The Ineffective Enterprise

THE INEFFECTIVE ENTERPRISE MOST AMERICANS TODAY WORK, either directly or indirectly, for enterprises, for large organizations that employ specialized workforces and multiple layers of management. Enterprises have been driving the American economy for well over a century, and Americans have been debating, for almost as long, just what needs to be done to make enterprises effective. The debates have revolved, for the most part, around a single simple question: How do you turn dozens, hundreds, or thousands of people who don’t know each other — and may not even know much about the work they have been hired to perform — into an operation that efficiently produces goods or provides services? At the end of the nineteenth century, one American felt sure he knew the answer. To make enterprises effective, industrial engineer Frederick Winslow Taylor asserted, managements needed to manage — down to the most minute details of the work to be done. Taylor called his approach to enterprise effectiveness “scientific management.” In a scientifically managed enterprise, Taylor taught, management does the thinking. All of it. Managers, he advised, should always “fully” plan out every single task every single worker “is to accomplish, as well as the means to be used in doing the work.”1 Taylorism — the notion that workers need to be carefully scripted, motion by motion — would go on to flourish in the new twentieth century. Businesses hustled to organize themselves, as best they could, along “scientific management” lines. Total management control over the work process, executives believed, would make for enterprises that functioned efficiently, with no effort ever wasted, no minutes ever lost. Today, a century later, the nostrums of “scientific management” seem a quaint, even barbaric, relic of a distant past. No contemporary business leader would dare suggest, at least not in polite company, that employees only do good work when management tells them exactly what to do and how to do it. Instead, modern executives orate, at every opportunity, about empowering workers, about the importance of creating workplaces that encourage employees to exercise their creativity. 159 Originally published in Greed and Good: Understanding and Overcoming the Inequality That Limits Our Lives by Sam Pizzigati (Apex Press/Rowman & Littlefield, 2004). For more, see Inequality.org. 160 Greed and Good Almost every high-level corporate manager now knows, by heart, this empowerment mantra: In generations past, they have learned at innumerable management seminars, command-and-control might have made some business sense. In the old days of mass production, with workers standing at assembly lines, performing the same mindless tasks over and over, corporations didn’t really need to know what workers thought. They just needed workers to do what they were told. But that mass-production world, the story continues, no longer exists. The Industrial Age has given way to an Age of Information. In the old days, enterprises could prosper churning out the same product by the millions. Customers were expected to buy what manufacturers produced — and they usually did. “You can have any color you want,” as automaker Henry Ford once quipped, “so long as it’s black.” In the new Information Age, by con- trast, enterprises only do well when they customize products to what customers want. And who knows what customers want? The workers at the front lines, the employees who interact directly with consumers. These workers, through their contacts with customers, gain incredibly significant information. An effective enterprise values this information — and the employees who have it. The effective enterprise, adds the empowerment mantra, also values workers on the production line, because modern production operations must be constantly changing to keep up with evolving consumer preferences. Who bet- ter to help figure out how to change, how to produce products ever faster, smarter, and more efficiently, than the workers actually involved in the pro- ducing? For Information Age business success, in short, workers simply must be engaged and involved. In our modern world, command-and-control no longer makes any sense.2 Think of modern enterprise life, suggests British economist John Kay, as a basketball game. If a basketball game were entirely predictable, coaches could succeed merely by defining what they want each player to do at each exact moment. But no coach ever tries to script an entire game. No script, coaches understand, could ever anticipate “the almost infinite variety of situations that might arise.”3 Smart coaches prepare players — and expect players — to make their own decisions. Expectations like these, notes Edward Lawler, the director of the Center for Effective Organizations at the University of Southern California, go against the “old logic” grain of corporate America. In the old logic enterprise, management makes all the decisions. Management, the old logic assumes, creates most value. What Lawler calls the “new logic” enterprise subscribes to a quite different set of assumptions. Corporate success, the new logic enterprise understands, requires that all employees, not just managers, “must add significant value.”4 And just how can corporations maximize this added value? In the late twentieth century, experts rushed forward with guidance. Their strategies would go by a host of different labels. Participative management. Quality circles. Total quality management. Experts would talk endlessly about “reengineering” cor- THE INEFFECTIVE ENTERPRISE 161 porations to effect “high-performance organizations.” Employee involvement, the experts stressed over and over, gives corporations smart enough to try it the “ultimate competitive advantage.”5 This empowering ethos swept through corporate America in the 1980s and 1990s. Managers and their staffs sat together, in meeting after meeting, draft- ing, discussing, and debating “mission” and “values” statements. And journals, magazines, and newspapers noticed. They celebrated, year after year, the tri- umphs of enterprises that were said to have successfully empowered their employees. One typical triumph came at Ironite, an Arizona fertilizer company. An Ironite customer had asked for the company’s fertilizer in boxes instead of bags, a reasonable enough request. But Ironite didn’t have a boxing machine, and buying one would have cost the company far more than the firm could have comfortably afforded. No problem. Ironite’s employees simply built a box- maker themselves, at a tenth of the cost of buying one. That sort of employee creativity, Ironite’s chief executive pointed out proud- ly, does not just happen out of the blue. “You get this only if you involve and respect employees,” explained Ironite CEO Heinz Brungs. “You can’t order them to build a machine.”6 Every company, “effective enterprise” gurus insisted throughout the 1980s and 1990s, could become an Ironite. But few companies, researchers agreed by century’s end, had actually reached anything close to Ironite status. Study after study reached the same dispiriting conclusion. Enterprises, by and large, were not empowering workers.7 Just 10 percent of Fortune 1000 corporations, Edward Lawler would report in 1996, were managing “according to the new logic.”8 And only a small frac- tion of the companies that claimed to be empowering workers, a Journal of Business study would reveal two years later, were actually engaging in any seri- ous empowerment work.9 Another study, published in 2000 by Administrative Science Quarterly, found executives across the United States quick to proclaim their allegiance to the new logic, but slow to practice it. On empowerment, concluded Barry Staw and Lisa Epstein, the study’s authors, top executives are essentially going through the motions.10 But why? Why aren’t top executives giving empowerment strategies a real go?11 Empowering employees, the experts all agree, can enhance enterprise efficiency. Why aren’t executives making any real effort to see whether the experts are right? What CEOs, after all, wouldn’t want their enterprises to be more efficient? Strange. Something is stopping American business from creating the employee-empowering, customer-focused “new logic” enterprises that the Information Age so clearly demands. What is it? ALMOST ANYONE WHO HAS EVER WORKED in a large company would probably agree, in a heartbeat, that the obstacles to enterprise effectiveness can almost always be summed up in just one eleven-letter word. Bureaucracy. Average 162 Greed and Good employees experience frustrating doses of “bureaucracy” each and every day, in everything from turf wars between managers to the endless delays while ideas go up and down the decision-making ladder. Bureaucracies, sociologists tell us, grow naturally — and inevitably — in enterprises organized along hierarchical lines. In the classic corporate hierarchy, workers sit at the base of a steep pyramid. Above them rest layers upon layers of management. The more layers, the steeper the pyramid, the greater the dis- tance between actual workers and ultimate corporate decision-making author- ity. To succeed in the Information Age, analysts contended in the 1980s and 1990s, enterprises needed, above all else, to “flatten” these towering pyramids.12 Many top executives readily agreed, some intensely. “Rigid hierarchies,” exclaimed one such executive, J. Burgess Winter, the CEO of an empowerment-minded Tucson copper company, “are the corporate cholesterol of organizations.”13 Reformers

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