Corporate culture is another limiting factor: The larger your company gets, the harder a great corporate culture is to maintain. From all accounts, WinCo has a great community of workers, and it has 15,000 of them, which sounds like a lot. But Wal-Mart has more than 1 million employees in the U.S. It might be hard to maintain that level of excitement as you get into the hundreds of thousands of employees. If you try to expand quickly to get scale, your core of loyal employees who have been with you forever shrinks relative to the newcomers who don’t yet have the same commitment to the company. This is particularly a problem in employee-owned companies; as you get more employees, you can dilute the sense of ownership, because each employee’s contribution makes such a tiny impact on the bottom line — or you may get wars between groups of employees, as we saw with United Airlines.
This is related to another key challenge: management. As organizations grow, they have to change. Anyone who has been through a startup can attest to this — when you start out, you don’t need to have many meetings; you just hash stuff out impromptu when the need arises. As the company grows, you start to need management reporting lines, and defined roles, and scheduled meetings, and other bureaucratic unpleasantness that everyone hates. But if you try to do without it, everything quickly degenerates into a chaotic mess.
Not every company is good at this transition. If one of the things that made you great as a little baby company was your informality and flexibility, you may find that growing makes your key producers unhappy and ultimately saps the creative flux that made you great at what you do.
This is also a big challenge as the company moves beyond “small” and into “large”; in fact, every time you dramatically increase the size of your business, you will find that it needs to gut-rehab its management structure. Your three great managers who made all the trains run on time can no longer oversee things at the level of detail they once did; they need to spend more of their time making sure that other people do so. Some of them aren’t good at that role, but they will be unhappy if someone else is promoted or hired over their head. You start to rely more and more on well-standardized processes rather than individual initiative, which may require some compromises on quality to maintain the price point that your customers expect. It is the difference between an exquisitely pulled shot at your local coffee shop and the massive amount Starbucks has invested in machines that make exactly the same coffee every time.
Megan McArdle, “In-N-Out Doesn’t Want to Be McDonald’s”, Bloomberg View, 2014-10-02.
September 17, 2015
September 16, 2015
A few days ago there was a big debate about a New York Times expose on working conditions at Amazon.com. (BTW, it would have been useful for the NYT to compare labor practices at the Seattle company to working conditions at firms operating in the Amazon region of Brazil.)
Many liberals were appalled, while conservatives often wondered why, if working conditions were so bad at Amazon, people didn’t simply “get another job.” I have sympathy for both sides, but probably a bit more for the conservative side.
One liberal objection might be that it’s not easy to get another job. And perhaps that’s because monetary policy since 2008 has been too contractionary. And perhaps that’s because conservatives have complained about the Fed’s QE/low interest rate policies, which has made the Fed reluctant to do more.
Regardless of how you feel about monetary policy, it’s clear that if employers feel they have a “captive audience” of workers, who are terrified of losing their jobs, it would be easier for the employer to crack the whip and drive the employees to work extremely hard. One advantage of a healthy job market is that workers have more power to negotiate pleasant working conditions.
Scott Sumner, “How bad government policies make us meaner”, Library of Economics and Liberty, 2015-08-25.
May 26, 2015
At least, that’s what this article in The Atlantic by Jerry Useem says:
At the University of Amsterdam, researchers have found that semi-obnoxious behavior not only can make a person seem more powerful, but can make them more powerful, period. The same goes for overconfidence. Act like you’re the smartest person in the room, a series of striking studies demonstrates, and you’ll up your chances of running the show. People will even pay to be treated shabbily: snobbish, condescending salespeople at luxury retailers extract more money from shoppers than their more agreeable counterparts do. And “agreeableness,” other research shows, is a trait that tends to make you poorer. “We believe we want people who are modest, authentic, and all the things we rate positively” to be our leaders, says Jeffrey Pfeffer, a business professor at Stanford. “But we find it’s all the things we rate negatively”—like immodesty—“that are the best predictors of higher salaries or getting chosen for a leadership position.”
Pfeffer is concerned for his M.B.A. students: “Most of my students have a problem because they’re way too nice.”
He tells a story about a former student who visited his office. The young man had been kicked out of his start-up by — Pfeffer speaks the words incredulously — the Stanford alumni mentor he himself had invited into his company. Had there been warning signs?, Pfeffer asked. Yes, said the student. He hadn’t heeded them, because he’d figured the mentor was too big of a deal in Silicon Valley to bother meddling in his little affairs.
