defeat challenges to their power, but that such challenges don't even arise. As Steven Lukes wrote:

Is it not the supreme and most insidious use of power to prevent people, to whatever degree, from having grievances by shaping their perceptions, cognitions and preferences in such a way that they accept their role in the existing order of things, either because they can see or imagine no alternative to it, or because they see it as natural and unchangeable? (Power, A Radical View, p28)

Comments

[Samuel Conner]

It might not be a structural problem of management itself alone; it may be something about the kind of people who aspire to have the power that managers have, and the purposes for which they want that kind of power. Martha Stout ("the Sociopath Next Door") has written that about 4% of the population is afflicted (if it's an affliction; maybe it's an adaptation) with deficiencies of empathy and conscience. They use other people for their own benefit without regard for the well-being of those used. Stupid sociopaths become common criminals; smart ones become powerful (but still harmful) in respectable ways. It may be that this phenotype of humanity is over-represented in the higher reaches of management of every kind of organization.

[Simple Simon]

I couldn't agree more with the above comment.

Having spent several decades working in retail and distribution I have struck time and time again by the similarity in personality type of middle and senior management, wherever and for whomever I have found myself labouring. Its almost as if these buggers came rolling off a production line somewhere in Asia.

I think work in this area is greatly under researched by the Left in particular, which has a tendency to adopt a mechanistic Marxist explanation for all things economic. An acknowledgement that individuals, or rather individual pathologies have a profound impact on the workplace would at the very least make Left political/economic analysis and prescriptions rather more meaningful and attractive to the working classes than has been the case to date.

[rogerh]

Sure the BBC payoffs seem ott but the money sums seem pretty trivial - but good ammunition for the BBC-haters. As for
private-sector payoffs - none of our business - except that the effect trickles down to the public sector. If you have a daft system you would be a mug not to exploit it - aka MP's expenses.

But what do top managers actually do? The conventional answer is setting strategy, steering the great corporate tanker freed from the trivia of day-to-day decisions - great thoughts from great men (usually). Not really a 24/7 job, more a 1/1 job
leaving plenty of time for game-playing, corporate infotainments, mischiefmaking and fighting off rivals and enemies. In
effect the live of a medieval prince.

As with the prince so it is with the top manager - frauds, mountebanks, conjurors, projectors and alchemists - or these days - special advisors, consultants and corporate programme-managers all beat a path to one's door offering the certainty of converting corporate dross into purest gold. A tough life to be sure.

[Richard Gadsden]

This may explain why non-merit-based mechanisms for choosing leaders (e.g. heredity, randomness) are not spectacularly worse than merit-based systems (e.g. appointment, election, examination). You'd anticipate that a merit-based system would have a huge advantage, but it's actually quite hard to measure.

The suggestion is that by choosing leaders from amongst only those who want to be leader, you're inclining your system towards the sociopath as leader.

[Churm Rincewind]

I don't quite understand the point here. If managers contribute little to the organisations they manage, then what does it matter whether they're any good or not?

Certainly there's a case to be made that their customary rewards are inappropriate (and often offensively so), but if in the end of the day their decisions don't really matter then why should we care (outside of the perspectives of fairness and social cohesion)?

[guthrie]

Churm - simple - if a managers decisions don't really matter then you can dump them and save the money they cost and trouble they cause.