Managing by abstract numbers: the eighth systemic disease of organizations

A Japanese house with many paper walls and  paper ceilings with many layers. It seems designed by a paper-obsessed architect.

Numbers are necessary to keep track of where we are and where we are going. Necessary, but not sufficient. Another simple ingredient is required: the competence to interpret the numbers. Unfortunately, this means direct experience with whatever it is that is measured or counted or registered. It means also to realize which facts are not in these nice numbers.
It is easy to calculate how much money you save when firing workers, but not what the cost may be of lost experience, know-how, of hiring and training and induction of new workers. It is easy to calculate what your turnover has been, but not the value of client satisfaction and dissatisfaction. It is easy to calculate what money you save by automating the response to income phone calls, but not what you lose by losing client
Saving money on execution is often used to increase staff and managerial positions. Boards rather discuss new building projects than upkeep or upgrading of existing facilities. The euro value of stock is based on assumptions, the value of goodwill is a fantasy coming out of accounting conventions. Writing off on property is based in tax and other financial considerations. But the value of any property is zero, unless you have a buyer. And what the buyer will be willing to pay is the umpteenth assumption.
Figures only seem precise. Accountancy is the most esthetic variety of quasi-precision: balances are by definition balanced. Administrators of bankruptcy proceedings are among the most realistic managers.

Many managers strive to a company in which nothing has to be done anymore: the hollow corporation. Everything is contracted out, if possible even the contracting out. What remains is supervision. Supervising things you don’t know and don’t want to know. Production is the first thing that should be eliminated. It produces noise and smell, it takes up space, it needs maintenance and repair, warehouses, transport. Its main drawback is that you need personnel to work there and people are always creating problems. If you can’t avoid having them, you prefer temps, so you can get rid of them the moment they start to have comments, criticisms and, worst of all, suggestions. But the most horrible thing of production is that things may go wrong. Imagine being responsible for that!
Sales is much more difficult to get rid of. But even that can be contracted out. You can limit yourself to creating the condition for sales: marketing. The main drawback of sales compared to marketing is that failure is much more visible and direct.

The only things you can’t get rid of, are finance and legal. Even in the most abstract of worlds, wriggling with money and contracts remains important. Anyway, it is a clean world of board rooms and hotels with only civilized and clean and well-dressed people.
And if you still want something tangible? Build a new headquarters. Of course, it will be much too grand for what you really need. So you rent it out to prestigious firms and events. And you sell shares in it. In the end, everybody invests in everybody else. Till reality kicks in. Preferably as far away as possible.

All this is in government administration as rampant as in business administration.

Bureaucratic politics: the seventh systemic disease in organizations

A lot of buzz in an auction room. Small groups watch each other furtively. Bidding is about to start. Who will go home with what?

Maybe we should have started with this dynamic. It is so prevalent, that it often seems to be the natural condition: the way things are. Especially larger organizations are often like this: everyt issue, every plan, every decision, every action is turned into internal politics. People defend their turf, want to enlarge their turf or are eying for a next, bigger and better-paid turf. Is there an outside world? Yes, but mainly insofar it helps to define the turf, and influences who gets what money, prestige or power. Customers or clients, unless they represent big money, big prestige or big influence, are a necessary evil. They may have complaints and problems to solve, they have unrealistic expectations; basically they are a nuisance.

Is it possible to avoid or eliminate internal politics? No, it isn’t. But unattended it is a cancerous growth that will supplant all healthy tissue. It becomes especially evil when it is infected with fraud or corruption of any kind and when egotists at the top only allow other egotists to join their ranks.
What is the ideal counter-poison? Someone at the very top who has backing from external directors, with a direct interest in the services or products, in the end-users of these services and products, in the development and production of these services or products and the people who make that practically happen. Usually, but not necessarily, that person has come from the ranks.
Why is the top person so important? Isn’t that idolizing the strong man or the strong woman? No. The point is that such a person is essential to prevent people not really interested in these aspects to fill the positions below the top. The top person is not only a role model, but the only guarantee against empty careerists.

And not even that works always. Especially when the top executive is an entrepreneur who started his own company and the company becomes so big that he or she can’t handle everything anymore, such a person may be enamored by candidates for the number 2 position who come from bigger firms, often have very general backgrounds like financial and legal types. Marketing people are suspect, unless they have been in sales before. usually, marketing is for people who are too sensitive to engage in the rawer edges of the commercial world, like sales. Sales have the nasty habit that they often fail. Not all tenders are won, not every sales pitch hits home. And if you are too sensitive even for marketing? Then you can go into public relations. PR, darling, PR!

Of course both marketing and PR are legitimate functions, just like financial and legal work are. But they are more easily taken over by people with more form than substance. I have learned to watch for those managers who want to distance themselves as far as possible from the coal face, the place where real work is done. In public institutions it is often worse than in companies.
Now many companies are so big that you can’t expect top people to stay near to the primary process of developing, providing and selling products and services. There are simply too many products and services. So there the heroes are at the level of business unit managers. But size is less important than diversification. In huge companies of Shell or Apple the main products will still be known in the board room. There will be people there who actually held the new prototypes of the iPhone or know how an oil well and a refinery look like and smell.
But in a city it is possible that the manager of the sewage department has never seen or smelled a sewer and doesn’t plan to come near one.

In any organization internal politics is natural. But where reality is held at bay, internal politics take over. And good people leave, if they can. If left unstopped, the organization becomes a hollow organization, an empty legal and financial envelop. Everything is outplaced. The ideal of financial and legal types. Marketing types then preside over a collection of brands. They exploit trademarks.
When in a still large organization degeneration continues, this may change into the forth dynamic: executive psychopaths.