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.”
Jonah Goldberg, “Of the Bureaucrats, by the Bureaucrats, for the Bureaucrats: The naked self-interest of the government-worker class”, National Review, 2014-06-20.
June 21, 2014
QotD: The bureaucratic revolution
May 29, 2014
QotD: Formula for measuring the importance of managers
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
Administration costs in higher education
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
QotD: The illusion of a rational world
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.
December 31, 2013
November 26, 2013
The illusion of omnicompetence
I’ve expressed this as variations on “the deeper the specialization, the more those specialists feel they’re experts on much wider subjects”. Megan McArdle‘s formulation is rather neater than that:
Amid the chaos, I got a call from the secretary of a very senior executive at the firm. His new voice-recognition software wasn’t working, and he needed me to come up right away.
I had servers that weren’t working right and a bunch of workstations that couldn’t access the network. “He should call the help desk,” I told her.
Her tone was arctic.
“He doesn’t deal with help desk personnel,” she said. “Please come up here right away.”
So I went to the office of Mr. Senior Executive. He was not at his desk. I played with his new software, which seemed to be working fine — a bit slow, but in 1998, voice-recognition software took a while to become acclimated to your voice. I told the secretary it seemed to be working, and I left my pager number. It went off as I got to the elevator bank. I trekked wearily back to the office, where Mr. Senior Executive gestured at his computer. “It still doesn’t work right,” he said, and started to leave the office again.
“Hold on, please,” I said. “Can you show me exactly what’s not working?”
“It’s not doing what I want,” he said.
“What do you want?” I asked.
“I want it to be,” he replied, “like the computer on Star Trek: The Next Generation.”
“Sir, that’s an actor,” I replied evenly, despite being on the sleepless verge of hysteria. With even more heroic self-restraint, I did not add “We can get you an actor to sit under your desk. But we’d have to pay SAG rates.”
Now, when I used to tell this story to tech people, the moral was that executives are idiots. No, make that “users are idiots.” Tech people tend to regard their end-users as a sort of intermediate form of life between chimps and information-technology staffers: They’ve stopped throwing around their feces, but they can’t really be said to know how to use tools.
And, of course, users can do some idiotic things. But this particular executive was not an idiot. He was, in fact, a very smart man who had led financial institutions on two continents. None of the IT staffers laughing at his elementary mistake would have lasted for a week in his job.
Call it “the illusion of omnicompetence.” When you know a lot about one thing, you spend a lot of time watching the less knowledgeable make elementary errors. You can easily infer from this that you are very smart, and they are very stupid. Presumably, our bank executive knew that the phasers and replicators on Star Trek are fake; why did he think that the talking computer would be any more real?
November 13, 2013
QotD: Trade unions
If they are timid in some respects, the Trade Unions are aggressive in negotiation and cannot be otherwise. To keep in business a union has to do something. Each year there must be a fresh demand, without which the union will lose membership. Members expect to see some return for their subscriptions and union officials are not paid to be inactive. Lacking a grievance, they will have to invent one. Realizing this, the directors must make a show of reluctance, postponing the inevitable concession until it looks like a victory for the employees. If the union is quiescent it will lose membership, most probably to another union. Its officials, honorary or paid, can always gain consequence on the other hand, from their decision to do battle. Any Trade Union has, therefore, a built-in aggressiveness, without which it can hardly survive. Nothing can be more damaging to the union official than the rumour that he is friendly with the management. This can only be the result of blackest treachery, it is assumed, and the official has to stage a conflict in order to secure his own re-election. Aggressive toward management, the unions are almost as aggressive toward each other, competing for membership and staging frontier disputes over the exact territory which belongs to each. Nor is this unrest the fault of individuals. It is a characteristic of union organization and one for which there is no obvious remedy.
C. Northcote Parkinson, “The Feet of Clay”, Left Luggage, 1967.
November 5, 2013
Just add lawyers and stir
Coyote Blog on the problem with the latest anti-discrimination law:
In reality, this is how it works: Suddenly, as owner of the company, one finds a lawsuit or EEOC complain in his lap, generally with absolutely no warning. In the few cases we have seen in our company, the employee never told anyone in the company about the alleged harassment, never gave me or management a chance to fix it, despite very clear policies in our employee’s manuals that we don’t tolerate such behavior and outlining methods for getting help. There is nothing in EEO law that requires an employee to try to get the problem fixed via internal processes.
As a result, our company can be financially liable for allowing a discriminatory situation to exist that we could not have known about, because it happened in a one-on-one conversations and the alleged victim never reported it.