“What happens if you put a python and a chicken in a cage together?,” Pfeffer asked him. The former student looked lost. “Does the python ask what kind of chicken it is? No. The python eats the chicken. And that’s what she” — the alumni mentor — “does. She eats people like you for breakfast.”
In Grant’s framework, the mentor in this story would be classified as a “taker,” which brings us to a major complexity in his findings. Givers dominate not only the top of the success ladder but the bottom, too, precisely because they risk exploitation by takers. It’s a nuance that’s often lost in the book’s popular rendering. “I’ve become the nice-guys-finish-first guy,” he told me.
Give and Take seeks to pinpoint what, exactly, separates successful givers from “doormat” givers (the subtleties of which we will return to). But it does not consider what separates successful jerks, like Steve Jobs, from failed ones like … well, Steve Jobs, who was pushed out of his start-up by the mentor he’d recruited, in 1985.
The fact is, me-first behavior is highly adaptive in certain professional situations, just like selflessness is in others. The question is, why — and, for those inclined to the instrumental, how can you distinguish between the two?
March 25, 2015
In The Federalist, Nichole Russell agrees that it is nearly impossible to “have it all” (a real career and a family) … at the same time, anyway:
The conversation about mothers in the workforce seems to be at once continuous and clamoring. Rarely does a working mother nail the problem and solution without sounding too whiny or too arrogant. Yet a recent commentary in Forbes comes as close to any as I have seen recently, complete with some eyebrow-raising admissions. If more men and women — parents and CEOs — viewed this exhausting issue with such clarity, perhaps we could finally work towards a solution.
In the piece, succinctly titled, “Female Company President: I’m sorry to all the mothers I worked with,” Katharine Zaleski recounts how, while employed in high-powered editorial positions at The Washington Post and The Huffington Post, she regularly scoffed at the work ethic of other women just because they were mothers, either mentally or by failing to support the decisions they made related to work and family.
She reveals this penitent anecdote: “I secretly rolled my eyes at a mother who couldn’t make it to last minute drinks with me and my team. I questioned her ‘commitment’ even though she arrived two hours earlier to work than me and my hungover colleagues the next day.”
What’s just as surprising as her admission that she evaluated a mother’s work-related achievements on a different scale than she did other employees is the equally important truth that the workforce isn’t just a tough place for moms because of their male bosses. “For mothers in the workplace, it’s death by a thousand cuts – and sometimes it’s other women holding the knives. I didn’t realize this – or how horrible I’d been – until five years later, when I gave birth to a daughter of my own.”
Zaleski goes on to discuss how she lamented her status as a new mom and employee only briefly before she determined to find a solution, both for her daughter so she wouldn’t feel “trapped” and other moms facing the same struggle. She wound up co-founding a startup called PowertoFly that matches women in technical positions they can do from home.
While many conservatives and liberals alike might call this an abandonment of the feminist theory, I think it actually expresses the heart of feminism — not radical left-wing feminism, but one of the few Oprah gems I agree with: “You can have it all, just not at the same time.”
February 21, 2015
The most common problem is that all these new systems — metrics, algorithms, automated decisionmaking processes — result in humans gaming the system in rational but often unpredictable ways. Sociologist Donald T. Campbell noted this dynamic back in the ’70s, when he articulated what’s come to be known as Campbell’s law: “The more any quantitative social indicator is used for social decision-making,” he wrote, “the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor.”
On a managerial level, once the quants come into an industry and disrupt it, they often don’t know when to stop. They tend not to have decades of institutional knowledge about the field in which they have found themselves. And once they’re empowered, quants tend to create systems that favor something pretty close to cheating. As soon as managers pick a numerical metric as a way to measure whether they’re achieving their desired outcome, everybody starts maximizing that metric rather than doing the rest of their job — just as Campbell’s law predicts.
Felix Salmon, “Why Quants Don’t Know Everything”, Wired, 2014-01-14
February 11, 2015
…but Jerry Toner says that modern employers can learn from the management techniques of Romans. Roman slave-owners, that is:
Most Romans, like Augustus, thought cruelty to slaves was shocking. They understood that slaves could not simply be terrified into being good at their job. Instead, the Romans used various techniques to encourage their slaves to work productively and willingly, from bonuses and long-term inducements, to acts designed to boost morale and generate team spirit. All of these say more than we might imagine about how employers manage people successfully in the modern world.
