Friday, July 01, 2011

A Review of Management

With unemployment high and manufacturing increasingly moving off shore American products and unions are under attack for high costs and low productivity. Union labor is viewed as unmotivated, illiterate, and giving a great deal less than a days work for a day's wage. Productivity is low and growth in productivity is either non-existent or modest. Labor unions continue to demand high wages and benefits while an increasingly ineffective management structure seems to be confused, inept, and unable to come to grips with the death grip unions have on both government and industry. The once formidable American management teams which dominated world markets are now struggling to maintain themselves in those markets which they once dominated.

What is the problem?

Why do so many American businesses seem to be operating out of control?

I believe the chaos which now pervades American business is caused by years of ineffective management, rigid union practices, and an outdated business model. The contemporary American business model was founded on a Socio-Political model which has been in vogue throughout history and it has only been recently that this model has shown itself to be seriously out of step with industry, business, and society.

It was this socio-political model which gave rise to the labor movement and established the concept of "Labor versus Management" which has characterized western industrial societies from their inception. It was this model which Karl Marx referred to when he spoke of exploitive capitalists and predicted the inevitable death of capitalism. There has always been this conflict between the governed (labor) and the governors (management), but how it has contributed to the decline in the American economy can best be seen in retrospect. When we look backward we can see that the symptoms and danger flags have been there for a long time.

• The separation of management from the work force, both physically and philosophically.
• A business focus, which has largely ignored any but financial issues.
• A persistent and longstanding antagonism between management and labor
• A high cost labor force governed by seniority and not performance
• A labor force with ever increasing demands for wages and benefits
• Failure by management and labor to recognize globalization and its impacts

The effect of these factors has been cumulative over a long period and the results are now becoming apparent. We are seeing reductions in quality, lower productivity, and increasing unemployment as jobs move overseas to lower labor markets. Much of this malaise is attributed to high labor costs, a declining work ethic, waste, mismanagement, and a wide variety of other reasons. However, rather than being the problem, these may be symptomatic.

The problem may be that as our culture and markets have changed, our management model has not. It has continued to follow the authoritarian form it has had since the beginning of the industrial revolution. Western business is founded on a business model whose roots are in 18th century cultural concepts rather than those of the 20th Century much less the 21st. Only recently have the cultural conflicts inherent in the American model, become obvious.

American management has consistently failed to recognize the underlying source of worker dissatisfaction or to deal with it in any effective way. Historically this dissatisfaction was glossed over with higher wages, improved benefits, and other concessions. Only rarely were these concessions tied to any increase in productivity or quality. Labor negotiations and concessions were oriented toward rectifying surface problems associated with worker dissatisfaction rather than coming to grips with the basic causes of the problems.

The result was an upward spiral of costs factored with lower quality and productivity. American management failed to recognize that the underlying source of worker dissatisfaction was tied to the authoritarian model and its failure to incorporate the worker into the business process. The worker was kept out of the "decision process" and pacified with increased benefits. As these costs increased they were simply passed on to the consumer. This simple solution was an endless spiral until foreign manufacturers began to provide serious competition with higher quality goods at equivalent or lower prices. Suddenly management and labor were confronted with a completely new set of circumstances which they were ill prepared to face because the current American industrial model pits labor against management. Therefore the possibility of establishing a partnership between labor and management, as a solution to the crisis, has never been seriously considered.

It is the union labor contracts that have driven American Labor out of global competition. When management made it clear those productivity improvements, fewer job classifications, and reduced wages and benefits were necessary the unions refuse to cooperate. This resistance left management in the position of finding ways to improve productivity and profits without the support of Labor, which caused management to turn to off shore suppliers and technology as a solution. However, it quickly became apparent that productivity increases due to technology required more than capital investment and off shore work came with some significant quality and management issues.

To be competitive the American Management Team found that this new work force had to be more educated and more computer literate which did not describe their unionized work force. This new labor force was made up of technicians rather than craftsmen and efforts made by management to convert the existing labor force to technicians were rebuffed because the union craftsman ratings were hard earned and represented lifetime achievement for many. Failing to convince unions that retraining was in their best interest management began to recruit new and more educated employees.

These new technically trained workers were not union oriented and certainly not satisfied with the autocratic management style employed with unskilled workers. These new workers were less loyal to the company and expected to have a greater voice in the process of operating the business. Initially management failed to understand this aspect of this new work force but they also had problems coming to grips with a work force where the workers frequently knew more than their managers, and wouldn’t tolerate being patronized.

As the work force changed from unskilled to skilled the union leaders saw their membership decline because these new technical people had even less patience with them than they did with management. The result of this failure of labor and management to recognize the changing environment has been a growing irrelevance of labor unions and a management structure that seems increasingly unable to cope with the competitive situation. This has resulted in a chaotic situation which is due, at least partially, to the continuation of a model which has failed to reflect the changes in the labor force and our society. Many of the managers, who are experiencing this confusion today, recognize the failure of the old ways to solve today's problems and are grappling for a solution.

The failure of Theory X, Theory Y, Theory Z, and Managing by Objectives has led to a mini-revolution in management. Gone or going is the centralized workplace and increasingly the workers are working from home offices spread around the globe. This means the organization has become virtual and the managers must manage based on metrics and milestones. The labor unions continue their decline because virtual workers in a virtual organization have little interest or need for a union. Of course this requires a completely new management style but this is increasingly the management style of the 21st Century.

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