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Wicked problems and self-inflicted wounds

Sat, 16th Feb 2013

The world has its fair share of ‘wicked’ problems – global warming, conflict in the Middle East, drugs, antibiotic immunity, and various tragedies of the commons come to mind – agonising dilemmas to which there is no one right answer, only less wrong ones. In these cases, as Goethe sagely pointed out, ‘The only answer to the problem is another problem.’

But there is a whole other class of serious issues that are entirely self-made. As Sumantra Ghoshal wrote in a celebrated essay on the role of the business schools, we don't need to do a lot more to prevent such issues arising: we just need to stop doing a lot that we currently do. We don't need to run our national health service like a Soviet tractor factory. If the financial sector has hijacked the economic system it is supposed to serve, it's because humans have designed it to do so. We want to eat beef rather than horse, or indeed the reverse? So stop creating supply chains that allow confusion of the two, just as we should stop dehumanising needy and vulnerable people and driving them into care homes in the name of care. We know the liberating effects of ceasing to do such things from the exhilarating cases where independent thinkers have chosen to do just that.

What this says is that never mind the economic downturn, it is perfectly within our grasp to transform people’s lives for the better without spending a penny on infrastructure, massive top-down reorganisations or giant IT products. We don’t need the permission of David Cameron or Mervyn King. We just need to reverse the ideas about how we run our organisations to make people happier and more productive. The efficiency improvements come free.

The current wrongness of management is systematic and fractal – it looks the same at every level, from the individual to the economy as a whole.

Start with the latest Employee Outlook from the Chartered Institute for Personnel and Development (CIPD) which shows employee engagement at work at 35 per cent, the lowest level yet. Only four per cent are actively disengaged, but that leaves 61 per cent neutral – they don’t care one way or the other. Worryingly, says the CIPD, it is the more recent hires who are more engaged; the longer they stay, the less engaged they become. The CIPD surmises that the dip reflects disillusion with senior managers: only a net 11 per cent agreed that managers treat employees with respect, and nearly one-third more people said that managers didn't consult them on big decisions than did.

To repeat: this is a choice. Managers are allowed to consult employees; they don’t have to treat them with disrespect. Indeed, as Julian Birkinshaw and co-researchers at London Business School showed conclusively last year, organisations that manage people well (basically giving them a good job to do and letting do it) get better results than those that manage them badly. Good places to work tend to be more productive, which for most people is not a surprise.

Economic theory says that you don’t find £5 notes lying in the street because someone will have picked them up. So why don’t managers pick up the free ones lying around in employee engagement? One reason is socio-cultural. Ninety-nine point nine per cent of management literature is written from the point of view of managers (the other 0.1 per cent is Birkinshaw), and that’s a tough bias to shift. Culture is supported by ideology. Ninety-five per cent of management literature assumes that the job of management is to command. In this view only managers know what it takes to deliver value to shareholders, and they must oblige employees to carry it out with carrots and sticks, otherwise they will shirk, cheat and dissemble to further their own self interest.

Where this reductive view of human nature leads is described in a damning academic research report on performance management published by the Scottish TUC. Self-explanatorily entitled ‘Performance Management and the New Workplace Tyranny’, the report traces the trajectory of performance management from benign, enlightened expression of shared interest (as it is still presented in the literature) to a direct instrument of management control, systematically used to intensify work, drive down cost and ‘manage the exit’ of those identified as ‘underperformers’. As the report puts it, the only thing left of the original is the smile on the face of the Cheshire cat'. Like ‘lean working’ and Human Resources Management (HRM), as in a horror film it has morphed into its opposite – synonymous ‘not with developmental HRM and agreed objectives but with a claustrophobically monitored experience of top-down target driven work’.

Low-trust management like this is self-defeating. The phenomenon is so well known that it has a name – the ‘superviser’s dilemma’, in which tight supervision and monitoring lead to demoralisation, disengagement and worse performance, apparently justifying a further turn of the supervisory screw. Just as aapplied to individuals this leads to Mid Staffs, at the level of the supply chain it gives us horseburgers. Scaling up the same tyranny, the big supermarket chains play suppliers off against each other, enforce short-term contracts and force prices down. The result: a British meat industry that is in long-term crisis and decline, unable to defend itself against less cannibalistic European counterparts.

I bore myself saying this yet again: it doesn’t have to be this way. You don’t have to take my word for it: here’s the verdict of Manchester’s Centre for Research on Socio-Cultural Change (CRESC). ‘There are better ways to organise the supply chain through vertical integration to ensure participants take responsibility for the overall health of the supply chain... The better way, which delivers on broader economic and social objectives, is represented by the integrated national models of the Danish and Dutch pig industry or the directly-owned processing operations of Morrisons, which competes on price in the mass market and uses a higher proportion of British meat than any of the other major supermarkets. The Morrisons model aligns the  interests of firm, supply chain and society through directly-owned processing plants which run at full capacity and proves the benefits of plant loading. Our accounting research show that Morrisons increases margins and reduces costs. Society gains through reduced import dependence, stable employment and the capacity to address animal welfare and climate change.’

If Morrisons can do it, so could Tesco and Sainsbury. Why don’t they? Because they are signed up to the top-down, short-term performance management agenda, locked in place by the equally reductive and simplistic belief that their only job is to make money for shareholders (and themselves), and hang the consequences for the rest of the supply chain, let alone the wider society.

As that suggest, there’s yet another level that the poison has permeated. For all that it is fatally flawed in both theory and practice, shareholder value is the basis of and embedded in all the official governance codes, and, as Said Business School’s Professor Colin Mayer makes clear in a telling RSA lecture on the consequences of that belief, the revision of company law in 2006 did nothing to weaken its destructive grip. So at the level of the economy as a whole, the result of thousands of companies doing what they believe is in their own self-interest is the adversarial supply chains and self-defeating competition that CRESC chronicles. Once again, as with performance management, HRM and the supposed marvel of the market, we end up with the opposite of what the bright official rhetoric promises: not the high road of the high-commitment, high-wage knowledge economy but the low road: the low-innovation, low-commitment, low-wage and high-insecurity economy embodied in Prêt and Amazon.

Dilemmas are dilemmas because the decisions are difficult. Getting rid of bad management is not a dilemma; there are simply no arguments against it. Do the right thing and economic recovery will take care of itself. What, I wonder, is Ed Milliband, or indeed any other ambitious politician, waiting for?



 


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User comments

John Carlisle :: 18th Feb 13
Simon I used to feel despairing when I read articles like this because over 25 years ago I wrote an evidenced based book on just this, and still they go on screwing their supply chains. Then I had a revelation, following the reaction of a mining company MD to a guest lecture I gave to their mixed audience of contractors and procurement heads. I pointed out to him that his greatest allies were in the room, i.e. suppliers and contractors. He nearly had a fit and called me provocative afterwards at the dinner. It was then that it dawned on me: it is not about overcoming resistance to change, which has been taxing John Seddon and Gordon Hall. They are actually in a state of denial; deep, deep seated denial. Now that is a pathology. How do we treat it? Time to bring in the shrinks, I reckon.
Paul Reading :: 20th Feb 13
Unfortunately over the last thirty years or more the obsession with shareholder value has had a side effect. As input costs are cut to deliver that "value" the managenent responsible has been rewarded by our highly concentrated shareholder representatives with rapidly increasing pay for their delivery of short term benefits. No wonder they are in denial; it may spell disaster for most of us but for a select few it has been win after win!
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