Above all, the story shows how comfortable the Romans were with leadership and command. They believed that there is a world of difference between having the organisational skills to run a unit and actually being able to lead it. By contrast modern managers are often uncomfortable with being promoted above their staff. I worked in a large corporation for a decade and I had numerous bosses who tried to be my friend. Raising yourself over others sits uneasily with democratic ideals of equality. Today’s managers have to pretend to be one of the team.
The Romans would have scoffed at such weakness. Did Julius Caesar take his legions off-site to get them to buy-in to his invasion of Gaul? Successful leaders had to stand out from the crowd and use their superior skills to inspire, cajole and sometimes force people to do what was necessary. Perhaps we would do well to learn from their blunt honesty.
February 4, 2015
Laura Spring linked to this interesting bit of news that CP Rail is “encouraging” non-unionized employees to take training on how to operate locomotives:
A Canadian railway company is training its managers and office workers to drive locomotives and load trains, a move one labour lawyer says could be an attempt to prepare for a possible work stoppage.
Documents show CP Rail has encouraged office employees to step away from their desks and cubicles and sign up for training both on the trains and in the rail yards.
The use of office workers driving trains could be a major safety concern, said Wayne Benedict, a former railroader who now works as a labour lawyer in Calgary.
“You’ve got them climbing onto a train that’s a mile and a half long, with a hundred and some cars, weighing 16,000 tonnes, with dangerous goods, going through our cities,” he said. “And they are not professional, running trades employees. They are running human resource professionals, or other managers and supervisors.”
CBC News has obtained an internal CP Rail document dated Feb. 19, 2014, encouraging non-union employees to sign up for training as a locomotive engineer or conductor. It calls the training “a requirement at Canadian Pacific. It is also the single best way for a management employee to learn what the business is truly about. It is a fundamental cornerstone to the development of our railway culture.”
The document also suggests, “no matter what your role is at CP, this experience will make you better at what you do.”
The program is targeted mainly towards mechanical and engineering workers, but open to any non-union employees.
November 26, 2014
No shit, this really exists:
Ethically, it’s been a rough couple of years for the military.
In July 2013, an Air Force major general went on an epic five-day bender while on a diplomatic mission in Russia. That November, Navy officials launched an investigation into misconduct involving top officers and a Malaysian contractor named Fat Leonard.
Individually, the cases are all bad news. The good news is that authorities often catch and punish government cheats, thieves and frauds. Penalties for ripping off the American taxpayer range from huge fines to hard time in prison.
And when the trial ends and punishment begins, many military ethics cases wind up in the Pentagon’s Encyclopedia of Ethical Failure.
That’s right, the military maintains a database of the federal government’s worst ethics violators. Unlike many government documents, the encyclopedia is clear, easy to read … and actually quite funny. Many of the stories are as amusing as they are aggravating.
It might be the most light-hearted official report anyone’s ever written about criminals.
H/T to John Turner for the link.
October 15, 2014
There’s been a lot of moaning on about inequality recently — some are even predicting it will be the big issue in next year’s Canadian federal election — but the eye-popping figures being tossed around (CEOs being paid hundreds of times the average wage) are very much a case of statistical cherry-picking:
Before retiring to their districts for the fall, the House Democratic Caucus rallied behind the CEO/Employee Pay Fairness Act, which would prevent a public company from deducting executive compensation over $1 million unless it also gives rank-and-file employees raises that keep pace with the cost of living and labor productivity.
Meanwhile, the AFL-CIO and its aligned think tanks have made hay of the huge difference between the pay of CEOs and employees. One of the most widely cited measures of the “gap” comes from the AFL-CIO’s Executive Paywatch website.
- The nation’s largest federation of unions laments that “corporate CEOs have been taking a greater share of the economic pie” while wages have stagnated for the rest of us.
- As proof, it points to a 331-to-1 gap in compensation between America’s chief executives and the pay of the average worker.
That’s a sizable number. But don’t grab the pitchforks just yet, says Mark J. Perry, economic professor at the University of Michigan-Flint and resident scholar at the American Enterprise Institute, and Michael Saltsman, research director at the Employment Policies Institute.
