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Rumination on Management

January 5, 2016

Many years ago, when Chrysler was undergoing one of its many reorganizations, it chose to lay off most of its high-paid management instead of their factory-floor workers. The company’s fortunes immediately turned around. Flush with profits the company then rehired the same people who drove it into the ground in the first place.

I always remembered this account of managerial blindness whenever I happened to find myself involved in running an organization. In government, much to the annoyance of the personnel department (now human resources), I tried to eliminate most managers and operate with line workers as much as possible (and ultimately eliminate myself when my own convenience began to take precedence over the job I was supposed to do). For about five years in a row, BT Collins and I drafted legislation to encourage this approach throughout government and every year it was defeated in the first committee to consider it because of opposition by the various personnel organizations.

Later when involved in management of two large law firms and presented with the ever increasing demands by so-called high producers for greater and greater claims on the firm’s resources, armed with analyses I prepared, I argued to the other members of the management committees that the economics of the firm would be improved by letting these people go. Of course, fear prohibited them from taking such a dramatic action (including fear of retaliation). Nevertheless, constant opposition to the greed of these super producers demands for a greater share of the firm’s resources often encouraged them to leave and the firms prospered. Nevertheless, eventually the firms went out and acquired other super-producers to replace those that departed, but it took a while for these new masters of the universe to feel strong enough to begin to undermine the organizations for their own benefit.

I believe an organization should concentrate on pruning from the top (including ownership) and such pruning should be ongoing and that their claim on the institution’s resources should diminish relative to those over whom they have authority. In fact, several recent studies have demonstrated that when Boards of Directors chose the least expensive among CEO candidates the company does as well, and often better than under the management of more expensive candidates.

(Note: Paying a manager more money, even for past performance, does not make him more aggressive, creative or effective; it just as well may make him more prone to covering up his mistakes.)

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