The American Economic Malignancy: Management
Harvard's Bob Hayes and the late Bill Abernathy launched an attack on management in their widely acclaimed article, "Managing Our Way to Economic Decline" in the Harvard Business Review in 1980. Two years later Harvard economist Bob Reich made a similar diagnosis, coining the unflattering term "paper entrepreneurs" in his book The Next American Frontier.
Many business executives grumbled that these were just academics overreacting to the 1981 recession. Besides, Reich was a close Mondale advisor, hardly known for sympathy toward big business.
The recent past has been marked by an unprecedented four-year economic recovery. But the criticism has not stopped. In fact, it is picking up. And it is beginning to come from business
Carl Icahn, who is trying to take over the firm long synonymous with American industry itself—U.S. Steel (now USX, of course), asserts that "U.S. corporations are in crisis." In interviews in Newsweek and Business Week, he says the reason is not lousy government policy: "What has developed is a sort of anti-Darwinism pattern, where you have survival of the unfittest. The directors who choose these chief executives seem to be studying from a primer titled 'In Search of Mediocrity.'"
His tone turns downright nasty and personal: "A modern chief executive [is] much like a feudal baron. He has a retinue, though his courtiers are more likely to be fawning MBAs than squires. ... [The chief executives] are out on their jet planes with their wives and going on safari and the company is going to the dogs, and then they'll give parties to celebrate how great they are."
Icahn proclaims, "We can't have people on the dole, but when you have ten layers of bureaucracy, isn't that the same as the dole? They're not producing for our society." He claims that if he gets USX and turns it around, he'll then "look for another outrage. ... There are a lot of people to be outraged at. ... I'm just outraged in general."
So we dismiss the Harvard panty waists. And it's also easy to dismiss Icahn's management critique as a self-serving rationalization for the havoc he wreaks on innocent bystanders. But how do we dismiss General Motors' director—the conservative Texan, Electronic Data Systems (EDS) founder and Forbes-ranked third-richest American—H. Ross Perot?
Perot joins the snipers: "We must replace bureaucrats with leaders," he warns, urging executives to "get out of their private dining rooms and talk to customers and people down in the guts of the corporation."
His most pointed commentary is reserved for GM (he owns 11 million shares of GM's class E stock, currently worth about $357 million). Perot told Newsweek that "top management [at GM] was in a 'time warp' and staff size had bloated to look like the Chinese army." To Business Week he added, "The first EDSer to see a snake kills it. At GM, first thing you do is organize a Committee on snakes. Then you bring in a consultant who knows a lot about snakes. Third thing you do is talk about it for a year." Or longer: "It takes five years to develop a new car in this country. Heck, we won World War II in four years."
The next blunderbuss is discharged by a man with impeccable credentials—Dick Darman, Deputy Secretary of the Treasury and close Reagan confidant. He declares that our big corporations are "bloated, risk averse, inefficient, and unimaginative," and blasts executives for "spend[ing] less time developing R&D budgets than ... reviewing golf scores."
These damning indictments do not go far enough. Management in our schools, cities, and of national defense is in wholesale disarray. Management per se is more of a problem than Washington, Albany, Sacramento, Tokyo, Bonn, and Seoul combined.
No one heeds Democrats who attack big-business management—we assume it's in their genes. Republicans don't attack big-business management, because they are big-business management. Weinberger and others permit no attack on defense management, because it is seen as an attack on Reagan's defense rebuilding policy, not management. And the Democrats vigorously attack Secretary of Education William Bennett for criticizing school management; they argue it's just a smokescreen to cover budget cuts.
But worse smokescreens are devised by the business community. Twenty-two of the major 23 recommendations from the touted President's Commission on Industrial Competitiveness (headed by Hewlett-Packard Chairman John Young) dealt with things that government, schools, and other non-corporate entities ought to do. Not surprisingly, the Commission's mostly big-company members didn't lay a glove on big-company management!
These issues are more urgent than ever, now that Democrats control both houses of Congress. The largest share of their Senate gains came from the South, where new protectionist-leaning textile lawmakers may well tip the scale in favor of reality-evading, self-defeating trade legislation.
The American executive suite, not Congress or Japan's Ministry of International Trade and Industry, is the place to start trying to reverse our precipitous decline in international competitiveness. So three cheers to Messrs. Darman and Perot. We desperately need more "establishment" people to blow the whistle on the management fifth column that is gutting America's economic future.
(c) 1986 TPG Communications.
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