The AFL-CIO calculated a pay gap based on a very small sample — 350 CEOs from the S&P 500. According to the Bureau of Labor Statistics, there were 248,760 chief executives in the U.S. in 2013.
- The BLS reports that the average annual salary for these chief executives is $178,400, which we can compare to the $35,239-per-year salary the AFL-CIO uses for the average American worker.
- That shrinks the executive pay gap from 331-to-1 down to a far less newsworthy number of roughly five-to-one.
August 31, 2014
The first sign of danger is represented by the appearance in the organization’s hierarchy of an individual who combines in himself a high concentration of incompetence and jealousy. Neither quality is significant in itself and most people have a certain proportion of each. But when these two qualities reach a certain concentration — represented at present by the formula I3J5 — there is a chemical reaction. The two elements fuse, producing a new substance that we have termed “injelitance.” The presence of this substance can be safely inferred from the actions of any individual who, having failed to make anything of his own department, tries constantly to interfere with other departments and gain control of the central administration. The specialist who observes this particular mixture of failure and ambition will at once shake his head and murmur, “Primary or idiopathic injelitance”. The symptoms, as we shall see, are quite unmistakable.
The next or secondary stage in the progress of the disease is reached when the infected individual gains complete or partial control of the central organization. In many instances this stage is reached without any period of primary infection, the individual having actually entered the organization at that level. The injelitant individual is easily recognizable at this stage from the persistence with which he struggles to eject all those abler than himself, as also from his resistance to the appointment or promotion of anyone who might prove abler in course of time. He dare not say, “Mr. Asterisk is too able”, so he says, “Asterisk? Clever perhaps — but is he sound? I incline to prefer Mr. Cypher”. He dare not say, “Mr. Asterisk makes me feel small”, so he says, “Mr. Cypher appears to me to have the better judgment”. Judgment is an interesting word that signifies in this context the opposite of intelligence; it means, in fact, doing what was done last time. So Mr. Cypher is promoted and Mr. Asterisk goes elsewhere. The central administration gradually fills up with people stupider than the chairman, director, or manager. If the head of the organization is second-rate, he will see to it that his immediate staff are all third-rate; and they will, in turn, see to it that their subordinates are fourth-rate. There will soon be an actual competition in stupidity, people pretending to be even more brainless than they are.
C. Northcote Parkinson, “Injelititis, Or Palsied Paralysis”, Parkinson’s Law (and other studies in administration), 1957.
July 12, 2014
I rather pride myself on my packing. Packing is one of those many things that I feel I know more about than any other person living. (It surprises me myself, sometimes, how many of these subjects there are.) I impressed the fact upon George and Harris, and told them that they had better leave the whole matter entirely to me. They fell into the suggestion with a readiness that had something uncanny about it. George put on a pipe and spread himself over the easy-chair, and Harris cocked his legs on the table and lit a cigar.
This was hardly what I intended. What I had meant, of course, was, that I should boss the job, and that Harris and George should potter about under my directions, I pushing them aside every now and then with, “Oh, you—!” “Here, let me do it.” “There you are, simple enough!” — really teaching them, as you might say. Their taking it in the way they did irritated me. There is nothing does irritate me more than seeing other people sitting about doing nothing when I’m working.
I lived with a man once who used to make me mad that way. He would loll on the sofa and watch me doing things by the hour together, following me round the room with his eyes, wherever I went. He said it did him real good to look on at me, messing about. He said it made him feel that life was not an idle dream to be gaped and yawned through, but a noble task, full of duty and stern work. He said he often wondered now how he could have gone on before he met me, never having anybody to look at while they worked.
Now, I’m not like that. I can’t sit still and see another man slaving and working. I want to get up and superintend, and walk round with my hands in my pockets, and tell him what to do. It is my energetic nature. I can’t help it.
Jerome K. Jerome, Three Men in a Boat (to say nothing of the dog), 1889.
June 21, 2014
In 1939, Bruno Rizzi, a largely forgotten Communist intellectual, wrote a hugely controversial book, The Bureaucratization of the World. Rizzi argued that the Soviet Union wasn’t Communist. Rather, it represented a new kind of system, what Rizzi called “bureaucratic collectivism.” What the Soviets had done was get rid of the capitalist and aristocratic ruling classes and replace them with a new, equally self-interested ruling class: bureaucrats.