What I want is a reasonable chance to fix problems, get rid of bad supervisors, etc. A reasonable anti-discrimination law would say that companies have to have a grievance process with such and such specifications, and that no one may sue until they have exhausted the grievance process or when there is no conforming grievance process. If I don’t fix the problem and give the employee a safe work environment, then a suit is appropriate. The difference between this reasonable goal and the system we actually have is lawyers. Lawyers do not want the problem to be fixed. Lawyers want the problem to be as bad as possible and completely hidden from management so there is no chance it can be fixed before they can file a lucrative lawsuit.
September 25, 2013
Corporate culture, entitlement and unearned benefits
I’ve never worked in the investment banking world, but even at the tech companies I’ve worked for over the years, I saw smaller versions of the kind of behaviour that Chris Tell says are sure-fire signs of a toxic corporate culture:
It was the late 90′s, markets were booming and the only thing that seemed to be flowing faster than the pints on a typical Thursday night in the city of London’s watering holes, was of course the money.
Living it up … great food, expensive cocktails — in fact the more expensive the better — that was the prevailing attitude. Never on your own dime of course.
This wasn’t unique to Lehman, who I was with at the time, or to any other bank for that matter. I contracted to a handful of the big names, and they were all abusers.
It was, and still is deeply ingrained in much of the investment banking corporate culture. It’s also been a cancer in many of the businesses I’ve researched over the years.
I now have zero tolerance for it as an investor and business owner, despite the fact that I was more impressionable when younger.
Back then, being young and naive, working for a fancy-pants IB, I was awestruck by my bosses spending hundreds of pounds in a drinking session. As I look back I’m embarrassed for thinking that these wealthy parasites where gods of some kind. The more they spent … the bigger an asshole they were … the more they were idolized and revered!
As far as I could tell most of my fellow inmates had applied to an ad that read something like: Arrogant, obnoxious, self-aggrandizing types being accepted now.
[…]
Humans have a desire for fairness but also love a free lunch. These two aspects work against each other.
Soon one manager sees another manager ordering lobster at lunch and thinks to himself, “Screw it, if he’s getting it so should I.” Rapidly a culture of entitlement develops where mysteriously, corporate travel, apartments, dinners, drinks and other things that have little to no ROI start burning up the expense accounts. These folks rarely stop to consider the impact of their actions, while somehow believing that they have “earned it” and indeed “deserve it.”
I was never able to put my finger on it at the time, but having subsequently spent the majority of my adult life researching and investing in early-stage businesses, I now have a keen eye for spotting this, and will never invest in businesses which allow this type of culture to gain footing.
Once let in the door it grows like a cancer and completely destroys shareholder value.
Incidentally, it’s not distinctly different to how career politicians view themselves. They actually believe that what the do, day in and day out is worth something more than it is. That it’s somehow more than just community service, and they should be compensated in the fashion that they (currently — hopefully temporarily) are.
August 16, 2013
“What is true for Walmart is true for al Qaeda”
In Foreign Affairs, Jacob Shapiro looks at the management side of the terror “business”:
But the deeper part of the answer is that the managers of terrorist organizations face the same basic challenges as the managers of any large organization. What is true for Walmart is true for al Qaeda: Managers need to keep tabs on what their people are doing and devote resources to motivate their underlings to pursue the organization’s aims. In fact, terrorist managers face a much tougher challenge. Whereas most businesses have the blunt goal of maximizing profits, terrorists’ aims are more precisely calibrated: An attack that is too violent can be just as damaging to the cause as an attack that is not violent enough. Al Qaeda in Iraq learned this lesson in Anbar Province in 2006, when the local population turned against them, partly in response to the group’s violence against civilians who disagreed with it.
Terrorist leaders also face a stubborn human resources problem: Their talent pool is inherently unstable. Terrorists are obliged to seek out recruits who are predisposed to violence — that is to say, young men with a chip on their shoulder. Unsurprisingly, these recruits are not usually disposed to following orders or recognizing authority figures. Terrorist managers can craft meticulous long-term strategies, but those are of little use if the people tasked with carrying them out want to make a name for themselves right now.
Terrorist managers are also obliged to place a premium on bureaucratic control, because they lack other channels to discipline the ranks. When Walmart managers want to deal with an unruly employee or a supplier who is defaulting on a contract, they can turn to formal legal procedures. Terrorists have no such option. David Ervine, a deceased Irish Unionist politician and onetime bomb maker for the Ulster Volunteer Force (UVF), neatly described this dilemma to me in 2006. “We had some very heinous and counterproductive activities being carried out that the leadership didn’t punish because they had to maintain the hearts and minds within the organization,” he said, referring to a period in the late 1980s when he and the other leaders had made a strategic calculation that the Unionist cause was best served by focusing on nonviolent political competition. In Ervine’s (admittedly self-interested) telling, the UVF’s senior leaders would have ceased violence much earlier than the eventual 1994 cease-fire, but they could not do so because the rank and file would have turned on them. For terrorist managers, the only way to combat those “counterproductive activities” is to keep a tight rein on the organization. Recruiting only the most zealous will not do the trick, because, as the alleged chief of the Palestinian group Black September wrote in his memoir, “diehard extremists are either imbeciles or traitors.”
