Failure of the management class
For years, I’ve bored my friends with rants about what I call “the failure of the management class.”
The root of most of our problems, I’ve argued, lies at the feet of a largely incompetent, ignorant and uncaring management class — the people who fill the executive offices with fradulent characters interested only in what and how much they can get away with at the expense of their organizations, its customers, and society at large.
The economic crisis has brought this home as never before. And today. I’m intrigued to read a long piece in The Globe and Mail by Professor Henry Mitzberg on this very issue. I’ve never read such a brutal analysis from the pen of a recognized business academic.
By exquisite irony, the Mintzberg article comes the very day that the big insurance outfit, American International Group (AIG) is being lambasted for giving its executives $165 million in bonuses while shareholder wealth was going down the drain.
It was AIG, you might remember, that lost $61.7 billion in its fourth quarter, laying the biggest egg in American corporate history. Even Ben Bernake, the chair of the U.S. Federal Reserve, says it’s scandalous that $170-billion of bail-out money is going to keep the company afloat.
In his Globe article, Mitz asserts that the present situation is being called “a financial crisis or an economic one, but, at the core, it is a crisis of management.”
He uses the subprime mortgage mess (which Canada has not entirely escaped) to ask:
How could these mortgages have come to exist in the first place and worse, how could they have spread to so many of the bluest of blue-chip financial insitutions?
His answer:
“What we have here is a monumental failure of management. American management is still revered across much of the globe for what it used to be. Now, a great deal of it is just plain rotten … From where I sit, management education appears to be a significant part of the problem.”
At the risk of oversimplification, I put the failure of the management class down to three main causes:
- Ignorance. The typical denizen of the executive suite, if he’s American, knows nothing about the rest of the world and is ignorant of culture, art and literature
- Selfishness. Too many people in upper mnanagement care only for their own salaries, bonuses and perks — as witness the immense and growing disparity between management salaries and worker pay.
- Hubris – lack of accountability, lack of responsibility. How often have you heard – “It’s not my problem,” “It’s not up to me to fix that,” “that’s not in my department?”
Meanwhile, we have to suffer witness to the continued depradations of these people on not just workers’ earnings or shareholders’ investments, but the money that Washington (and now Ottawa) is pouring into failed companies.
As Prof. Mintz says, outfits like General Motors, rather than being “too big to fail” are actually “too big to succeed.” Our preoccupation with saving the auto companies is nothing short of bizarre. Their products are the machines that are our biggest cause of climate change, they inflict massive congestion on our roads, and they take thousands of lives every year. Yet we’re so caught up in the rewards of building them that we can’t separate ourselves from their toxic grip!
Sure, most of us need cars to get around. A statistic I heard recently illustrates the dilemma we’re in. Canada has about 70 cars for every 100 people. In the U.S., it’s 100 cars for every 100 people. You see where the problem is.
Meanwhile, the next time you get poor service in a store or restaurant, have to put up with work that’s not up to par, or discover the rest of your savings have been swallowed up by a manipulative stock market, don’t blame the workers. Blame management.
“The root of most of our problems, I’ve argued, lies at the feet of a largely incompetent, ignorant and uncaring management class — the people who fill the executive offices with fradulent characters interested only in what and how much they can get away with at the expense of their organizations, its customers, and society at large.”
I suggest that, esides this self-serving class of managers, there is a whole other self-serving class of managers that have “drunk the Cool Aide” and in so doing support the fraudulent upper management. They do so either because they see their management future depends on this support of because they have actually bought into the lies from above about what is required for a business to be successful.