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Mutualist Blog: Free Market Anti-Capitalism

To dissolve, submerge, and cause to disappear the political or governmental system in the economic system by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State. --Proudhon, General Idea of the Revolution

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Location: Northwest Arkansas, United States

Friday, July 21, 2006

Great Discussion on Corporate Hierarchies

Damn, but this is good! Jeremy Weiland of Social Memory Complex got into an interesting discussion with Alexander Kjerulf on the latter's blog post "How Not to Lead Geeks." The post itself wasn't bad--a fairly good Dilbertesque take on tech workers' negative reactions to the pointy-haired boss. But the discussion in the comments was amazing.

Weiland entered the fray about halfway down, channelling Friedrich Hayek and R. A. Wilson:

I would be very interested in your opinion on the proper role of management.

We can talk all day about the ways management messes up in its relations with any social category (as if this type of conflict was anything fundamentally different than the ongoing tension between labor and management since the Industrial Revolution) but I’m afraid a lot of geeks see management as the solution to a problem that management itself created. Here’s the problem: no matter if you’re a geek, genius, or MBA, unless you’re doing the work, you’re in the least informed position to make decisions. Reports, scrums, charts - none of it is a replacement for being there, doing the work, and knowing the situation at hand. You can’t separate the experience of work from the process.

The problem isn’t bad management, it’s the whole concept of management: the idea that decision making can be separated from the actual work.... The problems with management are the same problems in any organization hierarchically structured where information flows between relatively more powerful and relatively less powerful people - because the jobs are on the line, and management is always playing catch up to the true situational picture, managers are simply told whatever they need to hear in order not to be fired much of the time. There’s a delay involved as well as a fundamental case of rose-colored glasses. It’s easy to see why somebody like Ken Lay could argue he didn’t know what was going on - in fact, I fail to see how any manager who isn’t getting his hands dirty on a project could possibly claim a knowledge of the project sufficient to judge it.

Really the only use for management is to keep other bureaucracies internal to the organization (such as HR) and external to the organization (such as the IRS or OSHA) from bothering the creative guys. Other than that, I see no reason why - if we’re going to have some people doing make-work “management” - they should be calling the shots. I don’t see why we working geeks should need to ask for the right to make decisions in the first place, other than that the power relationships are severely out of whack. Maybe we should start reforming there, instead of finding better ways to use managerial voodoo to pretend like managers have some gift to offer those of us who actually do the work.

Kjerulf responded in the voice of Tom Peters, who can also be pretty good at times:

Jeremy: You’re right, as long as we define management as making decisions for others. That has of course been the traditional role of management for the entire industrial age and we’re stuck with the paradigm.

However, I think that this type of management works pretty badly in industrial, production-oriented workplaces. In knowledge-based, creative businesses it’s even worse, for precisely the reason you mention: It’s an attempt to concentrate decision making away from the people actually doing the work. In a constant world, this has at least a passing chance of working. In a fast-changing business environment? Forget about it!

So traditional management is out. But leaders and managers are still very much needed, it just has to be a different brand.

Yesterday it meant making decisions, allocating resources, making plans, checking quality and enforcing regulations.

Today it has to be coaching, mentoring, teaching, facilitating and supporting.

THAT is the role of management. One that not only makes people happy at work but also gives businesses much better results. It’s not pie-in-the-sky, this goes straight to the bottom line!

Back to Weiland:

...let me make clear: I have no problem with managers are you describe them - at least, when they make business sense. I have no problems with hierarchies, where they naturally occur. But as long as one has to operate in the business world, one will have to deal with those inputs and influences that drain energy from productive organizations. So if managers can keep that stuff off of the guys in the trenches, provide actual (if marginal) value to those workers, and make sure the focus is not on “command and control” (it didn’t work in the Soviet Union; it’s not going to work in the corporation) but on arriving at decisions through a process that at least APPROACHES informed consensus - while still giving individuals freedom to take risks and pursue personal visions of value-adding to the organization - then I think that’s great. And if some suit-and-tie types get a little scared in the process, well, so much the better - market corrections happen, right? :-)

If leaders foster this environment without overburdening the individuals (i.e. seeing employees as “resources” whose output must be maximized rather than essential, creative, nuturing parts of an organic organization) then great. And I agree - a well managed work force is a total bottom line matter. The problems in current corporate climates rise not from the profit motivation but from the inability of management to see the long term time horizon, where the true growth and profitability occurs - usually from a lack of information, sophistication, or passion about a given project. True revolutionary, profitable value creation rarely occurs overnight or over the course of a year, even.