June 4, 2013
Marx for the modern era
A case for finding the proper modern interpretation of the works of Karl Marx:
The first view (held mostly by its detractors) is that Marxism is little more than the politics of resentment — a philosophical justification for the hatred of success by those who failed to achieve it. The politics of resentment offers three different methods for bringing its program of economic jealousy to fruition: Under socialism, the unsuccessful use the power of government to forcibly extract wealth and possessions from the successful, bit by bit until there is nothing left; under the more extreme communism, the very notion of wealth or success is eliminated entirely, and anyone who seeks individual achievement is punished or eliminated; and finally under anarchy, freelance predators would be allowed to steal or destroy any existing wealth or possessions with no interference from the state. Marx himself saw pure communism as the ultimate goal, with socialism as a necessary precursor, and perhaps just an occasional dash of anarchy to ignite the revolutionary fires.
But there is another, more intriguing and less noxious, view of Marxist thought that gets less attention these days because its anachronistic roots in the Industrial Revolution seemingly render it somewhat irrelevant to modern economics. Marx posited that factory workers should own the factory themselves and profit from its output, since they’e the ones actually doing the work — and the wealthy fat cat “capitalists” should be booted out of the director’s office since they don’t really do anything except profit from other people’s labor. Marx generalized this notion to “The workers should control the means of production,” and then extended it further to a national scale by declaring that the overall government itself should be “a dictatorship of the proletariat,” with “proletariat” defined in this context as “someone who actually works for a living.” The problem with this theory in the 21st century is that very few people actually work in factories anymore due to exponential improvements in automation and efficiency, and fewer still produce handicrafts, and the vast majority of American “workers” these days don’t actually create anything tangible. Even so, there is an attractive populist rationality to this aspect of Marxism that appeals to everyone’s sense of fairness — even to those who staunchly reject the rest of communist theory. Those who do the work should reap the benefits and control the system; hard to argue with that.
Although the “factory” is no longer the basic building block of the American economy, Marx’s notion that “The workers should control the means of production” can be rescued and made freshly relevant if it is re-interpreted in a contemporary American context.
H/T to Jon, my former virtual landlord, for the link.
February 13, 2013
US Cyber Command’s recruiting headache
Strategy Page on the “who could possibly have seen this coming” problems that the new electronic warfare organization is having with staffing:
U.S. Cyber Command (USCYBERCOM) has been operational for two years now, and it is encountering some serious problems in recruiting people qualified to deal with the enemy (skilled hackers attacking American networks for whatever reason). People in the software and Internet security business have been telling Cyber Command leaders that they will have to change the way they recruit if they want to get qualified people. That means hiring hackers who lived on the dark side (criminal hacking) at one point or another. Such recruits would not pass the screening usually given to potential government employees who would be handling, and protecting, classified information and critical Internet systems. Few government officials are willing to bend the rules, mainly because no one wants to be responsible for some rogue hacker who got hired without the usual screening. It’s safer to go by the book and use that for your defense when the inadequate recruiting effort leads to a major Cyber War disaster.
Cyber Command is headquartered in Fort Meade (outside Washington, DC), most of the manpower, and capabilities, come from the Cyber War operations the military services have already established. Within Cyber Command there are some smaller organizations that coordinate Cyber War activities among the services, as well as with other branches of the government and commercial organizations that are involved in network security. At the moment Cyber Command wants to expand its core staff from 900 to 4,900 in the next five years. Twenty percent of those new people will be civilians, including a number of software specialists sufficiently skilled to quickly recognize skillful intrusions into American networks and quickly develop countermeasures. That kind of talent is not only expensive, but those who possess often have work histories that don’t pass the normal screening. These are the personnel Cyber Command is having a difficult time recruiting.
The big problems are not only recruiting hackers (technical personnel who can deal with the bad-guy hackers out there) but also managing them. The problem is one of culture, and economics. The military is a strict hierarchy that does not, at least in peacetime, reward creativity. Troops with good technical skills can make more money, and get hassled less, in a similar civilian job. The military is aware of these problems, but it is slow going trying to fix them.
January 16, 2013
The 9 iron-clad rules of business
Rosabeth Moss Kanter has the nine rules many businesses follow:
- Be suspicious of any new idea from below — because it’s new, and because it’s from below. After all, if the idea were any good, we at the top would have thought of it already.
- Invoke history. If a new idea comes up for discussion, find a precedent in a an earlier idea that didn’t work, remind everyone of that bad past experience. Those who have been around a long time know that we tried it before, so it won’t work this time either.
- Keep people really busy. If people seem to have free time, load them with more work.
- In the name of excellence, encourage cut-throat competition. Get groups to critique and challenge each other’s proposals, preferably in public forums, and then declare winters and losers.
