Why are big corporations so productive, yet so wasteful?

It's a quandary of our times. Big companies command the most advanced technologies and make the brand products that dominate the economy. But these same companies are often awash in waste and cynicism. Anyone who has worked for a large company knows that. Our major corporations are usually plagued by office politics, a fair amount of worker resentment and much useless motion -- unneeded meetings and unread memos.

Comes now economist Harvey Leibenstein of Harvard with a partial answer to the paradox. Corporate strengths are also corporate weaknesses, he argues. Advanced technology and size create immense efficiencies. But workers in big companies are also tempted to shirk. The organization is so huge -- and responsibilities so dispersed -- that it's easy to assume someone else will do the job. Corporate bureaucracies can spawn destructive infighting as easily as constructive teamwork.

A lot of what Leibenstein says in his new book is common sense. (The book is "Inside the Firm, The Inefficiencies of Hierarchy," published by the Harvard University Press.) Strangely, though, his views run counter to much popular thinking about business. We've been inundated in recent years with pat management theories -- "Theory Z," the "art" of Japanese management and so forth -- as if there's a simple way to mend the competitive failings of U.S. companies. Leibenstein is skeptical. Companies are always at war with themselves, he indicates. Success and growth may also breed waste.

His portrait of conflict fits with what we see around us. Consider the 1980s' wave of corporate "restructurings": companies are closing inefficient plants and firing white-collar workers; diversified conglomerates are selling entire businesses to concentrate on fewer industries. The inflationary economy of the 1960s and 1970s encouraged bureaucratic inefficiencies. Less forgiving economic conditions in the 1980s -- a harsh recession, tougher foreign competition, deregulation -- have compelled wrenching cutbacks.

Or ponder this puzzle: although large corporations dominate business research and development, many innovations come from small companies. Apple Computer commercialized the personal computer; Xerox developed document copying; Federal Express pioneered overnight package delivery. These companies all began as tiny upstarts. What they overcame was the enormous advantage of larger companies in formal research and development. In 1984, firms with 1,000 or more employes accounted for 94 percent of business research and development spending, according to the National Science Foundation.

One explanation is that big organizations have trouble making radical departures from past practices. Much of their research and development focuses on improvements in current products and technologies. When large corporations do introduce major new technologies or products, the breakthroughs often involve circumvention of formal corporate hierarchies. A recent study of 12 major new products -- including videotape recorders by JVC Corp. in Japan and Post-it Note Pads by 3M Corp. -- came to precisely that conclusion:

"We have found no company that succeeded in creating an 'environment for creativity,' " researchers from the Arthur D. Little Inc., a management consulting firm, wrote. "Breakthroughs have come from creative teams that were ignored by their organizations, supported only belatedly by their organizations, misunderstood by their organizations, even assaulted by their organizations."

To Leibenstein, the corporation's central problem is how to motivate its workers. Companies can't simply bribe employes into doing their best by providing good wages, fringe benefits and working conditions. Workers may still relax or become demoralized. "Each individual employe may correctly feel that {his or her} contribution is too small to make a great deal of difference," he writes. The U.S. auto and steel industries attest to the shortcomings of bribes. Each had good pay and attractive fringe benefits. As a practical matter, job security was -- until the late 1970s -- high. Few workers with more than a couple of years experience ever permanently lost their jobs. Nevertheless, each industry became dramatically uncompetitive.

If bribes aren't the answer, neither is strict worker supervision. Militaristic supervision is costly and tends to alienate workers. In many jobs, the essence of the job -- the quality, care and intensity with which it's done -- can't be compressed into a few simple commands. Inevitably, companies must depend on the kind of work their employes want to do. Any organization exerts strong pressures for conformity: people tend to act like those around them. Successful companies inspire loyalty, a common sense of purpose and trust.

Leibenstein sees no quick formula for nurturing these vital intangibles. They emerge mostly from a company's history and unique personality. Large Japanese companies manage the feat better than their U.S. counterparts, he feels, but he doubts that U.S. companies can easily duplicate the Japanese success. The values that shape Japanese and U.S. companies -- a strong group consciousness in Japan and intense individualism in the United States -- are embedded in respective national cultures.

Nor should we want to emulate the Japanese. In Japan, workers may identify more fiercely with their companies than in the United States. But surveys show that Americans are generally more contented with their work. In Japan, group loyalty exacts a price. Workers feel intense pressure to perform and to devote themselves to their companies. What suffers is family life and a sense of control over their own destinies. Economic output is important for a society, but it's not everything.

The fate of U.S. companies is to grope for an awkward accommodation between corporate needs and individual tastes. It's a messy, continuous process: precisely the mixed picture of corporate strength, weakness and waste that we witness every day.