The key is to get managers into a frame of mind where they don’t interject themselves where unneeded. You sound like the type of manager who manages from a position of competence and not simply “monitoring human resources”. But please be aware: you are the exception (as I’m sure you already know). There is a “class” of white collar paper pushers and timesheet minders who see the worker as an adversary, not a partner, and who try to harvest the forest rather than grow and nurture it. This is a matter of fundamentals: “Who moved my cheese” or “Fish!” philosophy and mindlessness can’t mask it.

That "time horizon" thing is pretty synchronicitous, if that's even a word. I first read this exchange several weeks ago, before I read the book that resulted in this recent post: "Robert Jackall on Corporate Bureaucracy."

Kjerulf enthusiastically endorsed that comparison of top-down direction in the corporation and in Gosplan:

I could not say it better!

He also linked to a post about the success of Enterprise Systems:

* We had no managers
* People did excellent work
* We made major decisions together, democratically
* We made good money (not obscene, just good :o)
* We had fun
* All employees became co-owners
* People didn’t work too much - 40 hrs a week or less
* Leadership changed hands dynamically

Elling joined the exchange at this point, expressing his doubts about the dispensability of hierarchy:

....I think you’re attacking structures which you can do without in a small company....

In a large company there’s a NEED for the structures which you are proposing to tear down. And I think you’d notice it if you spent some time as a manager in such a company.

Weiland's response:

I can anticipate some of this need - the need to account for diverse costs accurately and thoroughly, the need to maintain a standard of output for workers in an organized, fair fashion, etc. - but these play to the weaknesses of large organizations. In other words, large organizations SHOULD be at a disadvantage, and the structures we’re proposing tearing out actually add value only in the sense that MegaCorp is inherently inefficient and out of scale with the market.

So... the need for management - and the organizational pathologies that accompany it - are symptoms of the problem of scale, not the problems themselves.

Elling again:

What I mean is that large companies need to have a hierarchical structure. And in such companies there need to be people assigned with jobs to “manage” groups of other people. If you do not organize it this way, it simply becomes impossible to handle.

Cityzen jane made an excellent point about the difference between intrinsic and extrinsic motivation, that sounded an awful lot like Paul Goodman:

What a lot of manager’s seem not to understand in more traditional companies (and I’ve worked both for huge companies and skunkwork garage projects) is that creative people (geeks, visual people and researchers) are intrinsically motivated. If they are good, they wake up and go to bed and dream about ng things better, more elegantly - more beautifully. I certainly do.

And that there is no better way to kill that in a person than to apply arbitrary, theory driven management methods and standards to them, or try to shove a technology you read about in PC magazine as the next big thing at them. Most managers get into their positions because of external motivational factors…. more money - bigger car, bigger house…Yes, those perks are great icing on the cake - but the best most of US hope for is a place where our talents and brains can be fully expressed.

We are internally motivated. We are on the eternal search for the best possible work situation and we very often will leave on a dime - for less money to find it....

It’s hard for a manager to hear that for the most part they are often irrelevant to the productivity of the techie. But it’s pretty much the case. I spend about 70 hours a week. 40 required by my job, the rest - because I am insatiably curious about technology and how to do things better. It is my nature. You want to encourage me to be myself in this regard or I am unmotivated to use my extra cycles for YOUR bottom line. With proper care and feeding I wish to make that MY bottom line - but that doesn’t happen if I’m a just cog in your plan for world domination or at least a Lexus by end of next quarter.

Weiland's response:

I think this applies to production and line workers, too - it’s just that management likes inculating a culture that prevents them from expecting the right sorts of incentives for efficiency. Whenever possible, management wants a bunch of predictable, homogenized worker “units” rather than having to deal with people with different talents, motivations, etc. It’s just easier if you’re gonna do central planning....