- Stress predictability above all. Count everything that can be counted, and do it as often as possible. Sweep any surplus into master accounts, and eliminate any slack. Favor exact plans and guarantees of success. Don’t credit people with exceeding their targets because that would just undermine planning. Insist that all procedures be followed.
- Confine discussion of strategies and plans to a small circle of trusted advisors. Then announce big decisions in full-blown form. This ensures that no one will start anything new because they never know what new orders will be coming down from the top.
- Act as though punishing failure motivates success. Practice public humiliation, making object lessons out of those who fail to meet expectations. Everyone will know that risk-taking is bad.
- Blame problems on the incompetent people below — their weak skills and poor work ethic. Complain frequently about the low quality of the talent pool today. If that doesn’t undermine self-confidence, it will undermine faith in anyone else’s ideas.
- Above all, never forget that we got to the top because we already know everything there is to know about this business.
Yep, several of the companies I’ve worked for followed most or all of these rules … to suppress creativity and innovation. Worked a treat, too.
January 11, 2013
In praise of mergers and takeovers
In The Register, Tim Worstall points out that most mergers lose money, but that they’re good for the economy anyway:
The final one of the four is the vital part that takeovers play in the clean up of the economy’s failures. Take a company that goes bust. The whole point of bankruptcy proceedings is to make sure that its assets aren’t then left, orphaned, or chained to an unpayable debt. The idea is to get them off into someone else’s hands where they might be put to good use. This is true of contracts, or the workforce, of the land and any other asset. It might be that the machinery is worth most as scrap. Or the factory is worth most as a supermarket. Or it could be that the OS coders and their desks would be best put to writing games: but under different management.
And it’s this last part of the whole system that our economists think is the most important. When failure happens, the vital thing is to clean up the mess and quickly. Don’t leave potentially useful assets orphaned but auction them off and get them working again. The price that is realised doesn’t matter very much at all: from the view of the entire economy, getting people and assets back to work pronto is the vital part. So important is this that we’re urged to overlook all of the above problems with takeovers and mergers to allow this part of it to function as efficiently as possible.
Yes, most takeovers lose money for the shareholders of the company doing the buying. This is often because the interests of the management diverge from those of those owners. Similarly, many companies are kept running longer than they should be for those selfish management reasons. But we put up with all of that (although try to constrain it) so that the scavenging upon the assets of the bankrupt can be as efficient as possible. For this is the very heart of the success of capitalism: Not how the successful make profits, but how the system deals quickly and cleanly with failure.
June 25, 2012
No innovation can survive the bureaucratic process
A story that won’t surprise anyone who has ever worked in a large bureaucracy is still eye opening — even Scott Adams’ Dilbert characters have it easier to get their suggestions implemented:
It was the summer of 2010, and the Treasury Board Secretariat (TBS) was about to launch the Employee Innovation Program — kind of like the employee suggestion drop box by the water cooler.
Except, nothing like it at all, as TBS employee Anna Bevilacqua was about to discover.
[. . .]
The employees who answered the call for creativity had to follow several rules, including: An employee could not make a suggestion without his or her boss’ approval; and proposals that might lead to a change in TBS policy would be rejected.
Managers tracked the proposals using a spreadsheet that noted the date and exact time a proposal was received, whether an individual or team of workers made the submission and the date it was received by a committee of three TBS managers.
The program designed to cut waste was taking shape. A bloated, forbidding shape.
[. . .]
Four managers formed a “Sub-Committee for Initial Triage” to conduct a “pre-screening” of the proposals. The selection process would be guided by a flow chart with text inside parallelograms and rectangles connected by arrows.
[. . .]
Bevilacqua needed to complete an “implementation framework” document. If she failed to “clearly define objectives, benefits, deliverables, exclusions, assumptions, responsibilities, estimated costs and timelines,” if her plan did not identify possible “slippage in target dates,” if it did not use a “risk log” or a “risk mapping approach,” it could die in Phase Two.
She and the other applicants were warned: “A wrong plan is worse than having no plan at all.”
[. . .]
The vetting and revising and perfecting continued. Each surviving proposal was screened by the Treasury Board’s chief information officer, deputy chief financial officer and chief financial officer.
[. . .]
The months of meetings, memos and emails confirmed her idea was a no-brainer. Her plan would be put into action.
A congratulatory note was vetted by three people before it was sent to her.
Then, the extensive trail of TBS paper — nearly 550 pages obtained by the Star through Access to Information legislation — ends in late 2010.
The employee who suggested this had already retired before the suggestion was implemented — and it was implemented outside the suggestion program anyway. The final line of the article sums it up perfectly: “Not one employee has received a cash award.”
H/T to Andrew Coyne:
https://twitter.com/acoyne/statuses/217238022482169857
