Follow Simon Caulkin on Twitter



Article Archive
2019
August
July
June
May
April
March
February
January
2018
November
October
September
August
July
June
May
April
March
February
January
2017
December
November
October
September
August
July
June
May
April
March
February
January
2016
December
November
October
September
August
July
June
May
April
March
February
January
2015
December
November
October
September
August
July
June
May
April
March
February
January
2014
December
November
October
September
August
July
June
May
April
March
February
January
2013
December
November
October
September
August
July
June
May
April
March
February
January
2012
December
November
October
September
August
July
June
May
April
March
February
January
2011
December
November
October
September
August
July
June
May
April
March
February
January
2010
December
October
September
2009
November
October
June
May
April
March
February
January
2008
December
November
October
September
August
July
June
May
April
March
February
January
2007
December
November
October
September
August
July
June
May
April
March
February
January
2006
December
November
October
September
August
July
June
May
April
March
February
January
2005
December
November
October
September
August
July
June
May
April
March
February
January
2004
December
November
October
September
August
July
June
May
April
March
February
January
2003
December
November
1998
January
1997
January
1996
February
1994
May


Avoiding the management tax

Fri, 6th Jan 2012
Here’s a thought to start 2012 with. Despite the universally positive assumptions, management is first of all a cost. In a chapter from his latest book, ‘What Matters Now’ (I shall be reviewing it for Management Today), Gary Hamel describes management as a ‘tax’ that in any large organisation will account for at least one-third of payroll. In addition, there’ll be thousands of senior people in staff roles in IT, finance and HR, all of whose mission is to keep the organisation from collapsing under its own weight. From memory, GE once calculated that admin and management ate up fully 40 per cent of revenues – a figure that in less ‘efficient’ companies will of course be very much higher.
 
Several thoughts stem from this. The first is that, ironically for a discipline that sets such (erroneous) store by it, traditional management does not benefit from economies of scale, if anything the reverse: the bigger the organisation, the more managers it needs to manage other managers. The one bit of scale it does get is a negative one. As Hamel notes, ‘The most powerful managers in most organisations are the ones furthest away from frontline realities. All too often, decisions made on an Olympian peak turn out to be unworkable on the ground… Give someone monarch-like authority, and sooner or later there will be a royal screw-up.’
 
Throw in the bureaucratic friction engendered by multilayered management (whence Peter Drucker’s lament that ‘So much of management consists of making it difficult for people to work’), and it is clear that management has an awful lot of work to do before it creates any net value at all. What does the management tax actually buy? Chiefly control and coordination. But like compliance, its mirror image on the employee side, control is an overrated and depreciating asset in conditions where discretionary effort and initiative are key, and coordination by the centre, as it is usually done, is both basic and expensive.
 
So what’s the answer?
 
One part of it is to distribute management differently.
 
Hamel has two examples. One is the extraordinary Morning Star, a US tomato processor, of all things, which has revenues of $700m and a full-time staff of 40, who manage themselves. That is, the company is not managerless but the reverse: everyone is a manager. No one can tell anyone else to do something; everyone has to do whatever needs to be done. Management is democratised. Similarly at the better known but equally remarkable WL Gore, where there are few formal titles except CEO – Terri Kelly, who was elected by the entire workforce – but the founding values are so fervently internalised that everyone is in effect a trustee; everyone holds everyone else to account for both performance and cleaving to the values. (It may be no coincidence, incidentally, that both Morning Star and Gore are private companies, able to pursue their unconventional path without worrying about quarterly income statements or the prying eyes of Wall Street.)
 
But we don’t have to go so far afield for lessons in management tax avoidance. Remember that ‘management’ in the abstract, without purpose, is meaningless – just cost. It only exists to get something done. If the information needed to coordinate and process the work can be carried in the work itself, and people are empowered to act on it, they no longer need management to tell them what to do. This is what happens in the best just-in-time manufacturing arrangements and the equivalent service designs, where measurement is closely connected to the purpose as defined by the end-user. In this case control comes free (because it’s in the work), so some of the manager’s previous role is redundant. And once the benevolent circle is launched more drops away: since workers are now doing an understandable, customer-related job that they are in control of, there is no need for anyone to manage morale or absenteeism or culture. In fact, in organisations that were particularly hierarchical in the past (the police, for example), working like this will often leave some central and functional managers twiddling their thumbs.
 
God knows, the public sector has no monopoly of poor management. But in the area of management excess it has no equal. It seems to have no concept of management as cost. When a university decrees that multi-page staff appraisals should be carried out twice a year (then anonymised so even if they were ever seen again they couldn’t possibly be used), it seems not to realise that it is subjecting itself to at least two levels of tax: the direct cost of employing HR people to draw up procedures and forms. and the opportunity cost of not doing stuff that would be much more useful. Some people (count me in) would argue that appraisal itself (‘a reminder of who owns you,’ as one cynic put it), taken for granted as it is, is another management exercise that can be gainfully dispensed with if the work is set up to provide instant feedback from the best source, the customer.
 
Now consider a classic example of this kind of management illiteracy from the mouth of the Prime Minister himself. In this week's announcment of a new initiative to raise standards of care in the NHS, David Cameron proudly promised a new Care Quality Forum, a ‘patient-led inspection regime’, and hourly ward-rounds by nurses to check on patients in their beds. It’s hard to know where to begin with this. Leave aside that Cameron has no way of knowing if ward rounds are the answer to the specific problem – he may be right, but he also may not. More importantly, the grotesque oxymoron of care-less healthcare now prevalent in the UK is not an accident but the wholly predictable result of ministers’ own ‘targets and terror’ regime, which effectively ensures that nothing not targeted gets seen to. Targets are already an enormously costly bureaucratic burden; to compound it with an additional new regulatory body, with all the direct and indirect costs it entails, simply doubles the management tax level at a time when the NHS is supposed to be cutting costs.
 
Care is the very heart of nursing purpose, the value that should be self-enforced above all other. If the answer is more management, it’s the wrong question, full stop. In management less is more and more always less. To adapt Peter Drucker, ‘There is nothing so useless – and uselessly costly – as doing efficiently that which should not be done at all.’
 

 


<< Back to Index

User comments

Gordon Pearson :: 8th Jan 12
Great stuff! As always. Cameron, and his several predecessors as well as his cabinet colleagues, seem to have absolutely no concept of work in the real world. Why would they? They've never tried it.
Name:
Comment:
Check:8+4=