My point is that for the typical manager, a workforce of 100 people who all produce at 80%, who all have the same world view, and who all have the same capacities - that is FAR preferrable to a workforce with some people who are 100% prouctive, some who are 60% or 70%, and who are diverse and have different goals in life.

That’s why in the blue collar industries, the goal is to deskill labor by making everything an “assembly line” process. If they can get labor to do just what’s necessary for production with no creativity - and have management direct all production centrally - they prefer it even though it’s less efficient because it makes them necessary.

He tied this strand in with the other one, Elling's remarks on the need for hierarchy in large organizations:

The problem for large organizations with this model [of bottom-up organization and self-directed work] is that it’s hard to guarantee reproducable results, NOT that it’s unworkable. The key is the control issue - they’d rather have control than success when it comes down to it. It seems perverse and counterintuitive but it’s true - when your job is on the line and you don’t have control over all the factors of production, you can be incredibly risk adverse, to the point of defeating the whole reason you exist: profitability.

Large organizations need to moderate the volatility of human factors such as creativity, personal lives, touchy-feely concerns, etc., which is why they higher managers to turn us all into “human resources” that are rationalized and understandable. They’d much prefer a decrease in productivity to a decrease in forcastability because of the inherent problems with large scale organization (it’s the same with a government, an educational institution, etc.). This is largely due to an entire class of people who see management as a task distinct from the actual productive work, which as I said before is ridiculous. They are scared on some level because they often simply don’t understand what it really means to produce good value. How can they - human motivation and ingenuity is not something you can break down into a cut and dry formula and “institutionalize”!

Since large groups can’t internalize the decision making necessary to engage in authentic risk (like individuals can) they are doomed to continuously direct workers by fiat, micromanage strategies where they do exist, and collect copious amounts of metrics to systematize what is essentially an entrepeneurial, personal, passionate endeavor that really can’t be quantified.

For me, the question is not whether or not large organizations need hierarchy. It's whether large organizations themselves are needed. All the management machinery that was created to manage the large corporation became necessary only because the state encouraged the growth of firms that large in the first place--firms far beyond the point of diminishing returns when it comes to efficiency. One might as well ask whether hierarchical management was "needed" in a single state factory that produced half the widgets used in the USSR. The question ought to be why the factory was that big to begin with.

Kjerulf was so stimulated by the discussion that he summed it up in a new post: "The Need for Structure."


Anonymous Anonymous said...

Thanks for the wonderful summary of what is indeed the greatest conversation I've hosted on my blog yet.

I think your question is spot-on: Why are organizations so big to begin with?

I've noticed recently that some businesses are challenging the "Grow or Die" maxim - some that inspire me are Patagonia and Semco.

The recent wave of mega-mergers shows that many people still believe that bigger is better, but as Lars Kolind points out in his new book The Second Cycle - Winning the War Against Bureaucracy (http://www.thesecondcycle.com/), size (along with age and success) is a factor that tends to lead to huge bureaucracy.

Wasn't it Goretex who limited the size of each division to 150 people? (it is, I just looked it up: http://www.commonsenseadvice.com/human_cortex_dunbar.html)

So there is some movement in that direction.

July 21, 2006 4:09 PM  
Blogger Kevin Carson said...

Thanks for stopping by to comment. It was Jeremy who drew my attention to your post, and enjoyed the opportunity to dig into such a productive discussion thread.

On the reason for corporate size, my own suspicion is that the government removes a lot of the competitive disadvantage of large size and associated inefficiencies. It subsidizes a lot of the inputs that are disproportionately by large corporations (subsidized infrastructure for long-distance distribution; technical education and depreciation allowances that benefit mainly high-tech or capital-intensive industry; deductions for debt involved in mergers; regulations that reduce competition; etc.).

I appreciate the link at your blog.

July 21, 2006 10:05 PM  
Anonymous Anonymous said...

Good point Kevin, I've never seen it in that light before.

Would you agree that at least some of these factores can aid not only large companies but also looser networks of smaller businesses working together?

Could they also be in a position to take advantage of artificially cheap education, transportation, infrastructure etc?

If so then this could help even the playing field a little. Not for one small company competing against a huge one - but for a network of small companies taking on the big fish.

