THERE'S a new book out called Everything Bad is Good for You. With management it's the other way round. Everything conventionally regarded as good is actually toxic.
Not enough people are aware that almost everything treated as axiomatic in today's management is intellectually shaky and riddled with contradictions and practical difficulty. Things that we accept as inevitable aren't inevitable at all in time, they will come to be seen as part of a primitive and finally destructive paradigm that was only held together for so long by unquestioned assumptions and the resigned (but wrong) acceptance that there is no alternative.
Start at the very top, with corporate governance. Current prescriptions, based on threadbare agency theory, are increasingly undermined by academic research. For instance, according to two new studies presented to the Academy of Management annual meeting last week, heavy use of stock options, still the main component of CEO pay for many companies, significantly increases the chances of poor strategic management and financial misrepresentation. In plain English: options give CEOs incentives to do dodgy deals and cheat. For all its box-ticking, America's Sarbanes-Oxley Act on financial disclosure does not address the issue of these underlying incentives, and is itself a contributor to the problem rather than the solution.
In fact, bits are falling off the official edifice wherever you look. Another Academy of Management paper knocks on the head the idea that multiple directorships are necessarily bad on the contrary: multiple directors turn out to be more diligent, and for the largest firms they are linked to slightly better shareholder returns. As in previous years, Booz Allen Hamilton's 2005 CEO succession survey shows that companies with combined CEO-chairmen deliver measurably better returns than those where the roles are separated. Booz Allen also suggests that insider CEOs are at least as good as outsiders and European firms are sacking poor performers too quickly: 'In 2004, CEOs removed for poor performance were in office for a median tenure of two and a half years, an astonishingly and counterproductively brief of time.'
But then, whether at the top of or lower down the organisation, performance management in most organisations is a nightmare. Because performance measurement is dependent on other people and the system, it is nearly impossible to establish one that is fair and accurate in any case, because the measures are attached to budgets or activity rather than work itself, they usually measure the wrong things.
Naturally, that also means that appraisal, as conducted by 99 per cent of organisations, is similarly dishonest, counterproductive and coercive, particularly when connected to pay. On the other hand, where measures are attached to the work and throw light on the purpose, the need for 'appraisal' as such dissolves. Appraisal and performance management are locked in place by the annual budget, another on the list of bad management masquerading as good. Every single organisation in the world grumbles about the budget - GE's Jack Welch called it the bane of corporate life - but very few are trying to do anything about it. The problem with the budget is that it is a target, and, like all targets it is subject to Goodhart's Law - the moment it is used to manage by, it is worthless as a measure because it sets up powerful incentives for people to cheat.
The havoc caused in the brutalised and punch-drunk public sector by the abuse of targets and specifications is incalculable (although this column has done its best) the harm that it does to private companies is often glossed over. In the private, as in the public, sector, managing by the numbers drives up costs, ruins service and demoralises those who do the work.
In relations with the outside world, we all know by now that most - say 70 per cent - of acquisitions fail to deliver the expected benefits. Yet companies continue to indulge their wishful thinking. A similar picture is emerging with out sourcing. In a Deloitte Consulting study, 70 per cent of respondents had had 'significant negative experiences' with outsourcing, and one in four were bringing services back in-house. Researcher Gartner found that 80 per cent of outsourcing projects failed to save money, the savings on transactions (cheaper calls or contacts) being more than outweighed by the defection of dissatisfied customers and other hidden costs.
I could go on, in general and in detail: customer relationship management and other IT-intensive 'solutions' to the wrong questions interactive voice response sales promotions. corporate social responsibility... Why is so much that managers do a waste of time, if not worse? And why do they still persist in trying to make it work? To Answer the second question first: because we're locked in. Precisely because we all know things don't work, a whole ecology of improvers - consultants, IT vendors, outsourcers and peddlers of tools of all descriptions - has grown up with a promise to make it better. Everyone has a vested interest in the setup, even business schools producing the research that discredits it.
The reason that none of these things work, and never will, is that they are being put to the service of a clapped-out model. The paradox of today's capitalism is that we're still trying to manage it by central planning. Managers at any corporate headquarters or ministry in Whitehall would have been quite at home in the Soviet ministry of planning. They estimate what the market will be, allocate resources and schedule production to match the estimate.
Most of the toxic techniques are attempts to make the predictions and scheduling work better or to mitigate the model's disadvantages. This they can often do at the margin, but at ever-increasing cost, so that now more and more management effort goes into managing the overhead, and less and less into the real work.
This is like painting go-faster stripes on a Trabant, a fruitless, bootless exercise if ever there was one. It's also why, ironically, the management exhortation of last resort - work harder! - actually makes things worse. As the original quality guru W Edwards Deming caustically put it: 'Having lost sight of our goals, we redoubled our efforts.'
The Observer, 7 August 2005