"Management" is one of those words that makes the eyes glaze over. When "management" appears in a headline, a message flashes to the brain: Turn the page -- quickly; this is dull and irrelevant.
Dull, maybe, but not irrelevant.
Diagnosing the ills of the American economy has become a growth industry, but the role of poor management has received only scant attention. Misguided government policies, high inflation and steep labor costs have gotten most of the blame. But anyone who has sampled the recent outpouring of studies on America's economic troubles cannot come away without a feeling that there is a more basic problem -- the inability to develop useful new technologies -- and that business has played a major role in this failure.
Confirmation of this suspicion now comes from the latest issue of the Harvard Business Review. In it, management professors Robert H. Hayes and William J. Abernathy argue that a new management style has arisen in the past 25 years that is corroding business's vitality.
Excessively dominated by accountants and lawyers, U.S. excutives have, in this view, slipped into a self-defeating preoccupation with short-term profits while avoiding long-term gambleson new technologies.
To appreciate the significance of this, you have to understand the role of new technologies in creating America's domestic prosperity and international economic power.
That's not difficult. Consider the development of synthetic fibers in the late 1940s. They substituted for more expense natural fibers such as wool and cotton, allowing people to buy more clothes for less.
The impact was substantial. Between1950 and the mid-70s, spending on clothes dropped from about 12 percent to8 percent of total consumer spending, and it is even lower now. O.R. Strackbein, a private economic consultant, has estimated that the decrease meant that in 1976, consumers could spend $45 billion on other goods and services.That's how rising living standards derive from better technology.
But there's not much doubt that American technological superiority has dramatically declined. This is most apparent in international trade. Studies by Labor Department economistC. Micheal Aho indicate that West Germany overtook the United States in 1977 as the leader in high-technology exports and that Japan may soon do the same.
By most accounts, the pace of technological development simply has slowed down. In a recent review of technologyover the past four decades, Commerce Department analyst Micheal Boretsky found only one major new development in the United States during the 1970s:the electronic microprocessor (or electronic"chip"). Between the late 1930s and late 1940s, by contrast, he counted at least six, including the transistor, nuclear power and synthetic fibers.
There's no dispute about this slowdown, but business generally has escaped major responsibility. Business executives tend not to be self-critical and spend most of their time blaming government policies.
Economists don't pay much attention to things that can't be boiled down to numbers, fed into computers and manupuated with clever equations. Management styles don't fit into that category.
But the implication of the Hayes-Abernathy analysis, if true, are immense.
It means that changes in government policies can have only limited effect on America's long-term economic performance and that hope for improvement depends heavily on companies' capacity for self-examination and correction. Where business has gone wrong, according to Hayes and Abernathy, is in its increasing acceptance of the idea that agood manager can manage anything.
The article cites figures showing that lawyers and accountants now head about one-third of America's largest corporations, a 50 percent increase over the past 25 years. And, once installed, the generalist "professional managers" are expected to produce quick results.
The idea of what constitutes a good manager has undergone a shift," says Hayes. "The theory used to be that you take good managers and let them stay for a longer period of time. They compete over the long term, make long-term decisions and see the fruits of those decisions".
Now, the pressures for rapid performance improvements are subtle and pervasive, he thinks. Inside the corporation, the number of performance indicators and regular reports has steadily multiplied. Middle-level managers are expected to show demonstrable progress, often on a quarterly basis. From the outside, companies pay increaing attention to Wall Street analysts and investment fund managers, who expectrapidly rising profits. The result, say Hayes and Abernathy, is that companies may achieve short-term gains but at the expense of longer-term vitality. Companies always can engineer mergers, reduce costs (including investment and research costs) and improve sales or profits. But the failure to provide for the future can boomerang with a vengeance.
Although they don't mention it, the auto industry is a conspicuous example. After the 1973-74 oil embargo, it failed to retool for fuel-efficient cars. It prospered only while artificially low gasoline prices sustained larger-car demand.
To say that management is completely responsible for America's technological slippage is nonsense. There's a large element of mystery as to what does and doesn't stimulate new technology. No one knows.
Some business complaints that government tax policies discourage research and investment surely are justified. But executives abroad also gripe, and yet the effect on technological development hasn't been nearly as great. Something else is going on: It may be that corporate executives are doing a good job at satisfying their own short-term interests but not the long-term interests of either their companies or their country.