But the biggest equalizer is probably the huge inefficency of many large organizations. Look at Microsoft - they used to be nimble now they act more like the proverbial colossus on clay feet.

From a "happiness at work" perspective it is also interesting to notice that people are happier working in smaller businesses. In the annual "Great place to work" survey, almost all Danish top 10 businesses have less than 500 employees.

July 22, 2006 9:40 AM  
Blogger Kevin Carson said...

Networks of small companies probably could take advantage of the same factors. But if they did, they'd be filling the same niche in a state capitalist economy currently occupied by big corporations. To some extent this is what Mondragon and Emilia Romagna do: they function within the structure of a globalized corporate economy.

On the other hand, if the subsidies were simly removed, we'd probably have an economy of small firms producing for local markets. Far more preferable, IMO. And there's no reason the overall efficiency would be less--far from it.

One advantage of small companies is that the larger they are, and the harder it is to track the effects of individual behavior, they more vulnerable they become to asymmetric warfare by disgruntled employees. The average worker can probably think of hundreds of easy ways to raise costs every day, with virtually no risk of getting cost. And the more he sees his relations with management as zero-sum, the more likely he is likely to start doing it.

One reason so much of big business supported New Deal labor policy was that it channelled unions into conventional strikes (essentially declared wars by parade ground rules) and away from the kinds of guerrilla warfare that the Wobblies call "direct action on the job."

July 22, 2006 11:21 AM  
Anonymous Anonymous said...

Good point about the underhanded ways unsatisfied employees can hurt their workplace. The study reported in this article supports the view:

I would like your opinion in something: It seems that some large organizations (1000 - 10000 people) do in fact manage to make the people there happy, do some good for their customers and for the planet all the while turning a profit. Examples include Semco, Patagonia, Rosenbluth, Southwest and Novo in Denmark.

They do so in large part by moving away from traditional business control structures and giving people larger degress of freedom.

Do you see this as a good thing? Do you see this as a way to go for the business world in general, or will these organizations remain in the minority?

July 22, 2006 1:43 PM  
Anonymous Anonymous said...

Thanks for linking!

I'm sad to report I had to google Paul Goodman, though I recall reading him hack in college.

I for one will never if I can avoid it at all work for an organisation over 50 people. The kinds of things I look for in work - a mutualism just is not possible in larger organizations. Their internal logics (for or non profit) tend to de-humanize people at that scale.

What managers and most conventional humans don't seem to get is that 'work' is not a horrible burden imposed from the outside-the price for the sin of seeking knowledge -- ...in a more natural system - mutual aide is our nature and more importantly OUR PLEASURE. There in a satisfaction -unattainable- through anything but work. To be useful to your community - in an obvious and direct way -- is I think the special secret of most happy people.

Work became burdensome and alienated when controlled overly by hierarchical dominance and power for the purpose of extracting value - it's the lucky few of us that find a little niche in an otherwise bad system.

What managers don't seem to get -- is well they've drank the kooliade --insisiting that if it weren't for the stick -- we would all be sitting in a pile of our own garbage uninterested in improving our lot or the lot of others through the wonders of late stage multinational capitalism.

There's a great piece from Harper's last year called "The Uses of Disaster" that talks about how most people step up in a crisis...THAT is what I think our nature is. When we are given a chance to be great - by harrowing ccircumstance -- that is REAL and not based on quarterly earnings....we do amazing things.

To think that we would be nothing without the corporate logic - is false consciousness of the worst kind.


July 22, 2006 2:45 PM  
Blogger Kevin Carson said...


They're certainly a good thing IMO, even if only within the context of a large firm.

BTW, I'd also like to get your opinion on something. I'm a fan of Tom Peters' work in the late '80s and early '90s, back when most of his focus was on self-directed teams and linking development, production, and marketing staff together instead of stovepiping him. My impression was that he was treating most of this stuff like new wine in old bottles--trying to introduce them in the context of large hierarchical firms, instead of using them as building blocks from the ground up. And most of the big corporations that tried such ideas (or quality, or reenginerring), rather than just paying lip service to them, were just artificially simulating the advantages that a small cooperative would naturally have.