The book wasn’t widely read, but it did reach Bolshevik theoretician Leon Trotsky, who attacked it passionately. Trotsky’s response, in turn, inspired James Burnham, who used many of Rizzi’s ideas in his own 1941 book The Managerial Revolution, in which Burnham argued that something similar was happening in the West. A new class of bureaucrats, educators, technicians, regulators, social workers, and corporate directors who worked in tandem with government were reengineering society for their own benefit. The Managerial Revolution was a major influence on George Orwell’s 1984.
Now, I don’t believe we are becoming anything like 1930s Russia, never mind a real-life 1984. But this idea that bureaucrats — very broadly defined — can become their own class bent on protecting their interests at the expense of the public seems not only plausible but obviously true.
The evidence is everywhere. Every day it seems there’s another story about teachers’ unions using their stranglehold on public schools to reward themselves at the expense of children. School-choice programs and even public charter schools are under vicious attack, not because they are bad at educating children but because they’re good at it. Specifically, they are good at it because they don’t have to abide by rules aimed at protecting government workers at the expense of students.
Working for the federal government simply isn’t like working for the private sector. Government employees are essentially unfireable. In the private sector, people lose their jobs for incompetence, redundancy, or obsolescence all the time. In government, these concepts are virtually meaningless. From a 2011 USA Today article: “Death — rather than poor performance, misconduct or layoffs — is the primary threat to job security at the Environmental Protection Agency, the Small Business Administration, the Department of Housing and Urban Development, the Office of Management and Budget and a dozen other federal operations.”
May 29, 2014
Every student of human institutions is familiar with the standard test by which the importance of the individual may be assessed. The number of doors to be passed, the number of his personal assistants, the number of his telephone receivers — these three figures, taken with the depth of his carpet in centimeters, have given us a simple formula that is reliable for most parts of the world.
C. Northcote Parkinson, “Plans And Plants, or the Administration Block”, Parkinson’s Law (and other studies in administration), 1957.
February 4, 2014
Megan McArdle says that the meme about fast-rising tuition costs at university being driven primarily by the increase in administration staff isn’t the whole story:
Tim Burke, a Swarthmore professor who is also a top-notch (if insufficiently prolific) blogger, has penned a long post that is a very useful corrective to this complaint. It isn’t that the professors are wrong, exactly — administration has grown fantastically over the last 50 years. And empire building is undoubtedly some of the reason for this, because all organizations accumulate unnecessary mid-managerial retinues unless the leadership makes a regular effort to scrape off the supernumerary barnacles.
However, most of those administrators have been hired for two much simpler reasons: The faculty wanted to outsource their administrative responsibilities to professionals so they could focus more on teaching and research; and the demands placed on a university are much greater than they used to be.
I am not going to excerpt Burke’s piece because it is too multifaceted, and too good; you’ll just have to read the whole thing. He elaborates the many new things that administrators now do, from monitoring diversity to tending the mental health of the students. He touches on the legal changes that have made much of this administrative bloat into an expensive necessity, a sort of institutional immune system that defends against lawsuits. He also mentions the new regulations, like Title IX, that imply a whole new staff of people certifying that you have complied with their requirements.
January 6, 2014
To the very young, to schoolteachers, as also to those who compile textbooks about constitutional history, politics, and current affairs, the world is a more or less rational place. They visualize the election of representatives, freely chosen from among those the people trust. They picture the process by which the wisest and best of these become ministers of state. They imagine how captains of industry, freely elected by shareholders, choose for managerial responsibility those who have proved their ability in a humbler role. Books exist in which assumptions such as these are boldly stated or tacitly implied. To those, on the other hand, with any experience of affairs, these assumptions are merely ludicrous. Solemn conclaves of the wise and good are mere figments of the teacher’s mind. It is salutary, therefore, if an occasional warning is uttered on this subject. Heaven forbid that students should cease to read books on the science of public or business administration — provided only that these works are classified as fiction. Placed between the novels of Rider Haggard and H.G. Wells, intermingled with volumes about ape men and space ships, these textbooks could harm no one. Placed elsewhere, among works of reference, they can do more damage than might at first sight seem possible.
C. Northcote Parkinson, “Preface”, Parkinson’s Law (and other studies in administration), 1957.