Chris Dillow – Management in question

Can we rebuild public services without massive extra spending? Can we really implement the new technologies necessary to get us to net zero? Can we build infrastructure projects on budget and on time? Can we increase housebuilding quickly? How can we reverse the UK’s lamentable productivity performance?

These important policy issues have something in common. They all pose the same question: do we as a country have the management ability to achieve what we’d like to?

Casual evidence suggests not. We have some of the most expensive electricity in the world; water companies cannot, it seems, make a profit without polluting our waterways; trains are unreliable and overpriced; infrastructure projects cost vastly more in the UK than elsewhere; and new-build houses are of appalling quality. All of which are signs that managers just don’t deliver the goods at acceptable prices and quality.

This isn’t the only evidence. Nick Bloom and colleagues have shown (pdf) that there is “a long tail of extremely badly managed firms.” Staffan Canback has described how diseconomies of scale often set in quite quickly, suggesting that managers can’t easily overcome the inefficiencies caused by expansion. Alex Coad has shown that there’s a large random element to firm growth, implying that bosses contribute less to corporate success than they claim. And Paul Ormerod and Bridget Rosewell have shown (pdf) that “firms have very limited capacities to acquire knowledge about the likely impact of their strategies”, perhaps because, as Kenneth Boulding said, there is a high chance that “top decision-makers will be operating in purely imaginary worlds.”

Is it really plausible that the UK’s low and stagnant productivity has nothing to do with the calibre of the people running businesses?

Maynard Keynes famously said: “Anything we can actually do, we can afford.” But perhaps we cannot actually do very much because we just don’t have the management skill to build things, provide decent services or increase efficiency.

Why not?

One possibility is that bosses haven’t had the incentives to do so. If they can make millions even from failing businesses such as Wilko, why should they bother trying to do a good job?

There’s evidence for this. The internet has become enshittified not because tech bosses lack ability but because they can make more money from ad-riddled sites than from ones pleasing to their users. And Bloom says that a big reason for that long tail of poorly managed firms (around the world) is that a lack of product market competition relieves them of the pressure to up their game.

To the extent that this is the case, the policy solution is to change incentives. In the case of utilities and transport, this requires – at least – more rigorous regulation of prices and quality. In other cases, we need that other regulator, the market. I’m not just thinking here of beefing up the Competition and Markets Authority. We need also to strengthen competition by reducing barriers to entry such as lack of finance or restrictive intellectual property laws.

In this context, we should welcome falling house prices. They send the signal that if you want to get rich you should try producing goods and services rather than relying on asset price inflation, and could therefore increase the supply of entrepreneurs and managers.

There is, however, another reason for bad management. It’s that the job of senior management has ceased to be what it should be – that of humble technocrats (pdf) improving corporate engineering – but has instead become a cargo cult ideology in which wannabe heroes express “leadership” and “vision”.

Managerialism has, in many places eclipsed management. And there’s a big difference between the two. Managerialism has a messiah complex and belief in great leaders, whereas management looks for good fits (pdf) between bosses and roles. Managerialism tries to apply the same methods everywhere, whereas management knows it is domain-specific; what works in (say) supermarkets might not work in universities. Managerialism valorises top-down control whereas management believes in listening and feedback. And managerialism speaks of vision and strategy whilst management focuses on empirical detail and ground truth.

If we are to have better management, we need to replace managerialism with management: more worker democracy might be part of this.

Now, you might or might not agree with all this. Whether you do or not, I hope you’d agree that there is at least an important issue here. But you wouldn’t guess so from Westminster politics, where this question is not on the agenda at all. How often, for example, is it discussed on those poshcuntstalkshit shows that pollute the airwaves?

Whilst the management question is not discussed in mainstream politics, however, labour issues very much are. Whether it be efforts to weaken trades unions or to “strengthen work incentives”, both Labour and Tory governments have for decades seen their task as ensuring an adequate supply of quiescent labour. Ensuring an adequate supply of good management, by contrast, has barely figured as an objective. In this respect, the state not so much an empirically-based solver of genuine economic problems but rather an embodiment of Marx’s point: “the executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.”