But my main question is, what happened? Peters was saying, almost 20 years ago, that his prescriptions were "must dos," and that the large corporation was going the way of the dinosaur (or Gosplan). Yet, 20 years later, outside of the IT sector and a handful of places like Johnsonville foods, self-directed teams and quality circles are just another fad that's come and gone, and the big dinosaurs are remarkably vigorous on their deathbeds. And from my bottom-up perspective in the workplace, things are exactly as authoritarian and hierarchical as they were ten or twenty years ago.

I suspect that Peters' underestimated the power of state capitalism to reduce the competitive disadvantages of inefficiency. After all, when your industry is cartelized among three or four firms with the same organizational culture, being a dinosaur isn't all that much of a handicap.

What's your take on this? Why didn't the flattening or dissolution of hierarchies take place to anywhere near the extent Peters was warning?


Good point. Such management assumptions about "the stick" and human behavior are just about the opposite of reality. From what I've seen in healthcare, most nurses start out idealistic and driven by a sense of obligation to patient care. But when management sees a nurse like that, they ride her like a $2 hooker, and play her for all she's worth. And guess where the burned out people who are motivated only by the stick come from? They manufacture burnouts like Carter manufactures liver pills.

That's another comment of yours that sounds awfully like Paul Goodman, btw. He said that hierarchies removed the natural intrinsic motives to work that came from setting one's own goals and controlling the process, and having some sense of direct personal connection to the final product. Then they were obliged to substitute administrative incentives and penalties--the carrot and the stick--to get people to perform work that had nothing to do with them.

That's certainly the way I feel. My hospital job (I'm an orderly) isn't what I do. It's just a job, a means to an end, and the end is outside those walls. The only way I can force myself to go in there is if I can compartmentalize it from the rest of my life and pretend it doesn't exist the rest of the time. For most people, I suspect, the job is just an 8-hour chunk of their lives they cut off and sell. It's the same as being an industrial robot (which management would prefer, if it would do the job) with a consciousness imprisoned in it.


I appreciate your heads-up on Alexander's post and comment thread.

This has been a very stimulating discussion.

July 24, 2006 10:56 AM  
Blogger Kevin Carson said...

BTW, Cityzen Jane, I put up a new post with two quotes from Paul Goodman that are relevant to your discussion of motivation, plus one from Ursula LeGuin.

July 24, 2006 11:13 AM  
Anonymous Anonymous said...

Yeah, what did happen with the big-to-small corporate revolution? That's a damn good question.

I think your point about larger structures in society that inhibit competition is definitely a large part of it. And there's also a general assumption that bigger is better. Take Microsoft. They were growing up during Peters' golden days and could've taken that route. And today they're looking more like IBM than ever. Could even Google end up like that? Man, I hope not.

Microsoft are also getting their ass kicked in a few different markets by the open source community - that's a hopeful sign.

Another example are the national airlines who are simply not allowed to fail - though eg. SAS (Scandinavian) should've been euthanized a long time ago and has been kept on life support by the nordic governments for way too long.

Maybe Peters just underestimated the time needed - and maybe now is the time. I choose to be optimistic and I see many signs that a new way of business is finally emerging.

And I definitely see a lot of signs that the old structures are groaning under the strain of keeping themselves together in a world that is becoming increasingly toxic to their ecologies.

But here's an interesting side note: The best and most efficient division in all of GE, their aircraft engine plant in Durham NC, is democratic. They have no middle managers, no hierarchy and workers are organized in self-managed production teams. For real!

They are constantly improving productivity and quality and are the most productive plant in GE.

And yet, when other GE division-managers and leaders tour the plant and see how great things work without a hierarchy, their reaction is inevitably "This is great, but it could never work at my plant, because..."

And THAT is the true barrier.

July 26, 2006 5:08 PM  
Anonymous Anonymous said...

Btw: Bonus quote from a man who gets it:

A financial analyst once asked me if I was afraid of losing control of our organization. I told him I’ve never had control and I never wanted it. If you create an environment where the people truly participate, you don’t need control. They know what needs to be done, and they do it. And the more that people will devote themselves to your cause on a voluntary basis, a willing basis, the fewer hierarchs and control mechanisms you need.
- Herb Kelleher, ex-CEO of Southwest Airlines

July 27, 2006 3:17 AM  

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